Drayage Trucking in Metro Vancouver - APGST | Owner

Drayage Trucking in Metro Vancouver
You will find this toolkit helpful
if you have been asking yourself:
What can I expect in the drayage business?
How can I manage my business more effectively?
How can I make more money?
www.toolkit.bctrucking.com
Owner-Operator Toolkit
PURPOSE of this toolkit
This toolkit was developed for owner-operators
working in the container drayage business in
Metro Vancouver.
Its purpose is to provide you with practical information
and resources to support you in your role as a
How this Toolkit Works
Throughout this toolkit, you will see this
icon for the information and resources
to help your trucking operations.
truck driver &
small business owner.
You will find this toolkit helpful if you have been asking
yourself:
»» What
2
can I expect in the drayage business?
»» How
can I manage my business more effectively?
»» How
can I make more money?
You will see this icon for resources
and information to help you as a small
business owner.
An important note about this Toolkit
Industry and economic conditions change over time. Users of this
resource are encouraged to use this as a guide, but to rely on your
own research to identify up-to-date information.
© July 2013
owner-operator toolkit
Table of Contents
My Truck
THE DRAYAGE BUSINESS
Owner-Operator Essentials
1.1
1.2
1.3
1.4
1.5
Drayage business environment
Lifestyle
Business & financial considerations
Choosing a company to work for
What companies look for
Getting & Operating My Vehicle
4
6
7
8
10
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Financing options
Getting bank financing
New vs. used
Importance of maintenance
Safety
Fuel efficiency
Practical terminal information
My Business
GLOSSARY
Managing My Business & Money
Page 30
3.1 Budgeting & bookkeeping
3.2 How am I doing?
3.3 How can I make more $$$?
3.4 Understanding my costs
3.5 Financial tools
12
13
14
15
16
18
20
22
24
25
26
28
3
1. THE DRAYAGE BUSINESS | Owner-Operator Essentials
1.1
Drayage
business
environment
Vancouver’s Asia Pacific
Gateway* is the largest and
busiest container port
in Canada.
In 2012, Port Metro Vancouver
handled 2.7 million TEUs*,
generating about
2 million drayage trips.
Import/export container
traffic moving through the
port is expected to double
by 2030, contributing to a
growing drayage market.
The supply chain’s various
participants must operate in
a highly coordinated manner
to deliver containers from
door to door.
* See Glossary
4
20
Shipping Lines
call at the port and require reliable
pickup & delivery of containers.
4
Marine Terminals
whose primary roles is to move
containers through the port. Truck
access is controlled at each terminal
by separate reservation systems.
Marine container terminals in
Metro Vancouver:
» Vanterm & Deltaport operated by TSI
» Centerm operated by DP World
» Fraser Surrey Docks
STEAMSHIP LINES
MARINE TERMINALS
How do Shipping Lines
impact Owner-Operators?
How do Marine Terminals
impact Owner-Operators?
» Late ship arrivals create volume
bubbles that increase congestion and
affect the timely flow of containers
through terminals.
» A terminal operator can control the
access and availability of the terminal.
» Shipping lines also influence where
empty containers can be picked up or
dropped off.
» Surges in import/export container
volumes increase wait times at the
terminal and lead to increased truck turn
times.
» Longshore labour productivity and
truck gate hours have a major impact on
truck efficiency.
4
Railways
CN, CP, BNSF & Southern Railway
contract with shippers and shipping
lines to move containers by rail to &
from the port.
THE DRAYAGE BUSINESS | owner-operator ESSENTIALS
Drayage Business Environment
Port Metro Vancouver
PMV leases terminals to the marine terminal operators under
long-term (50-year) leases & administers the Truck License
System (TLS).
Port Metro Vancouver dictates the terms of access to the
container terminals that are located on federal port property.
Owner–operators must be licensed under PMV’s Truck
Licensing System (TLS) to access port terminals. The TLS
determines the truck standards required to serve the port.
160
Dray Companies
serve the port with 2000 trucks &
approx. 950 owner-operators who
look to maximize productive two-way
moves.
1000s
of Local and
International
companies who import and export
goods through Metro Vancouver, with
the goal of minimizing logistics costs
RAILWAYS
DRAYAGE COMPANIES OWNER-OPERATORS
IMPORTERS/EXPORTERS
How do Railways
impact Owner-Operators?
How do Drayage Companies
impact Owner-Operators?
How do Importers/Exporters
impact Owner-Operators?
» Rail activity impacts labour availability
in the terminals, and therefore truck
productivity.
» Drayage companies directly influence
the selection of work (type and number
of trips), shift schedules and ultimately
the owner–operator’s revenue stream.
» Cargo owners determine which drayage
companies they use to move containers.
» Railways dictate the location for empty
container storage. Storing empty
containers at marine terminals reduces
marine terminal efficiency and, therefore,
truck productivity.
» Trains can block road intersections and
increase truck wait times.
5
1. THE DRAYAGE BUSINESS | Owner-Operator Essentials
1.2 LIFESTYLE
Good operators can make $50,000 to $65,000 a year. You will have the freedom of
running your own business in a market that is growing at about 5% a year.
