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Starting a Grain Hauling business

H

Hogleg

Member
This is tractor related in that tractors bring the grain to market...

Daughter and future son-in-law want to start a grain hauling business here in So. Illinois. He has his class A license and is working for low wages hauling grain for a local elevator. She is 3 years into a degree in business. She is very sharp (valedictorian in HS) and has realized that in this time and place, low wages are a way of life in rural america. So, to live in the place she loves, and not scratch by for the rest of her life, she wants to start a business to control her own destiny. She has devised a business opportunity hauling grain from collection points to the river for loading, and other farm related hauling activities. She has a well written business plan and lots of research on LLCs, licensing, maintenance expenses as well as the revenue side of the equation. The numbers look pretty good, and the risks acceptable.

What we are struggling with is how to get started.

How do we go about obtaining the first truck. Is leasing a viable alternative? How would you start out? We can walk into a bank and ask for starting funds and a line of credit, but I think that will never happen. Not likely to give a pile of cash to a 20 year old girl and a 21 year old guy, regardless of how good the business plan looks, I fear.

It's darn hard for young ones to get started on a good path in this day. How would you all do it?

John
 
There are some excellent government programs to start up businesses. I would check those first. The
problem with most of them is that they work on a very large scale and usually involve millions rather
than thousands, but some are out there for small businesses. This is especially true for women. Hauling
grain is the very low end of the trucking industry, so make sure there is both enough work and high
enough rates to make it work. Most that do it are either farmers that already own the trucks or folks
with paid off trucks looking to run local. Not many I know can make it while paying for a truck.
 
check with farm service agency and small business administration, if she keeps it in just her name and is the operator the money will be forthcoming.
 
I have been in the business; the gross is great; the net, not so good. rate cutters will try to steal any decent runs that you get.
sitting in line, eats up profits.
 
I trucked for almost 30 years and farmed. The truck helped keep the farm in those days. You need to remember it is 30-60 days before you get paid if you are on
your own. Lot of money for fuel either cash or credit has to be paid for before you get the first check. If you lease on to someone else with your tractor and
trailer you usually are only a week behind as they will pay each week and most times give you a fuel card.License for the truck run about $1800 a year here.
 
I was successful in the trucking business. I saw many try, then fail. My edge was being able to buy used equipment, then maintain it myself. Repairs will destroy a small, new trucking company faster than a unexpected flood. It happens over night. If you can not do your own repairs, and have your own place to do it it will be rough. Good luck,,, Al
 
If she is that sharp, she should get her brokers license. My brother has been in the trucking and grain
broker business for 15 years and seems to have plenty of money.
 
This is just my opinion: If you don't have any customers that will contract to you enough grain to keep you busy year round you can't afford to do it unless your truck, insurance, and license plates are paid for and you have enough capital to buy fuel and pay repairs until decent money starts coming in. If you start out owing money and things don't go your way you will regret it. I know I've been there and done that. I know trucks can cause ripples in family relations when they need repairs and the family needs to eat also. Just my opinion, John
 
In my area, certain
opportunities have developed in
grain hauling. Everyone is
doing it. Yes, an owner
operator could do well. My
thought was to rent a daycab so
all the plates n insurance was
covered. Trailers, u find em a
by where. If you find some
runs that work well, pay
decent, get some capitol in the
bank, look at adding a second
truck. Buy, or lease. Run em
together.
That's what they doing here.
 
I'd lease the first one. Walk in, Pay cash, drive home. Just be ready to put that truck to work that day or next day. I've seen em have 3 to 4, starting out with one, in less than a year.
Look at in state rules for loopholes to help to your advantage.
 
