On a recent episode of DAT iQ Live, we spoke to Todd Amen from American Truck Business Services (ATBS) about the 2024 outlook for owner-operators and small fleets and how they’ve been able to weather the perfect storm of low rates and higher diesel costs during 2023. The complete version of the show can be found here.
Get the clearest, most accurate view of the truckload marketplace with data from DAT iQ.
Tune into DAT iQ Live, live on YouTube or LinkedIn, 10am ET every Tuesday.
Question of The Week
How have fleet operators and owner-operators weathered the perfect storm of high diesel prices and decreasing freight rates this year?
Todd Amen: The smart drivers have done okay this year. For a smart driver, there’s always going to be freight moving, and I love that small businesses – an owner-operator or a small fleet – can adjust their business model that day compared to someone that’s got 100 or 1000 or 10,000 trucks. It could take them weeks, months, or years to adjust.
In 2022, when diesel spiked, we didn’t see the reaction we expected – drivers didn’t adjust like they should have and kept driving fast. They didn’t drive extra miles to compensate for lower rates, maintaining their COVID-era fast-driving habits. As this year has progressed, we’re finally seeing carriers realize they’ve got to do things differently to make money in this market. And that’s driving slower and running more miles.
Dean Croke: What has happened to owner-operator net income through the down cycle, and where is it now?
Amen: Our population of 20,000 drivers should wind up around $63,000 net income at the end of 2023. And that’s around $10,000 lower than at the height of COVID when that average was about $73,000. At $63,000, things are tight for drivers, like most Americans, who live paycheck to paycheck.
Every penny will support their business and home life, and what’s different this year is drivers are running more miles. In 2019, drivers ran 105,000 miles per year, but during COVID, when rates jumped, annual mileage dropped 20% to 85,000 miles. This year, mileage is back around 95,000 miles to offset lower freight rates.
Croke: What are owner-operators who are surviving in this market doing differently this year?
Amen: To most, it appears simple to operate a truck, but it’s not. This year, ATBS started talking to drivers about “plus one, minus 10” – our advice to drivers was to take an extra load each month and drop their speed by 10 miles per hour. An extra monthly load can generate close to $7,500 additional net income to your bottom line.
The “minus 10” is slowing down by 10 miles per hour, which can save around $10,000 annually. Combining the two for a smart driver means a driver could make more than they did during COVID.
Croke: Given how difficult this year has been, why has capacity taken so long to leave the market?
Amen: In past cycles, finance companies have made it easy to become an owner-operator, meaning no money down on relatively inexpensive used trucks under $50,000, so there wasn’t a lot on the line when things got tough.
The owner-operators that came in during COVID-19 were different. Many made significant down payments on trucks that were expensive. So a 10% or 20% down payment on a $120,000 used truck was as high as the $30,000 to $40,000 range. This time, operators have a lot more invested, forcing them to do everything they can in order not to lose their business.
Croke: Do you see new entrants still coming into the industry?
Amen: I love trucking because it helps people fulfill the American dream of starting a business. At ATBS, we’re seeing new carriers start their own businesses, and we sign, on average, 800 to 1,000 new clients every month. Last week, we had a driver cash in his 401-k and then spent $50,000 on a used truck hauling flatbed freight.
Croke: What do you think 2024 is going to look like?
Amen: It’s going to be a mediocre, break-even year, but what happens in a challenging market is drivers run more miles. Measuring the capacity impact of a driver running an extra load a month is difficult. It’s like adding 5% to 10% more capacity in drivers’ extra miles.
So, it’s one of the reasons we will continue to have a slow market through at least the first half of 2024. Trucking has become unpredictable, and the “plus one, minus 10” strategy will be even more critical in 2024.
The complete interview can be found here.