But it is also a challenging lifestyle in a highly competitive industry. There are about
2,000 licensed drayage trucks in the Metro Vancouver container hauling market.
You can expect:
»» To work 10-to-12 hours a day just driving your truck plus three or four more hours a week doing the necessary paperwork
»» To work five or six days a week, sometimes changing your hours of operation, in order to make ends meet
TR
»» To wait up to four weeks or more for a company to pay you, depending on which
LY
EEK
GW
IN
UCK
PLANNING
A BUSINESS
TRUC
& BU KING
SINE
SSSMALL BUSINESS
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company you work for
FOR BEGINNERS
»» To pay up to $140,000 for a new truck or about $60,000 for a good used vehicle
»» Daily frustrations in accessing marine terminals because of long line-ups at the gates, which can reduce your productivity and income
Ac
Af
»» Difficulty getting enough loads to cover your costs
»» Unpredictability in your income (e.g., due to seasonal fluctuations, truck downtime) as well as uncertainties related to costs,such as major truck repairs
6
Accountan
ts
THE DRAYAGE BUSINESS | owner-operator ESSENTIALS
1.3 Business & Financial Considerations
As an owner-operator, you are running a small business in addition to driving your truck.
Here are some important business and financial aspects you should consider:
Business & Financial Requirements
Resources
1.
Have an initial cash balance of about $10,000 or more to allow for slow payment by the trucking company you work
for, plus an ongoing reserve of $10,000 to $15,000 to cover slow periods of work or unforeseen costs (e.g., a new
clutch can cost $3,500).
2.
Have a computer with basic productivity software such as Microsoft Office to help keep good electronic records of
your daily operations.
3.
Consider acquiring personal finance or small business accounting software, such as Quicken, Quickbooks or Sage
50 Accounting to help you manage your books and money. These software programs can also help you prepare
documents required for tax filing and/or audits of your financial records.
4.
Get a separate business bank account and a business credit card.
5.
Get a local business license from the municipality where your business is located.
BC Business Registry: www.bcbusinessregistry.ca
6.
Consider incorporating the business to limit your liability and get some tax advantages.
BC Business Registry: www.bcbusinessregistry.ca
7.
Register for workers compensation with WorkSafeBC.
WorkSafeBC: www.worksafebc.com
Other Considerations For Your Business
Resources
8.
Find a trucking company to work for: You will need to determine which trucking company you want to contract
with. This is a critical business decision because the trucking company you select will determine your shift
schedules, the type of loads that are assigned, and ultimately your overall profitability.
9.
Learn about the drayage business environment: You will need to understand the drayage business environment you See “Drayage business environment” (page 4)
will be working in and how different industry stakeholders impact your business.
10.
Find a parking space for your truck: You will need to find a location where you are able to park your truck when not
in use. You will also need to consider the access, convenience and safety of your parking location, as well as any
specific parking by-laws in your municipality.
See “Choosing a company to work for” (page 8) , and
“What companies look for” (page 10)
7
1. THE DRAYAGE BUSINESS | Owner-Operator Essentials
1.4 Choosing a company to work for
There are about 160 drayage companies of varying sizes in the Metro Vancouver area. Each drayage company has direct relationships
with its customers, who can be cargo owners / shippers, shipping lines, freight forwarders, and others.
As an owner-operator, you need to select a company (or companies) to contract out your equipment and services as a truck driver.
The choice of which company (or
companies) you work for is critical
because it affects
your shift
DRAYAGE
COMPANIES
OWNER
OPERATOR
schedules
the loads you get
& your revenue
stream.
8
CARGO
OWNER
THE DRAYAGE BUSINESS | owner-operator ESSENTIALS
Here are some key considerations when choosing a trucking company to work for:
Key Considerations When Choosing a Trucking Company
Why It Is Important
1.
How long has the company been in business?
The longer the better, because companies that successfully operate in the industry have a
higher likelihood of having a good reputation, solid customer base and well-run operations.
2.
What is its driver turnover rate?
The lower the better, because high driver turnover may indicate poor working conditions.
3.
What do discussions with other owner–operators who work for the
company tell you about the company and its working conditions?
Talking with other owner–operators already contracted with a particular company is the best
way to find out what it is like to work for that company and whether or not it is likely to be a
good fit for you.
4.
Does the company provide a signed contract with clearly defined terms
of your business arrangement?
A well-documented contract should provide you with a clear understanding and written record
of your agreement with the trucking company. This will be particularly important if there are any
future disagreements regarding the contract.
5.
How does the company compensate its owner–operators in general and what
are its detailed compensation terms? Are there any deductions or holdbacks?
You need to have a clear understanding of what you will get paid for and what you will not in
order to determine the total amount of your income.
6.
Does the company pay for waiting time at marine terminals?
Do they subsidize fuel costs?
Compensation for additional items over and above the trip rate means more money in your
pocket. Don’t just focus on the trip rate alone—your total compensation is based on the trip
rate plus all other revenue items.
7.