Congrats to the young people who want to work for themselves and build equity in their own
business instead of working for wages. My only observation is that you need to look very
closely at who your competition is. In the machinery hauling business which I am familiar
with on a small scale you are very often undercut in pricing. You will find many times that
your competitor is a young farmers son. He will have a truck and trailer owned by the farm
operation. He is not having to make a profit or pay his own bills. He just wants to run
down the road and make diesel smoke. Dad is happy to have him do it so he stays out of the
way of the real farming that is going on at home. You will need to compete against other
people who have the same cost structure you do in order to keep pricing at a level that you
can make a profit and support a family. Good luck
 
Don't know about your area. Lot of guys west of me own their won trucks for farming. So in the off season they put their farm employees on the road hauling for a local elevator. Most are not making much of a profit. They do it to keep their workers busy over winter so they are available for the next season. We are seeing that with local landscapers and lawn series business. They have purchased snow removal equipment to keep employees working year round. Both grain hauling and snow removal have become very cut throat. So she needs to check on that. If locally owned farmers with employees and trucks are willing to cut prices to keep good employees employed over winter it could be a tuff business to make a profit in.

That being said for short haul you don't need new. Just reliable! So buying might be an option. The problem with short haul and why he isn't making any money is there are tons of people with CDLs. Many don't want to be gone from home so they flood the job market for short haul.

Rick
 
In many rural areas it often takes a skilled trade to earn halfway decent wages and benefits: plumbing; electrical; welding; diesel repair; computer repair; construction; accounting; machining; machine shop measurement and testing; etc. With some experience, those skills would offer far better opportunities to start a new business than a CDL can offer. The CDL is still a great asset to have along with a skilled trade. For the investment in one truck he could get an associates degree taking night classes at a local community college. Scholarships are often available.
 
Here's what I'd suggest:

1) Finish the business degree. IF your own business fails and you need to go work for someone, the degree means a lot. An unfinished degree often means your resume goes in the circular file.

2) Get married before going in to business together. It'll be a mess if the relationship fails and takes down the business.

3) Try the local bank. And if they so "no", ask what is missing. Equity? Experience? Holes in the plan?

4) For eons, the most common lender for start-ups is "First Bank of Mom and Dad." Would you give them a loan? If not, why not?

A few other tips- know who your clientele will be. Do they pay on time? And be willing to look out for them. A local guy that hauls for me will call with basis tips from time to time. "Hey, John,
Milwaukee needs to fill a bean boat by next Friday. You can get an extra 15 cents." That tip just paid for nearly all his hauling. Be prompt. Be upfront. No BS.

I think if they get the big picture stuff figured out, the details will drop in pretty quick.
 
What about a bobtail to start out with, you can get a good one cheap these days, if the haul is short enough to make it worthwhile it might get
them started.
 
Isn't most grain hauling just a few months out of the year ? We have a local farmer who started custom combining and trucking and he has a pretty good sized fleet now. They just sit most of the year. He is really good at repairing things too. I think one combine he bought as a burnt unit and rebuilt it.
Long term he might be better off to try and get full time with a city, county or township and forget about the local grain elevator. Years ago I think I could of gotten into the local city maintenance garage but did not go for it. I now see the error in that.
 
I would also encourage the young couple to talk to several bankers in their area, not necessarily to get their loan, but to get feedback on their business plan and to get some experience working with a banker. Banks are the "Confessionals" for area businesses, they see it all and have a very good pulse on what their local economy needs. If the young couple can go in with an open mind, they can some information about other opportunities in the county, and maybe some ideas for a new business.

If the young couple can identify something that:
their community needs;
that they could be good at;
that they would enjoy doing;
that would pay well;
and that can help other people,
that would be a great start.
 
All very good advice. Some details.

Primarily we would be hauling on 100,000 bushel contracts from corporate grain companies to the river depots. These tend to run around 6 to 8 months of the year around here. Sometimes shorter, sometimes longer. This is under a grain broker contract.

We are planning on good, used daycab tractors and good used trailers. Cabs seem to run anywhere from low to high teens for not too old, not too many miles. We have some solid folks that know how to help us find the right tractor. I like the suggestion of already licensed lease tractor. Will investigate.

