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Tag Archive for Federal Motor Carrier Association

Trucking Is The New Small Business King

It’s no secret that growth in manufacturing and increased consumer spending is helping trucking. Commerce is accelerating at such a rate that companies are having problems filling cabs. This is good news for small-business trucking entrepreneurs.

Trucking is now officially the fastest growing small-business industry in the country. As the economy improves and options for small-business loans and financing expand, small trucking companies are filling a void.

The Winners

A financial analysis company called Sageworks released a report this month that shows two kinds of small trucking businesses posting big jumps in revenue. The study looked at the 12-month period ending May 31 and was based on a breakdown of financial statements of small trucking companies who have a revenue of less than $5 million.

General freight trucking, which covers a wide range of merchandise transport, was at number one on the list, reporting a nearly 25 percent increase in sales. At number two was building and construction, with a 19 percent rise.

Coming in third was specialized freight trucking, at 17 percent. This category covers tankers and refrigerated trucks.

It should be no surprise that the report shows trucking’s momentum strongest in California, which is home to one of the biggest trucking associations in the nation. According to Shawn Yadon, chief executive of the California Trucking Association (CTA), “trucking is one of the great entrepreneurial opportunities.”

Trending Up

The report shows that trucking is on a financial upward trend. This uptick can be highlighted by looking at manufacturing and consumer spending.

Industry momentum was underscored back in May when the American Trucking Associations (ATA) reported that the industry topped $700 billion for the first time in history. As ATA chief executive Bill Graves stated, “trucking is, and will continue to be, the dominant way to move goods in this country.”

With the industry struggling with a shortage of 35,000 to 40,000 truck drivers, entrepreneurial opportunities for ambitious investors are coming in waves. David Gilbert, the CEO of National Funding, reported “seeing fundamental growth” in the transportation-related small business loan sector.

Are you thinking about possibly going into business for yourself? Trucking is full of opportunities. There are several key factors that you must keep in mind before you begin the adventure.

Understand Regulations

First, make sure you fully understand all the rules and regulations involved with trucking. Yadon of the CTA emphasizes the need to “go through the proper channels.”

If your potential trucking company will be operating in multiple states, it is prudent to check the website of the Federal Motor Carrier Association (FMCSA) to get information on state and federal requirements.

The first step is in getting a USDOT number, which will be used to track your small business operations in connection with safety audits and inspections.

Vehicle Plan

Next, you’ll want to develop a clear plan for buying and maintaining your trucks. The estimated cost for a truck ranges from $50,000 for a used model to $150,000 for a brand new truck with all of the bells and whistles.

It is important to understand the investment going into the vehicles. Will you routes take the vehicles over treacherous mountain passes? This is something to consider when shopping for trucks.

Having a solid vehicle plan includes a game plan for maintenance and preparation for any breakdowns. Managing good, quality vehicles and planning for downtime means there won’t be any hiccups in the operation.

Community Involvement

If you are looking to dip your toe into any market, it’s wise to reach out to others in the business. Try looking for local or regional trucking associations. Tap these resources for information and startup assistance.

As an example, CTA members get access to special programs, exclusive deals for equipment, legal services, and financial information. If you are looking to purchase or lease trucks, those already in the business can usually point the way.

The trucking industry has a lot of momentum. As the economy grows, you’re likely to see another uptick later in the year. If you are looking to start a business with serious growth potential, take a look at small business opportunities in trucking.

How Small Trucking Companies Survive: Part Two

Last week we introduced part one of our three part series covering how small trucking companies survive. This week we are going to take a look at two more crucial aspects of small-outfit survival in the land of the big guys.

We’ve covered the important topics, from finding a niche and focusing on customer service to finding and retaining top talent. While those are important aspects, they don’t complete the puzzle. The next two pieces are arguably just as important as the first three.

Safety and Compliance

It can be argued that this should have been first on the list. The Federal Motor Carrier Association (FMCSA) has been putting fleets that don’t meet the new safety standards out of service. Look hard enough and you’ll see that most of the fleets getting chopped are small operations.

Some might assume that they aren’t subject to the same regulations large fleets are exposed to, such as drug testing and maintenance programs. Unfortunately for them, this belief is far from the truth.

In some cases smaller fleets just don’t have the personnel they need to maintain a rigorous safety compliance program. For carriers with five to ten trucks, keeping a proper safety headcount presents a serious challenge.

Third-party companies who handle these services on an outsourcing basis are now hitting the scene. For a nominal fee, these companies can handle drug testing, qualifying drivers and keeping truck driver files organized and up-to-date.

As shippers increasingly look to CSA scores and safety records, the threat of loss of business or even lawsuits is all too real. Staying on top of safety and compliance issues is now more important than ever.

It’s also important to remember that safety and compliance are not always the same thing. Small trucking companies maximize safety potential by having the latest and most advanced safety technology, from disc brakes to anti-rollover technology and stability control.

