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Last year, I cofounded a trucking startup, went through YC W22, visited truck stops, raised a seed round, and left the startup. Speed running startups, any %.
Recently, I’ve been reflecting on my time in trucking with a couple of other founders in the trucking space. It’s, well, interesting.
Building in trucking is incredibly rewarding because you have a real impact on real people (trucking is the number one employer in 35 states).
Building in trucking is also incredibly frustrating. Drivers, owners, brokers, dispatchers, shippers, providers, and others working in the industry all have different opinions on the space. With so much fragmentation, it becomes difficult to truly understand what the customer wants.
So, below are my thoughts on trucking for future trucking founders.
Why is trucking so dominant?
Trucking: the process or business of transporting goods on trucks.
Trucking accounts for 80.4% of US freight costs and is 4x larger than rail, air, and ocean freight combined.  My favorite statistic: 95% of fruits and vegetables in the US are transported by truck. 
Compared to other forms of freight, trucking is neither the cheapest nor the quickest. But it carries two distinct advantages - infrastructure and flexibility.
Between Biden’s $1 trillion infrastructure bill, Obama’s $305 billion infrastructure spending bill, and Bush’s $286.4 billion highway bill, investing in transportation infrastructure has strong bipartisan support - it’s a platform nearly all Americans agree on.
A significant portion of infrastructure investment goes towards highways and roads. In 2019 alone, $203 billion was spent on highways and roads.  Of that sum, 42% went towards operational costs, such as maintenance, repair, and removal of snow and ice. Trucks are a large part of why that percentage is so high. An average truck deals 3,660x more damage to the road surface than a Toyota Camry. 
It’s difficult to picture the US government paying for rail tracks on behalf of private rail companies (although that’s essentially what they did in the 1850s), but that’s exactly what happens in trucking.
Rail tracks are generally laid between high population density centers, and many rail companies have famously abandoned unprofitable rail lines. 
Trucking companies don’t face these dilemmas. Because the government subsidizes all infrastructure costs, trucks can reach almost every warehouse in the US, even if the warehouse is in the middle of Montana.
The other advantage of trucking is flexibility.
First - flexibility in weight. Most companies don’t need to ship 220,000 lbs of freight (one rail car) at any given moment. Rather, the freight is usually dispersed between shipments of 10,000 lbs to 45,000 lbs. At those weights, it’s too costly for air freight but perfect for a truck.
Second - flexibility in dispatch speed. A shipper (someone who needs their freight moved) can get their load picked up and onto a truck with just one day’s notice. That truck can then cover 600 miles per day. All other forms of freight are either far slower (rail, ocean) or far more expensive (air).
With all these positives, it’s little wonder that trucking has become the backbone of the US economy.
All about trucking
While it’s great to understand why trucking is so dominant, it’s not helpful to founders when they’re building a product or pitching to investors. Let’s shift gears to something a bit more concrete: market size.
Surprisingly, there’s no consensus on just how big the trucking market is.
What is certain: it’s massive.
Some places quote $732 billion while others peg trucking at $1.2 trillion or more. Just a cool range of $500 billion. Given that trucking covers so much - freight brokers, fuel stations, private fleets, and owner operators - it makes sense that it’s been difficult to reach consensus on market size.
But we need a number. So let’s approach the market size by looking at the number of truck tractors operating in the US.
In 2022, that figure is roughly 3.071 million truck tractors on the road.  From there, we can estimate the average yearly net transactions per truck at roughly $340k per year.  Multiply the two numbers together, and we get $1.04 trillion!
That’s a lot of money (see footnotes for calculations and disclaimers). It’s natural that every year, founders like me decide to try building a business in trucking.
While a large number is nice, it hides how complex the industry is.
Trucking is a potpourri of different services and needs. There’s drayage: the process of moving containers from docks to warehouses. There’s reefer (refrigerated truck): the truck trailer is temperature controlled. There’s hazmat: transport of hazardous materials. Flatbed, dry van, tankers, partials, hotshots, box trucks, and more.
For our purposes, we’ll be looking specifically at class 8 vehicles with a gross vehicle weight rating of above 33,000 lbs. This disqualifies hotshots, box trucks, and cargo vans. 
For some background, let’s explore the industry based on the perspective of a driver.
- Carriers - trucking companies that employ drivers
- Brokers - how drivers and carriers make money
- Expenses - what drivers spend money on
Let’s start with some stats.
Right now (18-DEC-2022), there are 1,946,308 registered motor carriers in the US. Of these, 1,868,399 have fewer than 10 trucks. In other words, 96% of carriers in the US operate fewer than 10 trucks.  Another 4% operate 11-100 trucks. Only 5,538 companies have a fleet size greater than 100 trucks, 0.2%.