Are there any opportunities to participate in group purchasing programs
and/or benefits (i.e., group health, fuel subsidy, retirement plans, etc.)?
Participating in group purchasing programs can provide you the opportunity to take advantage
of group rates, which typically are much lower than what you can get as an individual. The lower
your costs, the more money you will make.
8.
How long does it take to get paid after you haul a load?
Cash flow is an important consideration, since you will incur daily expenses to keep your truck
running, such as fuel, tolls, etc. You will need to cover these daily expenses out of your own
pocket until you get paid by the trucking company.
9.
Will you be able to get double-ended, revenue-generating moves,
or will you be running a lot of bare chassis/bobtail moves?
Trucking companies that are able to set up double-ended moves, speed gates and other
productive moves will allow you to earn more money, especially if you are paid by the trip.
10.
Does the company have established arrangements with a repair shop that
can help you with truck repairs under the company umbrella?
The trucking company may be able to leverage the volume of its business to get better rates from
a repair shop. Also, the established relationship with the repair shop may be helpful to reduce
delays in getting unexpected repairs completed, thereby minimizing downtime in the event of
mechanical problems with the vehicle that is your chief source of income.
9
1. THE
getting
DRAYAGE
started
BUSINESS
| becoming
| Owner-Operator
an owner-operator
Essentials
1.5 What companies look for
Drayage companies look for the following qualities in an owner–operator—so if you have them, you are more
likely to be successful in finding one to work for:
Solid reputation based on a record of good driving experience
Positive attitude and willingness to learn
An understanding of the gateway container supply chain and the role of drayage in it
A thorough understanding of costs and sufficient financial reserves to handle unexpected costs, such as a truck breakdown
Reliability—the shippers whose loads you are hauling need dependable drivers; if you are reliable, you will get more loads
Responsibility—evidence that you have developed a business plan and business systems, including a regular truck
maintenance program
Flexibility—demonstrated by your ability to handle frequently changing work requirements
Self-awareness—your ability to understand and manage stress, build on your strengths and overcome your weaknesses
Mechanical aptitude—ability to perform simple truck repairs (the savings from doing this go directly to your bottom line)
10
my truck
Getting & operating
my vehicle
2. My truck | getting & operating my vehicle
2.1 FINANCING OPTIONS
buying/financing vs. leasing
The decision to finance a
truck through a loan or lease
depends on your priorites,
such as how long you plan to
keep the vehicle.
Although cash is the least expensive way to buy a vehicle,
few people are able write a cheque for the full price of a
truck, whether it is a new truck which can cost
$130,000 - $140,000
or a used one, which can cost about
$60,000 in today’s market
(see New vs. used).
Here are some of the major differences between buying with a loan or leasing:
Buying/Financing
Highlights
Pros:
»» Typically lower interest rate than with leasing
»» Payments stop once vehicle is paid off, while leasing payments continue
Pros:
once you are in the habit of leasing
»» May not require down payment
»» You can get a newer, higher-priced vehicle
»» You may be able to buy out the vehicle, one that you know, at the end of the
may be mileage limits in a lease
»» The lease is fully deductible as an expense
»» If you drive a lot of kilometres, buying is usually less costly because there
12
Leasing
lease at a good price
Ownership
You own the vehicle.
You don’t own the vehicle. You get to use it but must return it at the end of the
lease, unless you decide to buy it out.
Monthly Payments
Loan payments are usually higher than lease payments since you are paying
off the entire purchase price of the truck plus interest and other costs such as
taxes.
Lease payments are usually lower than loan payments because you are only
paying for the vehicle’s depreciation during the term of the lease, plus interest
and other costs.
Up-front Costs
These include the cash price or a down payment, taxes,
registration and other fees.
May include the first month’s payment, a refundable security deposit,
acquisition fee, a down payment. taxes, registration and other fees.
Excessive Wear & Tear You don’t have to worry about wear and tear, except that it will lower the tradein value of the truck.
Most leases hold you responsible; it will likely cost you extra if you exceed
“normal” wear and tear.
Insurance
May increase your insurance premiums.
Insurance premiums tend to be lower.
My truck | getting & operating my vehicle
2.2 getting bank financing
Here is a checklist of documents you will need to help you get bank financing:
Unless you have money available from your
own savings or a family loan, you may need to
establish a loan with a bank or credit union
before you get into the business for a variety of
items such as purchasing a truck or making
unexpected vehicle repairs.
TIPs
»» You are more likely to qualify for bank financing if
you have a business plan. Developing such a plan is
a good idea in any case, because it forces you to think
about the drayage industry and your position in it,
as well as your business objectives and how you will
achieve them.
»» Be prepared that you might be asked to offer security
for a loan. This may include your equity interest in
your residence.
For more information and practical tips on how to finance your business,
go to Small Business BC Resources: www.smallbusinessbc.ca/starting-abusiness/financing.
