How's Business These Days?
by
Phil Madsen
(Written March 20, 2009, for publication on SuccessfulExpediters.com.)
My stories from the road depict some of the adventures, and ups and downs Diane and I have experienced since entering the world of expedited freight transport over five years ago. These stories have been written mostly in good economic times.
An economic recession officially began in December 2007 and continues today (March 2009). It is the most severe economic downturn in our lifetimes. In our one-truck, owner-operator business, Diane and I began to see the effects in 2008. We saw a decrease in the number of loads to haul and lower prices being offered to haul them.
Our gross revenue in 2008, was 20% less than in 2007. Some of that is attributable to the greater amount of time off we took in 2008. But 10% or more of it is because of slower and lower-priced freight.
The first quarter of 2009 will end in ten days. The downward trend in freight availability and rates is not only continuing, it is accelerating. The economic bottom that people are looking for shows no sign of developing. Every time the indicators rebound, they give back their gains, leaving people to look for them to rebound again. The recovery will come, most people believe, but it appears that it will be a while before it does. So, most if not all expediters (including us) continue to do less and earn less than they did in more prosperous times.
To be a little more specific, from January 1, 2009, to March 20 (today), we hauled 21 loads over 15,525 loaded miles. In the same period last year, we hauled 28 loads over 21,401 loaded miles. That is a 25 percent drop in loads and a 27 percent drop in loaded miles. Gross revenue for that time period is down by 27 percent.
Year over year, from 2007 to 2008, our gross revenue declined 20 percent. Early in 2009, gross revenue is showing a 27 percent decline. In other words, the downward trend in our little one-truck business is continuing and doing so at a faster rate.
I am told of a saying that comes out of East Texas. "Nothing is ever so bad that at can't get worse." Those words ring true these days, that's for sure.
Despite these numbers, Diane and I are doing OK and love our life and work on the road as much as ever. There is nothing we would rather be doing than the work we are doing now, though it would be nice if available freight and rates recovered to previous levels. We are doing OK because we managed our money well when the good money was there to be made. We prepared for the slow times we knew this cyclical business has.
That's our story. But what about people who are thinking about getting into the business now? There is a lot I could say. The short story is this. If you are using this web site to research the expedited freight transport career opportunity, please be careful to notice the dates of the items you are reading.
A severe recession is now in progress that is hitting our industry like a series of bombing runs. Today's expediting world is nothing like the expediting world Diane and I jumped into in 2003. Some expedited freight carriers have failed. Some expediters have failed and many today are saying they cannot hold out much longer. Enjoy the older stories, but be careful to notice that they were written in more prosperous times.
Simply put, the good money Diane and I made as expediters early in our career is not there to be made today. While we are all hoping the economy will soon bottom and begin a recovery, there is very little in the news to suggest that will happen any time soon. I am afraid there will be more blood of failed expediters in the streets before this is over.
See my daily blog for or a day-by-day look into our life and work on the road.
UPDATE (March 29, 2009): top of page With the first quarter of 2009 ending on March 31, I will update this piece to reflect that time period. I wrote the above text on March 20. The February ATA Truck Tonnage Index figures were announced on March 25. ATA Chief Economist Bob Costello said that tonnage plunged again on a year-over-year basis, and nothing suggests freight volumes are about to embark on a sustained recovery.
ATA truck tonnage numbers are gathered from ATA member carriers, which haul a large portion of the freight moved by truck. Expedited freight transport is so tiny a slice of that freight that if it was removed from the index, it would not be noticed. Nevertheless, expedited freight volumes seem to parallel the larger index, making the index a useful indicator.
A few analysts and trucking company executives are starting to say the industry has reached a bottom and things are firming up. That is meaningful to some, but to those of us actually hauling the freight, moving slowly out of historically low levels means freight volumes will continue to be slow for several months at least.
I wrote in my blog a while back that Diane's and my strategy was to outlast weaker competitors and benefit from the truck shortage we expected to develop. While our strategy remains the same, we are finding that the truck shortage is not developing as quickly as we expected. With the employment picture as it is and jobs being scarce, people are not readily leaving the expedite business. They are hanging in as long as they possibly can because they have nowhere else to go.
UPDATE (April 8, 2009): top of page Our first quarter numbers (Jan-Mar):
Runs completed 2009: 24
Runs completed 2008: 32
Change: -25%
Gross revenue 2009: Confidential
Gross revenue 2008: Confidential
Change: -25%
News reports and informal trucker chatter show no sign of a freight recovery. Airlines are mothballing planes in record numbers. Container ships are stacking up in ports because they have nothing to haul. If freight is like a river, the water is low.
UPDATE (December 31, 2009): top of page
With your year-end 2009 numbers now known, the short story is 2008 gross revenue was about 20 percent less than 2007, and 2009 gross revenue was about 20 percent less than 2008.
A review of the economic and trucking industry news shows modest increases in a number of indicators while a few economists continue to predict a double-dip recession will develop in 2010. The majority of economists and industry analysts are predicting modest growth in 2010.
While we managed to increase our bank balance in 2009, it was done at a slower rate than we would have liked. To pay cash for a new truck several years from now (a goal of ours) and fund the retirement lifestyle we desire, we will have to do better in the years ahead than we did in the last two.
That means our 2010 numbers will be very important. If they do not increase significantly over 2008 and 2009 levels, we will seriously reconsider the expediting business.
Even with the recession-affected revenue levels of 2008 and 2009, expediting has been a fantastic business and lifestyle for us. But as good as expediting has been, it is not a business we are willing to ride slowly into the basement or into a hand-to-mouth existence. Before it comes to that, we will exit the business. We did not enter the business to lose money or break even. We entered the business to prosper and enjoy the lifestyle expediting makes possible. If the freight don't pay, we won't play.
Kindly note that there is much more to running a profitable expediting business than generating gross revenue. As I said above, this is the short story. A host of personal variables apply to every expediter. When one does well or poorly, it does not mean all will. If you read my blog day by day, you will see Diane and me make all kinds of personal and business decisions that affect our revenue; decisions that you probably would not make.
Yet, individual factors aside, the business has been hit hard by the recession. Many expediters and a number of expedite carriers have been driven out of the business. Those that remain have not seen the kind of uptick one might expect when the competitive field is thinned.
Looking forward, Diane and I are fully committed to expediting through 2010. At year-end 2010, we will review our numbers and consider the options that then present themselves.
Throughout 2010, I will also continue to develop my trading skills; partly as a plan B, partly in pursuit of the potential profits, and partly because it is a fascinating activity.