I am very worried about down time. The trucks eat money when they are idle. Thinking about a flatbed so we can short haul hay/etc during the down time. May even DOT license the 1 ton with a dual tandem gooseneck for 30K lb hotshot runs.

Keep the ideas coming.

John
 
The problem in my area is I can always find someone that will haul for less than I can haul myself. I started a towing business a few years ago to supplement my retirement so several people here bought tow trucks because they thought I was getting rich. The next thing I knew I couldn't work for what they were towing for because there wasn't enough work for all of us. I tried the hotshot thing and towing travel trailers and wore out a truck I couldn't replace for what I made on a lot of one way trips. Good Luck on your venture. I have been an Owner Operator and have driven semis and dump trucks since 1965. John
 
Trucking grain has never been known to be a high margin business. Further, if it is like around here somebody has a rich uncle who is subsidizing the business to boot so the trucker can operate for a lower rate because he is already covered on the truck and trailer investment. I know that opportunities are slim in a lot of areas but if it were me I would look at something else.
 
As a owner operator that hauls grain stone
and other stuff the biggest thing I can tell
you is chose the truck carefully. I would
not buy a truck newer than 2003. The
emission trucks will kill the bottom line
with fuel cost and down time and repair
cost. Look for a truck that is speced out
for what they need not a "It will do for
now". Spend the money on a truck because it
is cheaper to nickle dime a trailer into
shape. If I was looking now truck would
have a 425 cat or 6nz cat , 13 or 18 spd,
40k plus rear ends with 3.90 ratio. When you
start loading in the feild he will be glad
he had it.

This is my truck. 2000 KW with a set of
super trains that can gross 164,000 lbs .
a242281.jpg
 
I won't add input to the business plan, but I sell commercial Ford trucks for a living. They only go up to class 7, but the principles are going to be similar.

Credit for a starting company will need to be backed by a member of the company with ownership invested. So if she could buy or lease a truck on her own, she'll be able to do so for the company and begin to build the company's credit. More likely, you or someone else with a bit more experience will need to legally join the company with a percentage of ownership in order to co-sign for the company. Depending on the financing, this can either directly affect your own credit, or it can just use yourself for support and only show up on your credit should the company default. This is an important thing to understand because it could affect your own purchasing power and that needs to be a consideration. The company can't simply get a few credit cards and then be approved for $80k.

As for buy or lease, that's up to your accountant. There are advantages to both. Commercial leases generally do not work like the Ford or Toyota car you get. There aren't miles, but an agreed upon future value. You can set it for lower payments or lower residual. There are advantages to both. Cash flow is the big reason to lease with the focus on payments. However, if you focus on a low residual, you can have very large monthly expenses (tax offsets) and at the end of the lease you can either buy out and depreciate a much smaller amount, or send her off to auction and get a check for any equity you've built. I only sell the things though, seriously ask an accountant (they don't all say the same thing, so it's not a matter of which is best, but which works best for you and whoever is going to be preparing your books).

Before assuming used is better than new look at the numbers. I don't know how it is for the big stuff, but on the small work trucks I sell F550 and smaller mostly) used vehicles cost about the same, especially when factoring in wear and compromise to the build and availability. Finance is also harder to get on used.
 
First if he is going to drive and own the truck there is no reason to incorporate. If there is an accident they will sue the company then can sue him as the driver so no real protection from law suites. Check with a lawyer first don't just listen to billy bob and bubba. Now Look at OOIDA for your insurance and for the drug testing program. Much cheaper than anything I found. Also if you decide to do authority filings they are the cheapest ones around. They are a good organization. I have been a member for over 20 years now and had them do my filing for authority.
I would see about just getting an old sleeper truck for the first one as daycabs are much higher for the same power and model. Timpte or Wilson would be my first choice for trailers.
 
Owned my own and drove for others. One thing to keep in mind is the cost of ownership which is EVERY DAY.. It has to work every day, and even some weekends. Long Long hours in all weathers. I would be looking for as close to iron-clad contract as I could get, weather it was with a grain elevator or farmer.
 