Documents You Will Need
Resources
1. A business plan that includes information about your:
»» Drayage business environment
(the type of business you are in and the viability
of the industry)
»» Personnel (who is involved in the business;
their backgrounds)
»» Marketing plan (how will you get companies to
buy your services)
»» Operations (what loads will you take and how
you will grow the business)
»» Finance (income, cash flow, balance sheet)
»» Risks
Small Business BC—How to Write
a Business Plan:
www.smallbusinessbc.ca
2. A starting balance sheet and cash flow projections
(monthly and annual), or pro-forma statements
See My Business:
Managing My Business & Money
Many banks also provide online
tools to help you through the
process of developing a business
plan. Check your bank’s website
or give them a call.
3. Copies of your financial/bank account statements,
including assets and investments, deposits and any
existing loans
4. Copies of your business registration /
incorporation documents
BC Registry Services:
www.bcbusinessregistry.ca
5. Copy of the bill of sale or lease agreement with
details of your truck (if you’ve already purchased it) or
other assets
6. A good credit record—you should check your credit
history beforehand and be prepared to explain any
problems that you have overcome
There are two national credit
bureaus in Canada where you can
obtain a credit report:
»» Equifax: www.equifax.ca
»» TransUnion: www.transunion.ca
13
2. My truck | getting & operating my vehicle
2.3 new vs. used
A new truck suitable for container drayage costs $130,000 to
$140,000. A good used truck costs about $60,000 and would
typically be about 6 years old, with some 500,000 kilometres on it.
You will find some owner-operators prefer to buy a new truck, while
others choose to buy a used one.
TIPs
»» Talk
to experienced owner operators, and find out the reasons why
they chose to buy new or used. Based on their experience, they might
be able to provide additional insight to help you in your decision.
»» If you decide to buy a used vehicle, it is important to research
Advantage of buying used
»» Check
The main advantage of buying a used truck is that someone
else has paid the largest depreciation costs in the
first few years of ownership. Since the value of the truck is
lower, your payments and your overall ownership costs are
usually lower.
»» Talk
Advantage of buying NEW
the reliability of the makes of trucks you are considering and the
maintenance history of any particular used truck you are planning to
buy.
the warranty, if available, on any used vehicle, since it may
be quite limited.
to your bank or professional financial advisor. Find out what
you can afford and what makes the best financial sense for you.
»» Check
the TLS Truck Renewal Environment Requirements to
ensure the truck you are considering is eligible for approval in the
TLS. Check www.pacificgatewayportal.com for the most up-to-date
information.
14
Here are some considerations and tips to help you make the
decision for yourself:
However, older trucks can have more safety issues, such as
unknown defects, and cost you more in maintenance. Many
successful owner—operators buy new vehicles and replace
the trucks every eight to 12 years because they find these
trucks to be more reliable.
My truck | getting & operating my vehicle
2.4 Importance of maintenance
A regular, preventative maintenance program is critical to keep costs
under control and avoid lost revenues due to equipment breakdown.
If you have a maintenance issue while you are moving a container,
the dispatcher will have to get another driver and you will need to get
towed to a repair shop. You need to keep a reserve of money to be able
to withstand unexpected repair costs that arise from time to time.
Here is an illustration of the costs involved
in a major breakdown:
If you are buying a used vehicle, you should develop a
Maintenance Plan during the years you plan to keep it. The plan
should include good routine maintenance practices and factor in
the periodic replacements (such as clutches) and rebuilds (such
as an engine overhaul) that you are likely to experience.
Some preventative maintenance tips are:
»» Change the oil on a regular basis and use good-quality oil filters.
»» Follow the manufacturer’s recommended maintenance schedule.
»» Use regular inspections, like the required biannual vehicle inspections,
to identify potential problems.
»» Keep good records to ensure your maintenance plan is effective and on-track.
For an excellent resource on how to get started on a Maintenance Plan,
see CVSE’s Carrier Safety Guide (www.cvse.ca).
15
2. My truck | getting & operating my vehicle
2.5 safety
Safety is one of the most important aspects of being a
successful owner–operator. The companies that you
will be working for take safety very seriously.
This includes several different aspects, such as
general safety
on the road
inspecting &
adjusting loads
driving in
poor weather
conditions
16
My truck | getting & operating my vehicle
Here are several good sources for information on trucking safety:
Resource
What it is
DriveBC
The DriveBC website provides real-time highway information to help you make good Government of BC, Ministry of
decisions on when to travel and which route to take. Resource includes:
Transportation and Infrastructure
»» current road conditions, incidents, and future planned events, such as
construction and bridge maintenance.
»» highway webcam map which displays recently captured images of highway
conditions throughout the province
»» current and forecast weather data
»» seasonal load restrictions for commercial vehicles
»» Canada/USA border wait times
www.drivebc.ca
National Safety Code
The National Safety Code (NSC) is a set of national standards, administered
Province of BC –
and enforced by the provinces, that establishes minimum safety standards for
Commercial Vehicle Safety and
commercial vehicles and drivers. Included you can find:
Enforcement (CVSE)
NSC Safety Certificate—how to get a National Safety Code Application
Safety Plan Guidelines—how to develop a safety plan that meets NSC requirements
Carrier Safety Guide—how to meet your NSC obligations
www.th.gov.bc.ca/cvse/
national_safety_code.htm
National Safety Code
Program Course
BC Trucking Association (BCTA) offers the National Safety Code (NSC) program in a BC Trucking Association (BCTA)
3-part session so attendees will achieve a complete understanding of the National
Safety Code. NCS Level 2 program is also available. Level 2 focuses on National
Safety Code compliance and record-keeping with an emphasis on preparing to be
audited by NSC auditors.
www.bctrucking.com/events-andtraining
Startsafe Safety Tips –
Trucking
StartSafe Safety Tips are one-page bulletins developed for specific work
activities or businesses.
