There are three ways to make more money in local trucking and local air freight. You probably know them:
“Wanna make more money?”
- Get More Business
- Charge More
- Reduce Expenses
I’m going to try to persuade you right now that #3 — reducing expenses — is the single most important missed opportunity for most local trucking companies. It’s also the one over which you have by far the most control (you can do something about #3 today, unlike the other two).
1. Get More Business
Let’s look at the first one – getting more business. Of course getting more business is a good thing. It’s a tried and true strategy for local LTL — the logic is obvious. Just add more customers and fill your trucks with freight, increase billings, and life is great.
But is growing your customer base easy? As if you could say, “Sure, I’ll just go down to the Customer Store and pick out a few good ones”? Heck, no. If it were that easy, everyone would be doing it, and fewer P&D companies would be shutting down or struggling. But what I hear every day is just the opposite.
It can take years to cultivate a significant new account, especially these days. And if you’re seeking new ways to take control of your business, adding new customers is out of your control, even with the best service and the best sales team. You can’t control the economy, and you can’t control when a prospect is going to pull the trigger and give you a try in a small or big way.
So adding customers might work, but it’s not the answer for everyone. Of course, you can never stop selling. But if you’re looking to take charge of your business in a way that allows you to predictably make more money every week, there are other methods.
2. Charge More
What about charging more? If I raise my rates and keep my weekly expenses the same, I make more money at the end of the week. But… most people are afraid of it.
“Raising rates? AAAAAHHHHH!!!”
I hear it all the time:
“Jonathan, my customers will bolt if I raise rates.”
“Jonathan, I’m losing money with my rates where they are today. How can I go higher when the one-man shop down the street does truckloads for $200?”
“Jonathan, my fuel could be higher, but I don’t want to piss people off.”
If your service is so good that you can charge more, then hey! more power to you. But for most trucking companies right now, raising rates is pie-in-the-sky. It’s just a pipe dream, that is, if there is no corresponding improvement in service.
A side note: At some point, when we end up working together, I’m going to make you so efficient in the office, and I’m going to enable you to give such great service, that you can justify higher rates with no complaints from your customers. But that’s a little ways down the road. In the meantime, we have to finish our three-item list.
3. Reduce Expenses
So adding more trucks isn’t always the right tactic, and charging more is mostly not going to happen. What’s left? Spend less.
If you are billing the same amount every week, and spending less overall every week, then every week you have more money left over. That’s good math.
Some people glaze over when I bring this up. “I don’t know what you’re talking about. I can’t lower costs.“ Others get annoyed. “But I can’t spend less. I can’t lower the price of fuel, and my lease payments are fixed. After drivers and fuel, there’s nothing left.” I hear that a few times a month.
Here’s where most people stop, give up, and resign themselves to the slump. Don’t give up! I feel your pain – really I do – and I want to help you do something different so you can get different results in your business.
(Hint: It doesn’t take a genius.)
“Are you doing the same thing over and over and expecting different results?”
Albert Einstein once said that “the definition of insanity is doing the same thing over and over and expecting different results.” If Einstein is correct, then you have to do something different if you don’t want to stay stuck. Hopefully you have an open mind about this.
So…. if we want to cut costs and are truly open to anything, what can we spend less on?
Office payroll is a relentless expense. What are we getting for it? Sometimes we are getting redundancies.
Would you put a two-man crew on every truck?
Most people would not. So why do you have people do the same thing twice in the office, like entering order details in Excel and again in QuickBooks? It’s the same sort of waste — it’s just less obvious, so we often miss it.
We can spend less on office payroll by using tools that allow us to do repetitive things right the first time, and only once. For every ten minutes you can free up for someone in your office, that’s ten minutes they can spend doing something that actually makes you money — quoting a new job, for example. That’s ten minutes you don’t have to pay anyone any more. It adds up quickly.
Here’s the secret: Dramatically boost the productivity that you get from the people in your office, and watch your revenue per payroll dollar go way up.
A couple of examples show the sort of thing I encounter on a regular basis. Take a look:
- If you’re rating by hand, you’re wasting payroll dollars. Do you have a rating book that looks something like this?
The excess time it takes to do rating with a book like this, or paper rate sheets, is huge.
- If you’re dispatching in Excel, you’re wasting payroll dollars.
Why? Because you’re double-paying – you’re paying someone to enter dispatch info in Excel, and someone (usually someone else) to enter order details on an invoice – every order and every invoice.
Would you put two guys on every truck?
- If you’re dispatching with T-cards, you’re wasting payroll dollars. Ditto.
- If you’re using software–however you got it–that’s a poor fit with your business, forcing your staff to double-enter data, you might as well just go flush your money down the toilet.
Why? Because double-entry leads to errors that are even more expensive to fix.
(1) It costs you office payroll time to catch and correct the error.
(2) It could cost much more if the error snowballs. If it’s a missed pickup, then you also have driver time to pay all over again.
(3) If it’s an angry customer (let’s call her Zelda) who was invoiced incorrectly, then you have to research the error, fix it and re-invoice.
(4) Then there’s perhaps the most time-consuming task of all, which is taking the time (sometimes more than one person’s time in your office) to unruffle Zelda’s feathers and salvage the customer relationship.
All of this takes office time, and all that office time costs you money.
So double entry ends up costing you more than just double the hours. It costs you triple or quadruple, or worse.Now given what most people in your office get paid, you may not give much thought to the benefit from ten minutes saved here or there. But here’s the other part of the secret: when you do hundreds of orders a week and save time on every order, then something really cool happens…. a cycle gets going where your employees stop spending so much time repeating things and start spending time on things that create great service.
If you want to learn more about how this plays out in real life, shoot me an e-mail and I’ll send you a case study about how this played out at one of JSY’s customers. The time saved using our software has been unbelievable, except that it’s true. In the meantime, I encourage you to think carefully about which of the three options I’ve discussed here is best for your business. Call me at 630-517-0705 if you want to talk about it, especially if you are interested in exploring where “no more double-paying in the office” can have an impact for you.
And since this blog is intended to stimulate dialogue, feel free to post a comment on what you’ve read. I look forward to hearing from you.
Posted by Jonathan Miller, Editor
You can reach Jonathan at email@example.com or at 630-517-0705.