At the river terminal can you pickup another load for a paid back haul, or will the back haul always be empty?
 
I would sternly recommend NOT trying to make a living hauling grain, at least in this area. I can get grain hauled, out of the harvest season, cheaper than I can do it with my own truck(s). It seems every farmer and part time farmer wants to be in the grain hauling business. They see freight charges of $.20-30 per bushel and think that the trucker is getting rich. So they go out an buy a semi and hopper trailer. They borrow the money with their farm operating loan and then depreciate it under their schedule "F". Then they run farm tags even though they are hauling for hire. Few of them actually know the true cost of operation as they write all the cost off against their farming operation. So they look at any grain they haul in the off season as gravy profit.

An example of this: Right now hauling grain to ADM at Clinton Iowa from here, runs around $.25 per bushel. Starting in Jan. I have corn contracted to be hauled for $.12 as a back haul for two farmers picking up gluten feed at Clinton. So if you can legally haul 1000 bushels at $.25 that would be $250 for a 150 mile trip. About a $1.66 per running mile or $3.33 a loaded mile. That is a fair rate for both parties. Now figure the $.12 per bushel rate. That is only $120 for a 75 mile trip. That is a $1.66 per loaded mile rate. NOT GOOD at all. With the feed coming back it make them a little bit but the fuel burned and the wait in line negate much of a profit.

I know of many that have thought hauling grain would be the berries, 99% of them lost their shirt. The first time the truck needed new tires or a engine/transmission overhaul they were out of business. Even just paying their income tax at year end rather than having it deducted weekly sinks many of them. They look at the GROSS check compared to a forty hour weekly pay check and think their are getting rich. Many do not think of the total cost of owning/running a truck. Fuel and tires are only a part of the total cost.

IF they do not have outside income I do not see it ever working. There will be too many zero months to keep their heads above water.
 
File for their own authority,one problem we have seen here(Quincy IL) is the small county elevators have scales that are too small for modern long trucks. ADM only weighs trucks on a platform they don t allow split weighing. You have to make sure the truck and trailer will fit on the scales you will haul into and out of.(neighbor bought a almost new 45ft trailer, and had to sell it and buy a 42ft.
 
I would have her look for a new boy friend , one that is a
doctor or lawyer , truckers are either poor or rich , she
may have the ability to back him but I wouldn't. Trucks
are like have 2 girl friends while you are married . Run
don't walk RUN . In my trucking experience if driving for
someone else doesn't pay good owning and driving it your
self isn't any better.
 
(quoted from post at 11:05:27 11/10/16) Here's what I'd suggest:

1) Finish the business degree. IF your own business fails and you need to go work for someone, the degree means a lot. An unfinished degree often means your resume goes in the circular file.

2) Get married before going in to business together. It'll be a mess if the relationship fails and takes down the business.

3) Try the local bank. And if they so "no", ask what is missing. Equity? Experience? Holes in the plan?

4) For eons, the most common lender for start-ups is "First Bank of Mom and Dad." Would you give them a loan? If not, why not?

A few other tips- know who your clientele will be. Do they pay on time? And be willing to look out for them. A local guy that hauls for me will call with basis tips from time to time. "Hey, John,
Milwaukee needs to fill a bean boat by next Friday. You can get an extra 15 cents." That tip just paid for nearly all his hauling. Be prompt. Be upfront. No BS.

I think if they get the big picture stuff figured out, the details will drop in pretty quick.
Click to expand...

Agree with most of that except the part about the degree. The market is flooded with people with business degrees. Been that way for over a decade. Best is an MBA and that's still not a guaranty there will be a job upon receiving a degree. If they can get work with a 4 year degree in business they can expect to make between 35-40K a year while trying to pay off student debt. Try that while living somewhere that a decent apartment in an OK area may cost upwards of 3K a month like in Chicago! And they may have to move half way across the country to find that job. Lot of business majors with a 4 year degree wind up managing a fast food joint.