WorkSafeBC
www2.worksafebc.com/Publications/
StartSafe-Trucking.asp
Trucking Safety Council of BC
www.safetydriven.ca
Safety Training,
Trucking Safety Council of BC is working to improve safety performance in trucking
Resources & Information and related industries. Delivers free, confidential advice along with training,
resources and information.
Provided By
Link
17
2. My truck | getting & operating my vehicle
2.6 fuel efficiency
As an owner–operator and small business owner, fuel will be one of the highest costs of your operation. You can save a lot of money if
you monitor and take specific actions to improve fuel efficiency.
Here are a few suggestions on how you can reduce your fuel consumption:
»» Slow
down. Speed is the number one
contributor to high fuel consumption.
»» Check
»» Minimize
idling. Excessive idling not only wastes fuel, it also increases maintenance costs, accelerates the need for engine rebuilds and creates unnecessary emissions.
»» Use
»» Check
tire pressure regularly. Proper tire inflation is essential for fuel economy, safe vehicle handling and long tire life.
»» Follow
»» Check
»» Carefully
wheel alignment regularly.
Misalignment can cause accelerated tire wear and increase fuel consumption.
18
your fuel economy frequently.
Keep records.
fuel-efficient driving techniques, such as smooth acceleration and braking, proper use of cruise control, progressive shifting, etc.
your vehicle’s maintenance schedule. A vehicle that is not well-maintained will waste fuel no matter how carefully driven.
spec your vehicle for the intended application. Unnecessary additional weight
will burn fuel without any benefit.
My truck | getting & operating my vehicle
Poor driving habits can result in vehicles consuming up to 35%
more fuel compared to fuel-efficient driving techniques.
Developing fuel-efficient driving habits is the most effective and
least expensive way to reduce fuel consumption.
ResourceS to help reduce fuel consumption
1.
2.
Resource
Link
E3 Fleet - Information & Tools for Fuel Efficiency
E3 Fleet offers information and tools to help you increase fuel efficiency, reduce harmful emissions,
manage expenses, and incorporate new technologies.
www.e3fleet.com/free_tools.html
BC Trucking Association (BCTA) - Driving for Fuel Economy Training
Check out the BCTA’s training page for driving for fuel economy training. BCTA offers this in-person
training on a periodic basis and will consider offering it more frequently if there is demand.
www.bctrucking.com/events-and-training
19
2. My truck | getting & operating my vehicle
2.7 practical terminal information
The terminal operators in Metro Vancouver provide practical terminal information and news updates on their websites that could be
helpful in your daily work as a drayage owner–operator.
20
what information will you find?
links
DP World–Centerm
Safety information
Gate holiday schedule/hours of operation
Export cargo recieving and cut-off dates
Main website
www.dpworld.ca
Trucking specific
www.dpworld.ca/www/index.php?idpage=15
Fraser Surrey
Docks
FSD Container Yard Map
FSD Safety Pamphlet
Sample load plan
Terminal gate compliance initiative
Main website
www.fsd.bc.ca
Trucking specific
http://grs.fsd.bc.ca/grs/login.aspx
TSI Terminal
Systems Inc.
Deltaport, Vanterm
Navis information
Terminal safety rules and regulations
Terminal layout and traffic flow maps
Terminal gate compliance initiative
General facility information
Main website
www.tsi.bc.ca
Trucking specific
www.tsi.bc.ca/t3/index.php?id=695
Port Metro
Vancouver
Latest trucking news and information
Ongoing program information:
- Truck Licensing System
- Container Truck Efficiency Program
Trucking Headlines (quarterly newsletter)
Main website
www.portmetrovancouver.com
Trucking specific
www.portmetrovancouver.com/en/users/landoperations/trucking
Truck Licensing
System
TLS Login
TLS News & Notice Board, including:
- TLS Environmental Requirements
- License and Permit Renewals Information
- TLS Truck License Fee
- TLS Phone Line Information
List of approved companies
Main website
www.portmetrovancouver.com/en/users/landoperations/trucking/tls.aspx
Trucking specific
www.pacificgatewayportal.com
my business
managing my
business & money
3. my business | managing my business & money
3.1 Budgeting & bookkeeping
Budgeting
A budget is one of the most effective tools for managing
your business because it helps you
Sample Budget
Monthly Budget Actual Amount Difference
Income
keep track of your finances.
