Hey no worries, are you saying that you think this "gold rush" is coming to an end? They say it's going to be like this for a while. Also the big companies may be adding capacity but I have over 40 trucks of new technology and they are constantly down. Constantly.

 

First, you're right; unsociable is not how I'd describe you, but I know where you're coming from I don't think the end is in sight, however nothing last forever and the end will inevitably catch most by surprise. We saw it with the last downturn; 2006 started off on a record pace but by the fourth quarter, the signs of the downturn were starting to show. Not many recognized them and we saw the carnage that followed from '08 to '10. The industry learned a crucial lesson about capacity growth during that time and that patience led to the boom we're having now. The climate for carriers has been steadily improving since 2010 and it's not because the economy was on fire; it was because capacity remained constricted even as demand strengthened. We're starting to see signs that those lessons are being ignored. Carriers are actively talking about wanting to add as much capacity as they possibly can because the business is there. Luckily, the shortage of qualified drivers is tamping down their ability to follow through...for now. They will eventually find a way to get their drivers and, when they do, they'll put so many trucks on the road it will make our collective heads spin. Unfortunately, the way that they will be able to attract those drivers is going to be through higher wages brought about by rate increases. We all know that, as an industry, nobody pays more until they have to and that point is likely to be the peak of the market. That means those carriers are finally able to put their desired trucks on the road, just as we're coming to a cyclical downturn in the economy. So we again get to experience increasing capacity as demand is falling. There is also the wildcard that is the energy sector. If oil falls into the $70s for any meaningful period, we will likely see a significant decrease in drilling and exploration in North America. That sector has been more responsible for our relative economic strength over the past few years than any other. If it were to falter, could the rest of the economy support itself?

I think we've got a few very good years ahead of us, but my advice is to always be prepared and know how you'll weather the next downturn; because there always is one and it usually comes sooner than most expect.

 

I agree with you, Merrick, about some carriers not learning from the past. The ATA and trial lawyers are pushing hard for a huge increase in liability coverage for carriers. If they get the increase they want, it is likely to push thousands of smaller carriers out of business. That will create some problems and opportunities for the industry. It will be problematic for most smaller carriers and independents. Many won't be able to handle the likely huge increase in insurance premiums. The large carriers stand to benefit from the reduced capacity. I expect another downturn in the economy. What we are seeing currently is an artificial propping up of the economy. While the economy is sluggish, the government is keeping the economy up by extending unemployment benefits and encouraging others to seek a greater reliance on government services. It is unsustainable. If the government were not so active in keeping people out of the job market, we would be experiencing a much more sluggish economy.

Some of these larger carriers have been buying up equipment in anticipation of a gold rush for them as capacity tightens and more drivers are thrown into the pool when the insurance increase goes into effect. They never seem to learn. If they held themselves back, rates would go up and the industry would be more stable. I don't plan on adding any debt. I plan to keep it that way. The only way I was able to survive the last recession was due to my lack of a lot of debt. It was still difficult, but here I am. Thousands lost everything. Those with huge debt were not able to keep the doors open. With the economy being artificially propped up, used truck prices are up. I would not want to buy any of the newer trucks. They seem to spend more time in the shop than running. Equipment prices, new and used are being kept high because of demand mostly from the larger carriers.

 

Well to update this journey I'm on. My workman's comp needed renewal so I figured no problem there, we pay hefty premiums and had one small claim over the years. Long story short it is utterly impossible to get workmans comp in South Florida. Apparently I have an incredible score but they won't touch long haul trucking. (and a few other industries too). So I was forced into a PEO or one of those leasing companies. I was so opposed at first as I have my systems in place but this might not be such a bad move. I'm with one of the largest in the country for trucking and some of their customers I was stunned to find out. Much bigger than I am.

I am being sued again by some ex employee but that is no big deal as they tried once and lost and this case is even weaker. I am in trouble, well not trouble, but every year I get a refund but this year I wasn't prepared and as I don't have anything left to depreciate I am looking at a massive tax bill. I'm mad at my accountant who is a relative and doing my best to avoid this. I'm realizing it's hard enough to make money in this country but once you do (and I'm not a millionaire by far) then the problem is how to keep it.

I settled with the claim with Transplace. They owed me like $24,000 in receivables and the stolen loan was valued at $140,000 which I only had insurance for $100,000 and a $10,000 deductible. So they took the $90,000 from the insurance and kept my receivables and I didn't pay the deductibles and nobody owes anyone anything now. So since I didn't pay my deductible I lost about $14,000 on that one. But learned a lot, especially you owe the value no matter what and the $100,000 insurance only covers that so know the value of the freight your hauling.

Other than that getting the other hip done next month even though I barely feel it. But I know there's a lot of damage and while I have good health and good insurance I might as well get it over with as I don't want a total hip replacement at 50 or something like that. Can't believe another year in this business is coming to an end.

 

I am sorry to hear about the workers comp and insurance lawsuit. Litigation is one of those unfortunate aspects of doing business in today's world. I am not sure what you are referring to about the PEO?

 

HI GMAN,

A PEO or is what they call those companies that the employees are now employees of them. So we retain all control over pay, hiring, firing etc, we send in all they payroll amounts to them and they pay them instead of us. It also seems to have a lot of benefits as I can get better group rates on workmans comp which that I don't need as my rates were good, but health insurance, 401K and they also handle the Driver Qualification file. We are signed up with DAC but we did everything manually (our application) and now potential drivers can just go online and fill out an application and we can just log in and decide if we want him or not.

 

So, your drivers are now considered employees of the PEO? It sound sort of like you have leased your drivers and equipment to the PEO?

 

No the PEO has nothing to do with the equipment. The driver's still work for us but are considered co-employers with this leasing company. Here is an example of one which I decided not to use https://www.peoplelease.com/index.html

Remember most of my equipment is leased anyway. I have structured this where I can walk away at any time.

 

Happy New Year everyone. It was a rough end of year with tax liabilities (by the way I don't know why they call him Uncle Sam, if I had a real Uncle that wanted all that money from me, I would never speak to him again), lawsuits (going well) workers Comp issues (resolved) and now yesterday or the day before I was notified we will be audited next Tuesday by the DOT. This is not such a small operation anymore, (nor a huge one) but we did break 10 million in revenue this year (again that's revenue not profit) and there are a lot of drivers and things going on. We have been in a lot of accidents lately and almost none of them our fault, but I think that is what's triggered this.

What can we do? I think we are prepared. I know we are strict with the random drug tests, have an accident register, scan every log that comes in and make the driver's fix any violation. But if you have followed this post, what do I know? I mean I know more now than when I started but still this grew and I'm sure they will find something wrong. I'll update with the audit results.

 

I hope things go well with the audit, merrick.