Rick
 

I started a distribution business in 1981 with a $30,000 loan from parents. A big part of it was the trucking but a larger part was the service work that we did for our customers. It was very specialized work that I learned from a prior employer. When I started out, I did it with the training that I got from them, and the customers that I was servicing for them. I built it up for 25 years and then sold it for $880,000. The key was the service work that was and still is SPECIAILIZED. When I was starting there was no shortage of lenders who would loan the money provided that I would put an equal amount of my own on deposit with them. They will need to find an unconventional source of money for such a high risk loan. One company that gave me a break was Ford Motor Credit. After selling my business I bought a dump truck and hauled dirt. I had money to buy it with and a friend who would put me to work for half of the month, at top dollar. I had to find the rest of the work, and quickly found that as everyone else is saying that there is an over abundance of truckers who are willing to work for a losing rate, just to make it look like they are doing well. Most owner operator's wives work full time in order to have steady income and insurance. When construction came to a stop in 2007 I sold the truck and got a job again back in the field that I had been in before, OK money with far fewer headaches. I still drive dump truck on the side for friends that I hauled for when I had my truck. They pay me above the going rate, and I get paid for the whole time that I am working, not for just when the truck is working. I have my Saturday's free instead of working on the truck. I enjoy driving 1-3 days a week, and as I meet owner operators on the road in their flashy expensive trucks, I chuckle, knowing that I am making more than them.
 
Even if it is fast food, you are the manager, and not the burger flipper.

Dropping out now only shows your future employer you didn't have the ambition to finish something. That's not a strong selling point.
 
If driving truck for someone else isn't paying, how is running your own truck going to pay when you have the cost of maintenance, insurance, licensing, etc.? Maybe the company can't afford to pay the boyfriend more because the margins just aren't there? He better be prepared to value his time spent working for his own business at close to $0.

Also, as a younger guy (26) who has seen similar situations before with many of my friends, I would strongly caution your daughter against financially supporting a boyfriend, especially in a business situation. At age 20/21 there are still a lot of life lessons to be learned and not to sound negative but the relationship could very well go south, which could ruin your daughter's finances and credit if she is floating the boyfriend's business. Could negatively impact you as well if you are involved with co-signing loans etc. I have a business degree and run my own business and one lesson I learned early on was NEVER do business with family/significant others.
 
(quoted from post at 07:38:47 11/11/16) Even if it is fast food, you are the manager, and not the burger flipper.

Dropping out now only shows your future employer you didn't have the ambition to finish something. That's not a strong selling point.
Click to expand...

No, don't drop out! On that I agree. But it may be a good time to look at changing majors! Yea it may be managing but most fast food managers do a fair amount of burger flipping along with running a till. But like I say, 35K a year, to live on and pay back student loans with a very limited career unless they go back and get that masters? And even then odds of something really good are slim. May be time to look at other options! THis ain't yesterday when a BA degree was worth a lot of money. Today a BA gets you a application as a line worker flipping burgers.

Rick

Rick
 
I have to comment, you indicate how smart your daughter is, how about the young man? Are his wages indicative of his intelligence and drive? The whole plan sounds like a tough life lesson coming for all involved.

You can't influence her choice in partner, but if he is not as on the ball as she is, she needs to find a business she can put him to work in, and not rely on him as a key part. I've seen guys spend time in the ca$ino while their wife is struggling to figure out where all the money is going.

Her key interests are where she should look for a business interest, not just his CDL as their only asset.
 