Drayage
It shows how much money is needed to run the
business, where the money gets spent, and how much
you need to pay yourself for driving to earn a decent
living. An owner–operator’s budget should include all
sources of income (revenue), business expenses and
cash flow. It should provide a complete financial picture
on a monthly & annual basis.
Total Income
Other
Expenses
Fuel
Repairs
Tires
Insurance, Licenses
Truck Lease/Loan
Depreciation/Other
Total Expenses
Net Income
TIPs
Use a computer to manage your budget
An easy way to manage your budget is by using Excel, a
spreadsheet software program included in Microsoft Office.
You may also be able to develop budgets in your accounting
software and generate budget versus actual comparisons.
Some accounting software programs will export accounting
data to Excel.
22
ACCOUNT FOR DEPRECIATION
It is important to include depreciation as an expense. This is
necessary to budget for the day when you need to replace your
most important asset—your truck.
SET UP A RESERVE ACCOUNT
It is a good idea to have a reserve account in the business, setting
aside money to cover unforeseen costs such as a major repair bill
(a new clutch can cost up to $3,500). At least $10,000 should be
available for this purpose.
my business | managing my business & money
BOOKKEEPING
TRACK
expenses & income
A budget establishes the plan for your business, but
bookkeeping tells you how
the plan is working.
Successful owner–operators keep clear records so they
can track their performance and make adjustments along
the way to improve their bottom line.
REVISE
budget to improve your bottom line
TIPs
Keep good operational and financial records
»» Save all receipts and log books.
»» Open a separate business bank account to manage all income
and expenses associated with the business.
»» Get a separate business credit card to use for all business
transactions, and keep your monthly statements.
»» Keep insurance papers handy and in a safe place.
»» Keep maintenance records and expenses for the truck,
including warranty information.
»» Record profits/losses by month.
Try using bookkeeping software
There are several different types of software that can help
you manage your books. Some of the most popular options
include Quicken (personal financial software with some
business accounting features); Simply Accounting; and
QuickBooks (small business software with more robust features).
Pay yourself
Another best practice is to write a “distribution cheque”
each month from the business account to cover personal living
expenses. The amount you pay yourself is based on your personal
and family cash needs, while all remaining income stays in the
business account to fund operations.
23
3. my business | managing my business & money
3.2 how am I doing?
Good owner–operators monitor their monthly budgets
and track how they are doing using the following key
indicators:
»» Gross revenue per month
»» Gross expenses per month, including truck lease
payments, fuel, maintenance, depreciation, insurance and tire wear and tear
»» Revenue-generating trip
legs per day
Cost benchmarks: As a rule of thumb, you can expect to
incur the following costs as an owner–operator working in
the local drayage market:
Typical Drayage Costs
Cost per hour
Cost per day
Cost per month
$20
$250
$5,000
Note: These costs include truck payments (e.g., lease payments), fuel costs, insurance, about $200
a month for regular maintenance, and a factor to cover Workers’ Compensation costs (about 3.8%
of gross revenues).
24
As you can see, if you are not able to make at least $30
an hour in excess of your direct costs (i.e., total trucking
income of at least $50 an hour), then you will not be able
to make much money in this business.
my business | managing my business & money
3.3 how can I make more $$$?
Some of the keys to increasing your productivity and revenues
as an owner–operator are:
»» Be reliable and work for a reputable company
As an owner–operator, there are three key factors
that will help you increase your bottom line:
1
2
Increase productivity
»» Drive as many revenue miles as possible where Increase the number of revenue trips per day
you are moving a loaded or empty container; avoid deadheading, whenever possible.
Increase revenue per trip
Increase the total revenue received, including trip
rate PLUS compensation for any additional items
such as wait time, fuel subsidy, tolls, etc.
3
(see Choosing a company to work for pg. 8).
Reduce your costs
Reduce the total cost of operating your truck,
including fixed and variable costs.
»» Establish a good relationship and communica-
tion with the drayage company’s fleet manager and dispatcher.
»» Manage your time effectively.
»» Work for companies that pay waiting time.
»» Document and report undercutting of Ready Rates to PMV to promote higher trucking rates and driver compensation (see Glossary pg. 30).
25
3. my business | managing my business & money
3.4 Understanding my costs
What type of costs do I have?
Variable costs are related to how much you drive
(e.g., fuel, tires, maintenance). They vary with
distance driven.
In order to stay in business,
you need to earn enough
revenue to cover ALL of
your costs, both fixed and
variable.
Fixed costs are those that have already been
determined, such as insurance, loan payments and
license fees. They are the same whether you drive
one kilometre or a thousand.
The following costs are
typical for a 10-hour day,
driving 180 kilometres in
Metro Vancouver.
Variable costs
Fuel
Repairs & maintenance
Tires
Miscellaneous
Total variable cost
Fixed costs
Tractor ownership
Licenses
Insurance & administration Total fixed cost
Total Cost
98.60
21.86
5.00
2.68
128.14
47.48
7.18
54.00
108.66
$236.80
Based on this example, if you earned
$450 in revenue for the day, your return
would be $213.20 ($450–$236.80), or
about $21 an hour.