However, of the ~2 million registered carriers, only 10% or ~200,000 carriers are legally active. When a carrier decides to pause or quit trucking, they’ll submit a form to revoke their motor carrier authority. But rather than deleting the registration, FMCSA will simply mark the authority as inactive and carriers can reinstate their authority at a later date.
More importantly, if we look at the carrier market in terms of trucks rather than companies, roughly 85% of trucks on the road come from fleets and mega-fleets (more information below).
Broadly speaking, we can break down carriers into three categories: owner operators, fleets, and mega-fleets.
Owner operators are carriers with one to five trucks. As the name suggests, the owner of these trucking companies is typically also an operator/driver. Most owner operators work in the spot market. In other words, these carriers negotiate and book 95% of their loads piecemeal with behemoth brokers like CH Robinson and TQL.
90% of owner operators fail in their first year - trucking is incredibly cutthroat.
Booking a load in the spot market requires looking at several factors such as RPM (rate per mile), net rate, pickup location, backhaul, deadhead, detention, weight, broker, cashflow, tools, fuel cost, driving hours, and distance. In fact, I got my start in trucking by acting as a dispatcher (someone who finds and books loads on behalf of a truck driver).
It was some of the most difficult work I’ve ever done.
Growing from 5 trucks to 25 trucks is a huge transition for the carrier. We’ll call carriers with 5-25 truck as fleets. The biggest change for fleets is the introduction of dedicated lanes, long-term contracts with brokers/shippers to establish dedicated routes between two consistent destinations.
Contracts usually start with local lanes (less than 200 miles). As the carrier establishes their reputation, they can look for more lucrative, long-haul lanes. At the 25 truck mark, most carriers have dedicated 60-90% of their capacity running dedicated contract freight.
But besides dedicated lanes, operationally, a 25-truck carrier looks entirely different than one with 5 trucks. For starters, the role of the owner is entirely different. At 5 trucks, the owner is probably doing a bit of driving and dispatching. At 25 trucks, the owner’s role is almost entirely on sales with shippers and recruiting new drivers.
For the company, 5 trucks might mean one or two dispatchers. At 25 trucks, you now have a team of 5-6 dispatchers with a small accounting / hr arm. On average, I saw roughly 3-4 back-office members for every 10 drivers. And on the technology side, pen and paper no longer cut it. Instead, carriers invest in a dedicated TMS (Transportation Management System), ELD (Electronic Logging Device) integrations, payroll and compliance solutions, and more.
Moving up the food chain, we find ourselves in the 25+ range - mega-fleet territory (I know someone in trucking is yelling at me that mega-fleets means 100 or 200+ trucks, but 25 and 100 truck carriers have similar fundamental operations). This is where trucking gets fun.
As an asset-based carrier, finances become fairly simple. Buy truck for $X, pay driver for $Y, and profit $Z every month. This stability allows carriers to scale up operations at a sustainable clip. Other scale benefits include cheaper insurance, deals on equipment, partnerships with CDL schools, and large discounts on fuel.
Mega-carrier aren’t problem-free. But as long as ownership isn’t literally asleep at the wheel, the momentum of reaching 25+ trucks is often enough to keep propelling the carrier forward.
Talk to any truck driver - one of the first things they’ll complain about is freight brokers.
As the middlemen between shippers (companies like Walmart that need their product moved) and the carriers (companies that haul that product), brokers play a zero-sum game. Because most brokers quote shippers a fixed price, every dollar that the carrier earns is a dollar less for the broker.
It’s possible to write whole books on the inner workings of freight brokers. Some, like TQL, exist as a high-pressure sales environment where they eke out a margin through sheer force of will. It also helps that they have tremendous pricing power over drivers and carriers. Others, like CH Robinson, take on high-value contracts that have generous amounts of margin.
It’s easiest to understand the role brokers serve by walking through the lifecycle of a single load.
It all starts with the shipper. Shippers almost never need just a single load hauled.
Rather, they have a consistent schedule of freight to transport from one location to another, e.g. shipping Pork Rinds from Chicago, IL to Houston, TX weekly for 6 months.
The shipper will call up freight brokers and ask them to submit bids for how much they’ll charge for this contract.
The freight brokers will then solicit carriers in the network for quotes. For the best quote they find, the broker tacks on an extra 15-25% and send a bid back to the shipper.
The shipper looks through these bids and builds a waterfall list of brokers with different contracts. For our purposes, let’s assume the shipper picks a single broker.