Hogleg
You don't need authority for grain . If you start hauling things like steel or equipment then you would need authority for that. The equipment market went south with the price of beans about 2 years ago. I have been fortunate in my stuff is paid for except for one trailer and it is about so.
With ICC authority you can haul manufactured products like steel ,machinery and processed products. Otherwise you would be an exempt carrier.
As others said have her wait till either she is married to him or find a different direction. I have seen about all of it in this business. From selling fuel to the tires off the truck. It is not a big money game for profits. Lots of expense cost though. How is he going to pay for fuel? What is the breakdown program to keep those bills paid. How often is the truck getting paid for the hauling? If monthly then you have to budget for that and figure fuel will run easily $5-$10,000 per month. Then the maintenance. The cheapest maintenance is a grease gun. I have only replaced on Universal joint in over a million miles. Had the frame suspensoin bushings looked at at about 900,000 and was told they looked good. I have never needed to replace the bushings in the front springs though I should look at them this winter. His doing the maintenance will save lots of cash, but only if he knows what he is doing.
 
Heavy road vehicle tax 2290? Not necessary for a GVWR of 50000, correct? Was going over form and looks like it is just for really heavy duty trucks(logging) not the average tractor. Truck we are going to look at rates at 50k.
 
(quoted from post at 11:09:50 11/12/16) Heavy road vehicle tax 2290? Not necessary for a GVWR of 50000, correct? Was going over form and looks like it is just for really heavy duty trucks(logging) not the average tractor. Truck we are going to look at rates at 50k.
Click to expand...

My triaxle dump was registered for heavy loads. 73,000 plus you can legally go 5% over here, so you are often at 76,000 with a net load of 48,000. 50k may be what the tractor axles scale, and then the trailer is carrying another 50,000.
 
Thanks for all your help, guys. I think we have a handle on it now. Here is what we have going on -

1. Bank of Mom for funding.

2. Truck and trailer being bought outright, no financing.

2a. If we go idle, our run rate per month will go almost to zero, since the bank is flexible on repayment. We will prepay most fixed expenses to make that happen.

3. Buying an older Peterbilt with a hopper trailer that have both been used to haul grain recently. Tractor setup with a big cummins motor, 13 speed and lockers. 700k miles. Also has a headache for eventual lowboy purchase. Not a make do truck, one that is ready to roll...

4. EIN and LLC done. After we get the truck we will go for licensing and authority (contract with corp requires authority) and insurance/etc.

5. After the truck paperwork is complete, we sign the grain hauling contract and start running. We are 80 miles from the grain depot at the river so we can make 3-4 runs per day, 5 day work week. Our business plan is to only haul for corporate clients from grain collection points to the river depot. No farmer grain hauling is planned at this time.

6. After we get going for a few months, we will buy a backup truck.

7. We are going to DOT license our 1 ton flatbed and get a 20K gooseneck trailer for hotshot runs if the grain hauling falls off for a month or two.

8. All principals in the LLC will get Class A licensing.

That is about it...

John
 

A suggestion buying a high miles truck like that. Get an oil analysis done. Cheap means of getting an idea of any problems in the engine.
 
Hogleg I know the area you are in. You might try and get a contract with FS, Effingham Equity, or CPS and try to get back hauls of fertilizer on the way back from the river. Also has your daughter ever considered a job at NAL there in Salem. Pretty decent company for the area with production and front office opportunities. If she is in college she should try and internship with them.
 
Yes, already reaching out to see about fert. hauling on the backside. Also seed hauling.

We pick up the truck and trailer on Sat. Very clean. It has a rebuilt 855 big cam with a 13 speed eaton fuller trans. Only 40K on the rebuild. They are selling because it had a sleeper on it, thus longer WB that is just too long for some of the tight fields on the farms they work. Will be fine for hauling between elevators. They are moving to shorter WB Volvo. It is in very good shape for the ageand being a round headlight Pete, has good resale if this goes south.

She got the DOT number yesterday. We are now procuring insurance and MC authority. Wheels should be rolling by early December.

Daughter is in 3rd year at SIUC studying accounting. They allow all online courses so she does not have to live on campus. Pretty nice. You get the same degree as being there. The lectures are very good online. Much better than the guys that used to teach me in person at UIUC years ago.

John
 
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