26
my business | managing my business & money
Cost Breakdown
Good operators focus on costs they can control.
(Share of total trip costs)
Since the revenue you receive as an owner–operator is largely beyond
your control once you select a company to work for, being successful
really depends on understanding and managing your costs.
Tires
Maintenance & Other
Fuel
Every dollar in cost savings goes directly to
your bottom line profit!
Fixed Costs
Driver Operating Time
After compensating for your own time spent driving and waiting in traffic,
or to pick-up and deliver containers, the biggest cost is fuel. (See chart.)
Reducing your costs by just
5 cents per kilometre
will save you $3,500 a year
if you drive 70,000 kilometres a year. At that rate, you could
save $35,000 over 10 years
Driver Wait Time
There are several straightforward ways to keep
costs under control:
1. Reduce fuel costs:
» driving more slowly
» reducing idling time
» maintaining proper tire pressure
2. Do your own minor truck repairs.
3. Perform regular preventative maintenance
on your truck.
27
3. my business | managing my business & money
3.5 financial tools
As part of this toolkit, an online spreadsheet was developed to
provide three financial tools for owner-operators who wanted to
conduct a more detailed analysis of their operations.
Owner-operators who want to improve their financial
situation would stand to benefit by using this tool to
better understand how operational and business
decisions impact their profitability and cash flows.
The spreadsheet includes the following three (3) financial tools:
What is it?
1) Profit Estimator
This allows owner-operators to enter three factors that
affect the profitability of their activity and quickly see
the results. The factors are revenue, hours worked and
distance driven per time period.
»» How much money do I make per trip? Per hour? Per km?
2) Trip Cost Analyzer
A more detailed version of the Profit Estimator, this allows
an owner-operator to enter detailed trip characteristics to
calculate revenue, costs, profit and the effect of improving
trucking productivity.
»» How much money do I make per trip? Per hour? Per km?
»» How much money should I charge to compensate for this trip?
»» Does the compensation for this trip cover all my variable and fixed costs?
3) Pro Forma
Financial Model
This is a more sophisticated financial tool that can help an
owner operator analyze the expected financial result for
several years. The results from this tool can be used to
develop necessary information for a business plan,
including: 1) Income Statement, 2) Balance Sheet, 3) Cash
Flow Statement and 4) Financial ratios.*
»» How much captial do I need to start and survive in the business?
»» How much money can I borrow, and can I repay it?
»» How much do I get out of the business?
»» What will the business be worth in five years?
»» Do I really want to do this?
* See Glossary
28
What questions can it help answer?
To download a copy of this spreadsheet, go to:
http://toolkit.bctrucking.com
NOTES
29
glossary
Asia Pacific Gateway or “Gateway”
Financial ratios
National Safety Code (NSC)
Canada’s Asia Pacific Gateway is an integrated,
seamless supply chain that includes points of entry
(airports, seaports), warehousing and distribution
facilities, railways, roadways and border crossings.
The Gateway connects Canada and the North American
market to Asia and the world.
Allow you to identify key indicators to track the
performance of your business. Financial institutions
will look for these if you apply for financing. Examples
of these benchmarks include current ratio, acid test
ratio, and debt service coverage measures, such as
time interest covered by income.
The National Safety Code (NSC) is a set of national
standards administered and enforced by the provinces.
The program establishes management and performance
requirements for commercial carriers. The NSC
standards establish minimum safety standards for
commercial vehicles and drivers.
Balance sheet
Logistics / Supply Chain
Provides a financial picture of the business at the end
of each year, including assets, liabilities, equity and
retained earnings.
Logistics refers to the formal process in which
businesses ensure that supplies are procured from the
right sources and transported to where they are most
needed at the right time. More often than not, when
used with reference to business, the term occurs in
conjunction with the term supply chain, or supply
chain management.
British Columbia’s program objective is to ensure that
carriers maintain the minimum standards for their
drivers and vehicles, thus preserving road safety
through lower numbers of safety-related offences,
vehicles out-of-service and, ultimately, crash rates.
The rationale behind the program is that carriers are
responsible for mechanical maintenance of their
commercial vehicles and the actions of the drivers in
their control.
Cash flow statement
Shows operating cash generated by the business and
takes into consideration the acquisition of assets (such
as a tractor), how the business is financed, and the net
addition/reduction to cash at the end of each year.
Drayage
The term drayage was first used to describe the
overland transport of cargo to/from barges or rail yards.
A more suitable recent definition is: truck container
pickup from or delivery to a seaport terminal with both
the trip origin and destination in the same urban area.
Some containers moving through Port Metro Vancouver
originate or terminate at locations outside the Lower
Mainland. Those trips are referred to as long-haul
drayage.
30
In the Asia Pacific Gateway, the logistics aspects deal
with the movement of goods from source to destination
using air, marine, rail and trucking resources. The
process is the supply chain; logistics refers to the
science of ensuring that the movements to and from
each segment of the chain are carried out as efficiently
and economically as possible.
