Optimizing Profitability During the Four Seasons of Freight
Trucking companies that are most resilient to market fluctuations understand that the changeable conditions of the economy, weather, supply chain issues and more profoundly affect rates and demand. Navigating the ebbs and flow of demand can be difficult without a guiding star. Whether you’re a startup owner-operator or a veteran truck company owner who’s seen it all and done it all, it pays to remember that some things never change. The industry generally follows four seasons of freight, a repeating pattern of demand throughout the year.
Learning to anticipate, plan and optimize profitability throughout the four seasons of freight is essential to the success of your trucking business. In this article, we look at how to manage your trucking business to optimize profitability during the four seasons of freight.
Navigating the Four Seasons of Freight
Supply and demand are the principal drivers of cost no matter what industry you’re in – but in trucking, it’s the rock you survive or perish on. Knowing the seasons and planning to align business strategy with trending market demand is the best approach to optimize profitability. The first step is to understand the four seasons of freight:
Quiet Season (Jan – Mar):
The mad rush to get goods to market for the holiday season is over, and freight volume has dropped significantly. Much of the nation’s roads and highways are hampered by ice and snow, further impeding the movement of goods. Leverage relationships and use a load board to fill capacity. As you unturn every rock looking for freight, start planning and preparing for the busy months ahead when freight volumes and rates rise again.
- Inspect and service your equipment to minimize the cost of future downtime.
- Get in touch with customers to nurture relationships
- Ensure your company finances are in good shape. Consider freight factoring to manage cash flow.
- Establish a system of record-keeping throughout the coming year. It is important to keep copies of receipts and other paperwork for tax purposes.
- Study the traditional freight ratios of each state in each season to better position your equipment in the high seasons to come.
Produce Season (Apr – Jul):
Freight volumes begin to pick up again as produce starts coming into season. As more trucks migrate south to move high-paying produce loads, the entire market feels the effect. Shippers across the nation stretch to find capacity. Carriers can be more selective with the freight they haul and charge higher rates as the market tightens. Produce season is the time for trucking companies to capitalize on their planning to operate efficiently.
Concentrate on running profitably:
- Know your costs to run. Use a cost-per-mile calculator.
- Set your rates to be competitive and profitable
- Use a profit & loss calculator to determine financial benefits before you haul a load.
If you can’t be competitive and haul profitably, you need to make operational changes. Cut costs, run more efficiently, and eliminate deadheading as much as possible. This season is the time to tighten operations and set the pace for the remainder of the year.
Peak Season (Aug – Oct):
As the produce season closes, another busy period begins. Product is being shipped in and out of warehouses as consumer demand increases. Back to school has started, and preparations for the upcoming holiday season are taking root. Freight volume is at its peak, and rates are still rising. Trucking companies are flat out, trying to keep up with demand.
As you hustle to keep up with the whirlwind of activity, keep your eye on costs and rates. Continue optimizing efficiency to run profitably. It’s too easy to dash from pick up to delivery and back to pick up repeatedly without monitoring profitability. Avoid the danger of running hard week after week and then discovering you’ve lost money at month’s end. Unfortunately, this is a common scenario for owner-operators who think more like truck drivers than business owners.
- Keep deadheading to a minimum to protect your bottom line.
- Focus on filling the backhaul
Holiday Season (Nov – Dec):
This is crunch time for shippers who need to ensure they get their last orders in or out for the Thanksgiving, Christmas, and New Year’s Eve rush. These final days of the year are the busiest for shippers scrambling to ensure no freight is left behind, delayed, or lost in the system. Trucking companies must be fully operational to meet customer demand, maximize profitability, and grow business relationships. As the year wraps up, start thinking about the year to come.
- Reach out to customers and thank them for their business. Let them know you’re looking forward to servicing their transportation needs next year.
- Focus on touching base with the freight brokers you use and establish relations with new ones. They are the low-hanging fruit at this time of year.
Anticipating demand and establishing strategic plans to optimize profitability throughout the year is more than smart business – it is essential to the continued success of your trucking business. Knowing what to plan for starts with a clear expectation of future market demand. Use downtime to research trends, establish new relationships and improve operational efficiencies. Know your costs and what is needed with every haul to contribute healthy revenues to your bottom line. Place equipment in areas of high freight supply, plan routes, and minimize deadheading to optimize equipment utilization without undue expense. Most importantly, have a cash flow management plan to ensure access to working capital through the highs and lows of market demand.
Work hard but work smart. Concentrate on optimizing profitability during all four seasons of freight. Learning to anticipate demand and planning to maximize operational efficiencies throughout the year will help to build business stability and position your trucking company for growth.
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