Making a Start in Road Haulage
Page 64
Page 65
If you've noticed an error in this article please click here to report it so we can fix it.
"There is No Doubt that whilst Shortage of Capital is a Handicap, Lack of Personal Aptitude is an Absolute Bar to Success in the Haulage Industry"
IHAVE not in my study of the Transport Bill or the Parliamentary discussions seen any reference to the type of individual to whom the vehicles now belonging to the Road Haulage Executive may be sold. In particular I have not noticed anything which calls for investigation into the character of a prospective buyer of vehicles. He may or may not have any knowledge of haulage; it does not seem to matter. Neither does the subject of capital enter into the matter.
Presumably, any man who will, may now enter the haulage industry simply by purchasing one of these vehicles. All that is necessary is for him to be able to put down a sum of money which will serve as the initial payment-on a hirepurchase contract and he becomes a haulage contractor holding an A licence and thus at liberty to carry on as though he had been in the industry since the days when licences were not necessary. If I am correct in that assumption, there is the possibility of the industry being flooded with new entrants who may make haywire of all that has been done since 1920 to stabilize the industry.
I am not, in drawing attention to this matter, venturing to suggest that such a development would be for good or ill. Within limits, I am actually in favour of introducing new blood into the industry, but there should, it seems to me, be some means of controlling the influx, for otherwise we may find ourselves back into the conditions which prevailed before 1933. '
Type of Potential Entrants
According to my mail, there is quite a number of potential entrants who are of the owner-driver type. Some of my correspondents are experienced, but many are not, None of them is at all dismayed at the prospect of entering this highly specialized business: most of the queries raised are in respect of capital, asking information as to the minimum amount needed to make a success of the move. Many of the letters are strongly reminiscent of those which 1 was accustomed to receive between 1920 and 1933.
It is well-known that lack of capital is a serious handicap to any business. There is no exception to that rule: at least I am satisfied that, broadly speaking, haulage is not one of them. It is nevertheless true to state that entry into haulage is not as difficult as most other industries and calls for less capital than many.
Actually, many hauliers commence with insufficient capital. Before the coming into operation of the present licensing scheme, as imposed on the industry in 1933, anyone who wished could enter the industry and it was largely that, and partly the possibility of getting into haulage with little capital, that made the 1933 Act needful. It seems to me that ,hose conditions will be reintroduced when the new Transport Act begins to operate.
There is, so far as I can see, no criterion by which capital requirements or qualifications, -business,. personal or techideal, can be measured. The amount of capital required, which to the inexperienced might seem capable of assessment, at loast approximately, is in fact the most insignificant of the ift0 factors concerned. Many hauliers, perhaps the most numerous among those who until the industry was nationalized, made a success of haulage, started with little capital, a few with none. 1. hey made successes of their ventures because they had business and technical aptitude and personality, whilst many failed who had sufficient capital bin were lacking in the other essentials to success.
There is no doubt that whilst shortage of capital is a handicap, lack of personal aptitude is an absolute bar to success in the haulage industry. Perhaps more necessary is the willingness to work hard, Many of my regular correspondents are among the successful hauliers who started with little financial backing and I am happy to be able to state that not a few of them have been successful -because they were guided by me in their initial steps.
Clearly, the course to adopt in dealing with a beginner who has not much money to invest is to examine his other qualities. Usually there is evidence of experience in only driving and maintenance. The question is what are the other requisites and how is their presence to be discovered? Some clue is frequently afforded in a letter of inquiry. If it is of a character to denote that the writer has given long and serious thought to his project before writing, well and good, If, in addition, it shows that he has already had some experience of the kind of work in which he proposes to engage, even if the experience is only that of a driver, the prospects arc even better.
No Prospect of Success
If, on the other hand, the letter has obviously been written off-hand, and embodies queries of only a general character, thus demonstrating that the writer has not devoted a great deal of thought to the matter, there is not much prospect of his success. 1 think the most extraordinary letter of this kind was one in which the inquirer enthusiastically informed me that he had just paid the initial instalment and tax on a £1,000 lorry which he proposed to use for haulage contracting and asked me to assist him in making a. start! He added, naively enough, that the expenditure involved had absorbed all his capital. Either the writer was as foolish as his letter seemed to indicate, and he has now repented Of his impetuosity, or his capacity and aptitude for haulage business were out of the ordinary run.
The foregoing letter was, of course, an exception and an extreme case. .I do, however, receive a great many which arc very vague in their statements Or inquiries and tend to show, as I have stated, that the writers have not given much thought to the matter. Generally, a letter of this kind begins with a statement that the writer is about to engage in the business of haulage contracting, or hopes to do so. He has had his eye on a certain vehicle or maybe, on several vehicles, now
operating for the R.H.E. and likely therefore to be available to him as a buyer, each vehicle, of course, carrying with it an A licence. He asks my advice. He mentions the vehicles which he proposes to buy, if he gets the opportunity, and asks if in my opinion he is making a good selection. He asks which is the more profit-making side of road haulage, that which is mainly confined to medium-distance haulage, or long-distance work.
My trouble, apart from the question of the psychology of the writer as revealed in his letter, is that I cannot give him a useful reply. There is no answer to an inquiry of that kind, because longand short-distance haulage are equally profitable.
