It’s all in the system

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Are you happy with your trucking company’s financial performance? If not, is your management team certain – and united – in the ways to improve profits and cash flow. Almost everyone says “no” to the first question. But you likely said “yes” to the second. Frankly, with the financial stresses and strains of the past three years or more, few companies that would answer “no” are still in business.

But although management may be certain on how to achieve success in trucking, it may not be right. Changing financial situations and economies mean that what works at one point in time may not work at another. For example, getting more freight – or more trucks – and “making it up in volume” is often not the answer.

After 20 years of working with dozens of companies, I see a distinct pattern of habits of those that are highly profitable, and those that are not. I believe that long-term and steady profit improvement starts with a systematic review of the entire business at least annually. Consider both the external business environment and the company’s internal workings.

The most consistently profitable companies seem to have an overall package of basic traits, consistently applied, with a system of checks and balances rooted in their daily practices.

How does this happen? First of all, it’s very rare that a single person conceives of the company’s vision and inspires the team of “doers” that implements his or her plan profitably. For the vast majority of companies, the “profit engine” breaks down quickly because one or more ingredients are missing. And the target itself can move as conditions and people change year to year.

Who is most qualified to establish the terms of success? Perhaps it’s the owner or a key manager. Often it is an outsider who is not constrained by outdated assumptions that things must be done the way they have always been done. Most successful companies tend to welcome some outside influence because insiders are often too close to the action or hampered by internal politics.

A successful overall review of the profit-making structure of the company starts with a systematic gathering of data and analysis. Look at all the typical metrics of success in trucking and seek out industry standards to measure them by. Based on this assessment, proceed to setting some strategic and operational action plans as well as a system for ongoing monitoring and implementation.

I’ve found that in setting the “Profit Improvement Potential” of a company, this assessment really must be detailed in two areas: the external environment the company operates in, and the internal environment or characteristics of the company.

Managers usually recognize and focus on the external environment – the overall industry, competition, customers, technological trends and the business environment – fairly well. But rarely does the profit improvement analysis consider the key shareholder circumstances and what must be done to ensure this supports the rest of the business properly.

Turning internally, the profit-improvement assessment should look at the overall vision for the company, and then at each chosen strategy, the company structure and company culture as key internal drivers that can lead to profits or cause losses.

From there, none of this works unless the particular internal mix of services or products is combined properly with marketing and sales, the right people for the right jobs, overall a disciplined set of systems and processes supporting each function for it all to work, and finally, the right financial and cash flow structure.

Conditions change year to year, so most profitable companies implement this process continuously. When you consider getting on the road to consistent profits, you will improve your chances of getting there if you start with a systematic assessment of the company, and the route you’ll need to take.

Resources:
Chapter 4 of “How to Write a Business Plan,” a Commercial Carrier University manual, provides a guide for analyzing a trucking company’s strengths, weaknesses, opportunities and threats.