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 The trucking business has always been a tough business. Kind of like farming..
When you finally get a good crop (freight) your expenses go up and your bumper crop just turned into a so-so year. (If you're lucky) When your expenses finally fall, so does the crop.
Maintaining profitability in a cyclical industry, such as trucking, is hard. But it's definitely do-able........
Successful companies grow and thrive in both good and bad times. Although they may hit a bump now and again they continue to grow and prosper. There are many examples of these companies in the trucking industry. You see them all the time chugging along through rain and shine. You may look at them and wonder.... what is their secret?
Actually, their secret isn't very secret. What their good at, is understanding that in a cyclical industry there will always be cycles. They base their business models on this fact and plan accordingly. They develop plans that take advantage of the good times and mitigate the pain of the bad times.
Let's take a look at how this works in an area everyone in the industry is familiar with, Insurance.
The insurance industry is a lot like the trucking industry, it's cyclical. For those who been around awhile we've seen many hard markets and we've seen many soft markets. When the market is soft and everyone wants our business we tend to forget that we're in for a hard market down the road. Insurance is cheap, freight is scarce. So, don't worry about accident reduction, just turn the claims over to the insurance company and haul freight. That's what you pay your premiums for....... and right now it's the least of your worries.
This short-sighted business approach is exactly why hard markets come to the industry and raise everyone's premiums.
Don't think you can make a difference in the overall market? Think again.....
As a trucking company owner or executive, can you make a difference in your near term premium costs? No. As a trucking company owner or executive, can you make a difference in your long term premium costs? You betcha...
The successful trucking companies know that they will face hard insurance markets ahead but they also know that by managing safety at their store, they won't face increases that can put them out-of-business. They can continue to operate during the bad times and still remain profitable. And best of all, they have a competitive advantage over the companies that didn't plan this way. There goes your freight....
In addition to helping themselves out, they've helped you out too... They helped moderate the inevitable hard market by keeping their claims down.
What Can I Do?
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Invest in accident (claims) reduction all the time. Even during the soft market when you don't think it's important. The good operators raise the level of the bad ones and visa versa.
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Establish a long term relationship with your insurance carrier. Without exception, if you have a long standing relationship that is fair to you and your insurance carrier, your carrier will stand beside you during a hard market or a bad claims year.
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Mange safety just like you would in all of the other aspects of your business. You wouldn't stop changing oil on your trucks just because engines were cheap, would you? Why cut effective safety programs when insurance is cheap?
Many people view safety as an expense.
It's probably because they view safety and regulatory compliance as the same. They aren't... Safety is a gold mine, if you approach it correctly..
Oh, one last thing.....
Don't blame your insurance agent. They don't have any control over the market. You do...
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