Marine Container Terminals
There are four marine container terminals: Vanterm
and Deltaport, operated by TSI; Centerm, operated by
DP World; and Fraser Surrey Docks. The primary role of
these terminals is to provide throughput of containers
through the port. The terminals have an operational
relationship with drayage companies and owner–
operators, and no contractual relationships.
Port Metro Vancouver (PMV)
Port Metro Vancouver (PMV) leases terminals
to marine container terminal operators and is responsible for the operation and development of port assets.
PMV also administers the Truck Licensing System that
allows owner–operators and company truck drivers to
access marine terminals.
Port Pass
All workers requiring regular and frequent access to
Port Metro Vancouver (PMV) property must have a Portauthorized photo identification card called a Port Pass.
PMV has chosen Port Passes as the means for marine
facility operators to comply with Transport Canada
security regulations, which require identification of
all individuals on marine facility property at any given
glossary
time. Failure to have a valid Port Pass may result in
being refused access to Port property. PMV has
authorized the BC Trucking Association to issue port
passes to drivers of vehicles over 5,000 kgs.
Profit and loss (income) statement
Indicates whether or not the business is profitable by
comparing revenue and expenses to arrive at profit
before and after tax.
Ready Rates
The compensation paid to non-union owner-operators
for the pick-up, delivery and movement of containers
to/from marine container terminals is based on Ready
Rates. This regulated rate regime emerged from a
trucking dispute in 2005 and the federal–provincial
task force that led to the Vince Ready Memorandum
of Agreement (MOA). Mr. Ready was the mediator in
the dispute. The intent was to establish a rate floor to
help ensure a reasonable level of compensation for
local drayage activities. The Ready Rates do not apply
to unionized company drivers, whose compensation is
governed by collective agreements.
TEU
The 20-foot-equivalent unit (TEU) is a common
measure of the cargo capacity of a standard intermodal
container measuring 20 feet long and 8 feet wide. A
40-foot container equals 2 TEU.
Truck Licensing System (TLS)
The Truck Licensing System (TLS) was originally
introduced as a requirement to access terminals
within the jurisdiction of the port authority in order
to manage the number of vehicles and drivers. It was
later amended to impose safety and environmental
standards relating to the condition and age of vehicles
serving the port. The TLS also gives Port Metro
Vancouver a mechanism to impose sanctions on
operators who display behaviour that does not meet
the port’s standards or service requirements.*
The TLS program grants two different types of licenses,
each of which requires holders to pay no less than the
Ready Rates to non-unionized, independent operators:
Full Service Operator (FSO) License
This type of license is for a drayage company that has a
direct relationship with cargo interests (shippers,
consignees, shipping companies and agents), provides
a complete dispatching service, and has sufficient
equipment to provide services in an efficient and
ongoing manner to the port community. Full-service
operators are granted access to the container terminal
reservation systems. There are two types of FSO licenses:
local and long-haul. A local license allows a truck to
provide pick-up and delivery of both local and long-haul
containers. A highway license restricts a truck to picking
up and delivering only long-haul
movements.
There has been a moratorium on applications from
independent owner–operators since early 2007. Only
operators who could prove they were in operation within
a specific six-week historical window were able to
apply. The moratorium was expanded in 2009 to
include all local and long-haul license and permit
holders and to preclude fleet expansions by existing
licensees. In 2011, the moratorium on the issuance of
new licenses and the restriction on fleet expansion were
lifted for FSOs only. Today, the moratorium remains in
place for independent operators.
In July 2013, PMV launched a pilot project introducing
a new temporary driver category. This category of local
TLS drivers will operate within the Port under a Joint
Temporary Permit (“JTP”) signed by and issued jointly to
the hiring TLS approved local FSO License holder and a
non-TLS approved owner operator.
* It should also be noted that trucking company safety oversight
responsibilities, such as vehicle maintenance and driver hours of
service, are governed by the National Safety Code, which falls
under provincial government responsibility.
Independent Owner–Operator Permit
This type of permit is for a drayage entity that may be an
incorporated company and does not have a
significant pool of equipment or access to the reservation
systems. Owner–operators can only access port property
through a subcontract with an FSO. There are also
separate permits for local and long-haul operators.
31
The BC Trucking Association (BCTA) is a province-wide,
non-partisan, non-profit motor carrier association. Its
members include for-hire and private carriers hauling all
types of freight, including drayage trucking companies that
contract with owner-operators operating within British
Columbia’s ports. BCTA takes an active role in advancing
HR and skills training for the trucking industry, including the
development of a variety of educational tools and programs.
The Asia Pacific Gateway Skills Table is a non-profit,
regional partnership between labour, business and
education/training institutions. The Skills Table works
together with these partners to develop proactive, projectbased solutions to ensure the Asia Pacific Gateway has
enough people with the right skills and training to meet its
needs.
This project is funded by the Government of Canada’s Sector
Council Program.
For more information:
The opinions and interpretations in this publication are those
of the author and do not necessarily reflect those of the
Government of Canada.
—
www.toolkit.bctrucking.com
O: 604.684.1471
—
E: [email protected]
—
www.apgst.ca
www.hrwire.ca
© 2013