Putting a Hot Shot Car hauler on the road clearly stands out as one of the hottest trends in Commercial trucking. With good reason, the overall return on capital is off the charts when compared to other types of trucking. While front end capital for equipment can be financed, and is relatively low, we’ve seen a number of new operators under estimate the true cash flow in their operation and the need for ongoing operating capital. It takes roughly $7,000- $10,000 cash to effectively put a hotshot rig on the road.
Here’s the break down
Insurance Upfront Cost (20% of the annual premium) $ 2,000 to $ 2,400
One week of Fuel $ 800 to $ 1.000
Ongoing Accounts Receivable $ 3,000 to $ 4,000
Total $ 6,000 to $ 7.000
With over 10 trucks on the road on any given week, one of the biggest challenges we face is keeping up with our accounts receivable. It would be nice to run only COD paying loads, but that eliminates a lot of high paying loads from reputable brokers. COD loads always pay less per mile.
A truck averaging a gross of $4,000 per week will collect about $1200 (30%) from COD’s. That usually covers a week of fuel , but $2,800 is left somewhere between the broker and the bank. Our AR will typically run 10-12 days and will average $3-4,000 on a rolling basis per truck. There are times when the AR can run as high as $6,000 on a truck if there are a series of high grossing loads, or delays in processing bol’s and invoices. The key a new operator needs to understand is that committed cash flow is a PERMANENT investment in the business. Unless a rig stops running it will have an ongoing rolling $3-4,000 of capital tied up in accounts receivable.
The good news is that cash flow is improving as several large brokers have released mobile app's that drivers can use to file condition reports and proof of deliver verifications. This speeds the payment process with next day payment usually available. Even with this trend managing cash flow for a new carrier can be challenging, and that's why in training we spend a considerable amount of time helping drivers learn to manage cash flow. A valuable aspect of our training.