Moving Words – Too Much Truck?
“If you think education is expensive, try estimating the cost of ignorance.”
Howard Gardner, American developmental psychologist, Hobbs Professor of Cognition and Education; Harvard Graduate School of Education
There’s a method used in real estate investing that also works well for those in the Moving Business and their lease operators. When investing in real estate for the purpose of receiving the greatest return on the dollar invested – for renting it out, in other words (creating a sustainable, consistent income), purchase the house with the lowest price in a neighborhood. In so doing, you have far greater profitability by being able to charge a higher rent with lower costs. Yet the revenue (rent) necessary to support the expenses like loan payments, taxes and insurance can be lower than other houses in the area.
Now you may be thinking, “How does this apply to a moving company or their lease operators?”
Moving companies have different business models based on the type of customer for whom they haul. This can be influenced by the areas in which they haul and if they are hauling COD, corporate, military and government household goods or tradeshows and high value electronics. All of this determines their “neighborhood” and the average revenue each of their shipments generate. This is going to be different for each moving company.
As an owner and/or manager of a moving company it’s vitally important you understand and know how the average revenue matches up with both your fixed and operational costs of the trucks you or your van operators own. Are you at the high end of costs or the lower end, compared to the other agents within the van line and with other moving companies and agents running in the same lanes or markets?
If you’re looking at a short haul and local moves the model, age and cost of the truck you bring with you is going to be different than one you’d use to run cross-country moves or tradeshows and electronics. Each has revenue streams which are totally different. Local and short haul moves tend to be at the lower end of the revenue scale, while long distance moves, tradeshows and electronics are much higher. So you wouldn’t want a high-end, top-of-the-line tractor with all the bells and whistles – plus the high purchase price and payments – to pull the lower revenue moves.
In other words, you must make sure the truck you have (or a van operator leases on with) isn’t going to put you or that van operator at a disadvantage in making the revenue you or he needs to cover all the costs of the truck, all operating costs, and profitably necessary to sustain and grow yours and his or her operation.
“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’” – Warren Buffet (Benjamin Graham, British-born American investor, economist, and professor; widely known as the “father of value investing.”)
Contact Tim Brady
at tbrady@writeuptheroad.com