As for his final request for such advice as I think I should give him, that leaves me with the option either of telling him he should leave road haulage alone until he has made more of a study of the subject, or of spending my life in writing him a continuous letter about what should really be his business.
The sort of letter I do like starts in this way: "I have been offered a contract involving the use of a 6-ton lorry which will keep me fully occupied on three days per week. I have been asked to quote for the work and would like you to advise me what I should charge for the job. The mileage I shall cover in connection with this work is 95 and I shall be able to complete each day's work during ordinary working hours without assistance. I have been looking round the neighbourhood and find that there is a reasonable prospect of my being able to find work for the vehicle during the rest of the week.
Another matter on which I would like your advice is capital. I have £401) available. Would it be better for me to lay out all my capital and purchase the vehicle outright, or would I be safe, with this contract available at a price near the figure suggested by you to acquire the vehicle under a hire-purchase agreement, relying on the profit to enable me to pay off the instalments?"
Market Parcels SerVice
Alternatively, as contracts of haulage do not often go begging after that fashion, a letter after the style of the following meets with my approval:— " I have been investigating for a parcels service in this area between a market town A and the surrounding villages B, C and D. I have made inquiries and a number of principal shopkeepers in the market town has promised support if I can quote reasonable prices.
"It seems that I could rely on picking up about 3 tons of traffic every Friday, that being market day, and about 30 cwt. each day for the rest of the week. The distances between the places are—here mileages are quoted—and, taking into consideration the time involved in collecting and delivering it would be as much as I could do to complete one journey per day. Will you please advise me what I should charge per parcel according to weight and bulk?"
The point about these two letters is that they show that the writer has himself given serious thought to the problems involved in his project. There is hope for the man who uses his head to supplement his capital, indeed, so much so that in those circumstances the actual amount of the capital becomes a secondary consideration. Such a man is more likely to succeed with a small capital than the haphazard " bull at a gate" type of inquirer.
We have now come, as was perhaps inevitable in the circumstances, to a discussion of the vexed problem of hire purchase. It is a subject concerning which much ink has been spilt by writers both for and against the purchase of rolling stock by instalments. I have often referred to the matter myself. Let me quote a story of such a transaction.
A haulier who had purchased his vehicle in that way and had been using the machine for a year, complained that his vehicle was no use to him because all that he had been able to do in that time was to operate it and pay for it. The sum involved was £1,900. If he had earned sufficient in one year to be able to pay that much out he was doing very well indeed and did not know it. He clearly did not realize that he was paying for his vehicle out of his profits.
Paying Off Instalments That story emphasizes the very thing I am going to deal with now, namely, the place in the haulier's profit-and-loss account for the item "instalments of hire purchase." The operator to whom the short story just elated applies, clearly is of opinion that the proper place is in among the vehicleoperating costs. That is not the case. Hire-purchase instalments must be paid out of profits. The fact that a man is able to continue paying them until his indebtedness is wiped out is a sure indication that his business is going well, always provided of course, that he is paying his way in other directions.
There are many members of the road haulage industry who hold the view that the hire-purchase system is the cause of the ruin of the industry. It would be a good thing, in the opinion of these men, if it were made impossible for a man to acquire a vehicle for use in haulage in that way.
My reaction to that was: where is this ruin of our industry? I entirely disagree with the suggestion that the use of hire purchase is detrimental to the continued progress which the industry should experience when all these nationalization theories have gone by the board. That hire purchase is a bad thing because a few of those who utilize it have gone astray is much the same as saying that strong drink is the cause of the ruin of the British nation.
Generally, when a haulage contractor who has acquired a vehicle under a hire-purchase agreement gets into difficulties it is because he lacks appreciation of the fact that in order to complete his contract, paying his instalments without fail on the days they are due, he must make sufficient profit to pay those instalments and earn a living besides.
Hire Purchase and Rate Cutting
It is here that I can deal with and squash the suggestion that the purchase of vehicles through the medium of hirepurchase contracts is harmful. Those who are against it declare that price-cutting is the natural outcome of such methods, that an operator, finding it difficult to meet his obligations under the hire-purchase agreement, turns to ratecutting as the only way in which he can find the funds to pay his instalments. That may be so in some instances but the proportion of hauliers who act in that way is small: most of those hauliers take care that their earnings are sufficient to provide for the payment of instalments. They are more likely to try to get better rates because they realize that only in that way can they stay in the industry.
The fact is that hire purchase of vehicles for use by a haulier has, in the past, helped many a good man to establish himself and become a credit to the industry. It is a good thing and one to be encouraged if that is all that has come of it. Mother aspect of the matter which can be described as beneficial is that, as a rule, the purchaser is enabled to buy a new vehicle and not a used machine. It is better for the haulier and for the industry too that the newcomer should begin with a new machine. • Here again, however, I must admit and present for consideration the fact that in certain cases the purchase of used vehicles is to be recommended. An intending haulier who is really a good mechanic and has the knowledge and capacity to make a wise choice may purchase a used vehicle. There must, however, be no doubt about his mechanical aptitude and no risk of his being deceived as to the real value of the used machine. S.T.R.