PROBLEMS OF THE HAULIER AND CARRIER.
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Obtaining a Footing in the Goods Transport World.
JTJDGING from some of the letters I receive from time to time, there is a great deal of misconception on the part of beginners in the transport industry as to how much they can earn and what their outlay will be. Far be it from me to throw cold water on people's hopes, but I do think that some facts should be placed before them, so that they can gauge the possibilities with a reasonable degree of accuracy.
To the man who has used mechanical road transport and who knows something of its business aspect, my.
remarks this week will cover known ground, but to the genuine tyro I trust they will serve as a basis for serious . calculation of figures in the light of peculiar _circumstances best known to himself. So far as possible, I prefer to take a definite instance of a problem so as to be able to give figures which are more instructive than a mere keneral discussion of principles. One can, however, by a process of deduction trace out the moral and apply it to another case, altering the figures accordingly.
A. popular plan for a beginner is to purchase a second-hand lorry of about four tons capacity, paying for it on the instalment plan. In some cases the vendor of the lorry offers to help in the initial task of finding work, and it is here that caution should be shown in accepting the rather rosy figures which are put forward from time to time by the enthusiastic salesman. One man wrote to me -recently asking my opinion about a story of £9. a week profit earned by a lorry costing
• .£175. This would work out at £450 profit in 50 working weeks. At this rate of profit-earning the haulage industry would be even more crowded than it is
Working on the basis of a £175 lorry of four tons capacity (at which price nothing very grand can be expected) let, us see how matters stand. A common plan is to pay £25 down, plus £30 for a year's insurance and about £7 10s. for a quarter's. tax. The balance of the purchase price will be £150, paid in 12 instalments, each of which will include interest at 8 per cent, on the £150 outstanding; this gives an instalment figure of £13 10s. a month, or, say, £3 7s. fid. a week.
• . Let us first reckon up the standing charges per week
for the first month :—Licences, 12s.; wages, £3 16s.; garage rent and rates, 11s. 6d.; insurance, us. 8d.; interest at 5 per cent, on deposit, 6d.; total, £5 11s. 8d. It must be remembered that the interest figure will increase monthlystuntil the full capital has been expended on the lorry, namely, £175, plus £.12 interest.
Now, turning to running costs, these will be about 6.63d. per mile, made up as follow :—Fuel 2.5(1.; lubricants, .5d.; tyres, 1.2d.; maintenance, 2.2.d. • depreciation (reckoning on 20,000 miles life of lorry), .18d. It should be remembered that fuel, oil and maintenance items will be fairly heavy, as the vehicle is an old one, and I have allowed accordingly. Establishment expenses would be quite low at first, as very meagre office work would have to suffice, say 10s. a week to cover them.
Let us add up the weekly expenditure to be met regardless of the amount of work done by the lorry:— Standing charges; £5 11s. 8d.; instalmetit, £3 7s. 6d.; establishment expenses, 10s.; total, £9 112d. On top of this there will be running costs accordi g to mileage.
One of my correspondents, whose circumstances may be regarded as those of an absolute novice, has the prospect of regular work at the docks with his vehicle, and hopes to cover some 200 miles per week as a rule, the man from whom he buys the lorry drawing 10 per cent, on all takings which are the outcome of his introduction. The Operating Costs Tables show that about £17 2s. should be obtained for 200 miles. so the haulier would actually draw £15 7s. 9th after deducting commission. Subtracting the "non-running" total previously mentioned—namely, 19 Os. 2d., we get £5 18s. 7d. From this must be taken away the running costs for 200 miles at (3.63d. per mile, which is £5 10s. approximately, leaving the very slender profit of 8s. 7d. per week at the rate of working mentioned.
Obviously 8s. 7d. a week profit cannot be considered a satisfactory result, although, of course, the ownerdriver would draw £3 16s. a week wages. This must not be allowed to obscure the fact that he is scarcely obtaining a fair return for his capital invested. On the other hand, I would not suggest that a profit of Ss. 7d. for the first week or two would be too bad, taking into consideration that he has no connection when starting and his outlay would be under f80 at that time, Including insurance and tax.
Assuming for the moment that our lorry owner has started and is earning this meagre profit, how can beturn things to good account so that the weekly surplus of income over expenditure shall become mote reasonable? Obviously, one of the first things to do is to' cut out the commission business, which absorbs probably it 14s. per 'week. This makes a great deal of difference when one's earnings are small, The method, of course, is to get work from people other than those parties introduced by the vendor of the lorry. This will take some little time, particularly when the ownerdriver is on the road a good proportion of each working day, but he will eventually come into touch with many prospective customers, in such places as docks, railway sidings and business areas in which he is unloading.
Other men similarly placed to himself will also find that some concerns have a good deal of business to place, and their reputation for paying fair rates gets round amongst the small hauliers. A connection can ho built up in this way, which will enable him to avoid the payment of commission without breaking faith with the person who originally got him his first contract or two.
• It is more than probable that the first few jobs secured by introduction will not occupy the whole of each working day. In some eases a dock job, for example, may be over by mid-day and ce. little local distribution Work can be obtained to fill in the afternoon. In any ease, extra mileage—paying mileage, of course—must be one of the principal objects to receive attention. As I have pointed out almost weekly in this series of articles, every endeavour must be made to cover more mileage per week in order to reduce the burden of overhead charges per mile. The farther you travel the less each mile costs. Running costs do not vary so far as their rate per mile is concerned, so that every extra mile covered means more and more income available to bear the constant burden of standing
charges and establishment expenses. Once these two items have been fully covered for the week, the surplus cash goes towards profit.
It must not be thought that the foregoing remarks and figures are intended to dissuade any prospective haulier from taking up the vocation to which he feels inclined. My chief object is to point out some of the pitfalls which crop up when one has to deal with the glib tongue of the salesman. In most cases he does not state that a profit of, say, £8 to ill) a week can be obtained merely to clinch a deal, but because some of his former customers have told him this is what they are getting. The root of the trouble is that they do not analyse their own figures minutely.
Some of the points on which they go wrong are the ignoring of allowances to cover future tyre renewals and vehicle overhauls, also forgetfulness of the burden of depreciation. Other items are the failure to appreciate the fact that partial insurance only does not effect a great saving, as the owner who covers only a few of his risks must set aside part of his revenue to a contingency fund, otherwise he is likely to had himself in "Queer Street" in case of, an accident for which he has no reserve in hand.
Lastly, there is the matter of loss of interest cal capital, which is rarely understood by the novice. It amounts to this: The money which he spends in buying a lorry would bring in about 5 per cent, if invested in a sound business concern or good security without work. When he has to undertake the risks of business himself he must not overlook the fact that his profit should be greater by a fair margin than the sum which he could earn by doing nothing and letting other people use his money and pay him interest for it.
An extract from a recent letter to me reads as follows:—"I have a greater inclination to the spanner than the pen," and this is so often the case with the prospective haulier that he might, with advantage, consider the advisability of getting a fair grounding in business methods before tackling the organization of a transport concern. Mere mechanical knowledge, useful
as it is, is not sufficient. S.T.R.