Compliance is met behind the office desk. Small trucking companies may need a fleet of very smart people to help keep up and comply with the ever-changing regulatory environment. By having qualified people in the right places, companies should be able to ride out any regulatory storm that comes their way.

Revenue and Costs

The nature of complex operations makes it easier for medium- to large-companies to better manage cost versus revenue stream. Smaller operations are looking at a smaller cash-flow. Operating margins and expenses seem larger than life when you start removing zeroes from the bottom line.

Small trucking companies need to be treating each truck and driver as an individual profit center. It’s vital to know what the actual costs for each dispatch is. Without this information, it’s difficult to determine what can be done to maximize profit and minimize loss.

Companies should be getting financial statements regularly. If a company is only parsing out the cost on a yearly, quarterly or even monthly basis, they aren’t adjusting fast enough.

Some small carriers participate in buying programs that offer discounts as part of an association membership. Certain state, federal and private trucking organizations can offer discounts on fuel, equipment, supplies and more. And unlike the old days, carriers don’t have to be huge to take advantage of bulk discounts.

The personal nature of small trucking companies also helps in negotiating prices on equipment, from tires and rims to mechanical work on the trucks. Since the overall equipment costs are always rising, having an edge is important to keeping the bottom line in black.

The final aspect of costs relate to maintenance. Smaller companies can manage things like tire programs more effectively. In some cases technicians can even salvage fuses from junkyards because taking the truck to a dealer for fuse problems can be quite expensive.

Now we have a more comprehensive picture of how today’s smaller fleets make it work. Find a niche, focus on the customer, hire and retain top talent, maintain safety and compliance and manage revenue and costs. Next week, in our final part of this three-part series, we will take a look at how smaller fleets can master technology to their advantage, invest in quality equipment, and practice smart growth principles.

What Is The Coercion of Commercial Motor Vehicle Drivers Rule?

In May of 2013 the Federal Motor Carrier Association (FMCSA) issued a notice of proposed rule making entitled “Coercion of Commercial Motor Vehicle Drivers.” At the time there was a fair amount of confusion surrounding the rule.

With the FMCSA set to unveil the final version of its rule in September, has the confusion abated? Furthermore, what exactly is this new policy commonly referred to as the “driver coercion rule?”

The Details

When this rule was first proposed, as it was written, there were various moving parts that could potentially change certain aspects of how freight is moved, tendered, and brokered by motor carriers. How these changes will end up being interpreted in the final rule is still a question.

The exact verbiage of the rule proposes to “adopt regulations that prohibit motor carriers, shippers, receivers, or transportation intermediaries from coercing drivers to operate commercial motor vehicles (CMV) in violation of certain provisions of the Federal Motor Carrier Safety Regulations, including truck drivers’ hours-of-service (HOS) limits and the commercial drivers’ license regulations and associated drug and alcohol testing rules or the hazardous materials regulations.”

Though the outcome of this rule is now somewhat clouded by the reversal of the hours-of-service rule earlier this year, there are other questions that remain. The hours of service tie-in to the coercion rule is not the only piece that still needs to be ironed out.

The Current Questions

Though the 10 page rule is filled with bureaucratic language, parsing it reveals the methodology used. In one section it adds that an act of coercion by a carrier, shipper, receiver, or transportation intermediary doesn’t mean the driver no longer has to comply with the rule, which makes sense.

Then it goes on to explain that the definition of coercion prohibits the aforementioned parties from withholding future business from a driver if he or she objects to operating while in violation of safety regulations.  This threat to withhold business wouldn’t constitute coercion unless the driver objects to operating the vehicle for reasons related to hours of service and other regulations.

Here’s an example of how this rule could be put into practice. A shipper calls a motor carrier about a shipment and the carrier agrees to the run. Let’s say a driver then arrives and tells the shipper that he doesn’t have enough hours to make the run. This then puts the shipper in a predicament.

What responsibility will a shipper have for validating that the driver has sufficient time to fulfill the commitment? If the shipper asks the driver to still take the run, this could be viewed as coercion. If the shipper intends to call another carrier to handle the load, this could also be viewed as coercion by financial threat.

Many in industry are speculating as to what level of severity the onus to “know what you should have known” is placed on the shipper, receiver or anyone else engaging with the truck.

What’s Next?

Some analysts predict that this rule could prevent brokers and shippers from pushing carriers to break the rules and speed limits. They purport that this would impact small carriers, reduce capacity, and drive labor away.

Others feel that it might actually increase freight brokerage because shippers are going to want to put as much distance between them and the rules as possible. At this juncture neither side is sure how it will all play out.

The FMCSA has not articulated how the suspension of the hours of service rule now affects the coercion rule. There may be little change considering HOS isn’t the only safety regulation that could potentially be violated during the course of a job.

Violations of the truck driver coercion rule could result in fines of up to $11,000. The agency would also reserve the right to suspend, amend, or revoke the registration for a for-hire carrier, broker, or forwarder. As we get closer to September, more information regarding how the agency plans to roll out the rule should be forthcoming.

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