The Business of Independent Service Provider Contracting

By any measure, it’s been, and continues to be, a challenging time to be running a transportation business. However, as we often see, there are many opportunities that present themselves during challenging times.

As we look ahead to better times in 2023, it’s important to take a look at where we are currently at and how we got here so that we avoid mistakes of the past.

Our current situation is rooted in the events of 2019. This period introduced the density-stop / ecommerce push from FedEx Ground. As ecommerce deliveries gained traction and increased in number, they fueled the deterioration of contractor per-stop operating margins.

As you know, ecommerce stops are paid at a lower rate and typically include fewer packages per stop vs. commercial stops, resulting in a stealthy revenue per stop decrease across your entire business.

Topics: Business Planning, Bookeeping, Management, Business Metrics, ISP, Business, Money, Cash flow, Inflation, Costs, Financial, Margins

So as you might imagine, there is a considerable amount of chatter out there about some recent, controversial events.

Many want to know what we think about the whole situation.

We’re going to give you some thoughts, but I’d like to point out our perspective on the matter first.

 

Topics: Law, Management, FedEx Ground, Business, Investment, Agreement, consulting, Money, settlement, renegotiation, Financial

Well, the time has finally come.

FedEx has officially announced the big move that we had known was coming for a long time.

The announcement that they will be combining most of the operating components of their networks will trigger significant operational changes. The plan does include utilizing mostly contractors, even though some are currently struggling.

Many will recall that we have been signaling for more than 5 years that a change was coming. By far the largest issue will be that the demands of the new network will force contractors who operate Lifestyle Businesses into operating Transportation Companies.

The time has come to put old habits behind and embrace change, or get left behind. 

Topics: FedEx, Management, Ground, Business, Contract, model, Money, Cash flow, renegotiation, Network 2.0, transformation

By now, it’s easy to see that everyone’s operating margins are being seriously squeezed.

In an effort to force some sort of helpful response, some made a plea to FXG asking for assistance in various areas to solve a worsening financial situation. 

Trust us when we say that FXG is very aware of the plight of CSP & TSP’s.

But now, there is another added challenge that has reared its head. This one, along with inflation not seen for generations, is going to create some unprecedented financial problems that will test even the best operators…

Topics: Business Results, Bookeeping, Training, Intelligence, Business Metrics, Negotiation, Profit, consulting, Money, Cash flow, Inflation, Costs, recession, expenses, renegotiation, Financial, Rates

So it’s not the 2008 financial crisis, but in the FXG Contracted Service Provider world, it could ultimately prove to be worse.

A combination of events has spawned a crisis that we foreshadowed back in August of 2021 in our post:  the Dark Side Of Density.

What we described in that post has ultimately proven to be true, and is now exacerbated by the quickly deteriorating economic conditions.

As business owners, solving problems is a daily occurance. This one however is going to need full attention, for an extended period of time.

Let's begin our look at what to do about all this by analyzing the root causes of why the issues now exist...

Topics: Business Results, ISP Negotiation, Payroll, Business, Contract, Profit, consulting, Money, Inflation, Costs, Holiday Season

This post is the second in a two-part series.

In my last blog post, I shared that people often ask me, “Should I pay my drivers by the day or by the hour?”  My answer is based on comparing both methods, and I'll tell you why I recommend paying drivers by the hour.

Paying by the day is still most common because it’s a holdover from when delivery volume was consistent and only 5-days per work week.

As a result of adding residential service and e-commerce, package volume swings now vary widely on a daily basis. Paying drivers by the day has made business owner profitability more challenging.

Topics: Business Structure, Payroll, Ground, FedEx Ground, overtime, leadership, Money

This post is the first in a series on choosing to pay drivers by the hour, or by the day.

Almost every week, another new Contractor will ask me an old question.  Should I pay my drivers hourly, or by the day? There’s truly one right answer, but complex dynamics cause many new CSP’s to believe that the old ways of paying drivers are acceptable.

Many new Contractors do not bring transportation industry experience with them. Although it’s likely they achieved significant success in their previous ventures. That success can lead to a variety of ways they address driver compensation.

New Contractors typically choose to either keep the same practices as the previous owner, or they make drastic changes. If they choose the latter, it’s because they recognize the existing compensation method is not financially feasible.

Topics: Business Structure, Payroll, Ground, FedEx Ground, overtime, leadership, Money

 

Any investment made into a business should be measured by its return. Simply put, when businesses invest in a product or an initiative, they expect that the profits created by the investment will outweigh the cost of the investment.

This is no different in the transportation industry.

If you take a minute to think about what options you could invest in, that could provide you substantial returns, what is it that comes to mind? New trucks? The latest software package that promises the world? Some other shiny object?

There is one thing, that may not be obvious, that will no doubt provide you with a lasting return on your investment. Most larger companies understand that investing in this one thing provides big time returns, and don’t mind the investment it takes.

And now, this type of investment is available to you…

Topics: Classes, Training, Ground, FedEx Ground, leadership, Money

Image by Workhorse Group Inc.

This blog post is written by our friends at Workhorse Group Inc.

Tips for transitioning to an EV fleet and the benefits for your business.

The adoption of Battery Electric Vehicles (BEVs) for fleets with daily return to base routes under 200 miles is becoming a fast-growing segment of the EV marketplace. More than two-thirds of surveyed fleets that have used BEVs plan to either pilot or purchase them in the next 12 months. *

This move to EVs can be attributed to the significant operational savings and the positive environmental impacts of an EV fleet. With more and more fleet managers moving to EVs, you may ask yourself - Is an electric fleet right for my business? Here are a few things to consider.

Topics: Business Results, Management, FedEx Ground, Business, Investment, Metrics, contractor, Profit, Purchase, Fuel, Money

Image by Xos Trucks

This blog post is written by our friends at Xos Trucks.

The passenger transportation sector has seen a significant uptick in Electric Vehicle (EV) adoption over the last several years, yet the commercial side has been slower to follow.

Now, that’s changing. Increasing environmental regulations and a growing interest in reducing costs have begun to tip the scales toward more widespread fleet electrification.

As a fleet owner and operator, you might be asking yourself, “When, how, and why should I consider electric trucks for my business?” Unfortunately, there’s no simple, one-size-fits-all answer to “how” you should go about transitioning to electric, but “when” and “why” you should go electric can be more easily summarized.

Going electric can positively impact the efficiency and profitability of your business. Here’s a summary of the main reasons why you should consider electrifying your fleet.

Topics: Business Results, Management, FedEx Ground, Business, Investment, Metrics, contractor, Profit, Purchase, Fuel, Money

In this uncertain time, it seems like there was one thing that was certain.

It appeared that stops and volume were marching forward, with no regard for the turbulence and difficulty that we were told surrounds us. 

In a roughly 2+ year environment of growth, the rising revenue tide hid many tree stumps, and kept the good ship Contracted Service Provider sailing happily into the sunset.

All was well.

Until it wasn’t.

Recently, the volume has leveled off and in many cases, retreated.

This dip is not too much different from a “normal” summer, but this time, it hurts...bad. 

Let’s look at why.

Topics: Business Tools, Business Planning, Management, Business, Investment, contractor, Profit, Money, less, settlement, Cash flow