Now the broker is on the hook for moving this freight. They have two options.
First, they can sell this contract a dedicated lane and find a carrier partner to take these loads on a weekly basis. The broker will correspond with the shipper on the shipment’s status and regularly check in with the carrier when the freight in en route. This is fairly low-touch, so the broker can sit back and pocket the difference between what the shipper pays and what the carrier is promised.
The second option - perhaps the broker decides to break up the loads individually, or the assigned partner carrier misses a load. The shipper doesn’t really care about these details, all they care about is the freight to arriving on time and in one piece.
In these cases, the broker will look to fill these loads quickly by listing them on the spot market.
To do this, they post the load onto load boards like DAT, Truckstop, and 123 Loadbards. These load boards host millions of carriers (mostly owner operators) who will bid on open loads. A broker could post a load and receive 50-100 emails or phone calls back from carriers within just twenty minutes.
The broker then goes through a back and forth with a couple of the carriers. On average, brokers post loads for 20-30% below their target price. It’s a known game between carriers and brokers to negotiate for every dollar on the load.
Once the broker and carrier agree on price, the broker sends over a final rate confirmation. This so-called rate con includes all the details of the loads, where and when to pick up, as well as the agreed upon rate for the load.
The carrier deadheads (drives empty) to the pick-up location for warehouse workers to load the freight. For smaller trucks like box trucks or hot shots, drivers will help with loading. After everything is loaded, the driver receives a Bill of Lading (BOL) from the warehouse and takes legal possession of the freight in the truck.
Once that’s done, the carrier hits the open road. Throughout the haul, the broker periodically checks up on the carrier to update the shipper. It’s a relatively hands off process most of the time.
However, a lot of edge cases show up with an 80,000 pound machine covering hundreds of miles. A wheel might blow out, an engine might malfunction, the driver might get stopped at the scales, or the truck might get into an accident.
In these cases, brokers function as the human connection between carrier and shipper. They figure out what, if anything, has happened to the load, any necessary contingency plans (including hiring another carrier to finish the load), and how best to communicate issues with the shipper.
Assuming a smooth journey, the carrier arrives at the receiving warehouse. The shipper unloads the freight and hands the carrier a Proof of Delivery (POD). The carrier sends the POD over to the broker, who in turn requests payment from the shipper. The shipper pays the broker, who in turn pays the driver roughly 30-45 days after the load is completed.
And with that, we’re finally done with a load.
Despite the tension between truck drivers and freight brokers, brokers are a vital piece of the trucking industry.
There are roughly 17,000 brokers in the US today. We can also broadly classify them into three groups:
- Regional broker
- Asset-based broker
- National broker
Regional brokers are just what the name suggests - brokers with shipping relationships in a specific region.
For example, Cal Freight is a regional broker that operate primarily out of Northern California (they’re also an asset-based broker). Most of the loads from regional brokers will be intrastate, local lanes. They primarily service smaller shippers and have a dedicated list of partner carriers in the area.
Regional brokers also make region-specific investments. Cal Freight operates around 500,000 square feet of warehousing to help their clients manage storage needs. Drayage carriers such as Viper Transportation own yards for stacking containers. These investments help regional broker differentiate themselves from larger brokers and lock in smaller shippers.
Asset-based brokers are both a broker and a carrier.
Most mega-carriers (25+ trucks) start branching into brokerage business. After all, they already have the necessary shipper connections and it’s far easier to scale a brokerage than an asset-based carrier. For example, Cheema Transport is another Northern California freight broker that also operates a fleet of 60 trucks (primarily reefers). Usually, asset-based brokers will funnel the best loads to their internal fleet and then broker out their lower quality loads.
National brokers are - well - national, with multiple brokerage offices.
For example, TQL is headquartered in Cincinnati, OH but has 56 offices in 26 states. Besides size, a key advantage of a national brokerage is the variety of loads. Regional brokers are limited to a specific area, so it’s harder for carriers to find a suitable backhaul. National brokerages don’t face this problem (TQL posts 65,000+ loads a week), and more often than not, can sell a packaged round-trip route.
It’s difficult to balance earnings and expenses in trucking. A carrier grossing $250k per truck will often lose $200k in expenses. Some large expense categories (based on ATRI data) include:
|Category||% of Spend||$ / Year|
|Driver Wages||34%||$ 51k|
|Driver Benefits||10%||$ 15k|
|Fuel Costs||19%||$ 28k|
|Truck Payments||16%||$ 24k|
|Repair Costs||9%||$ 13k|
|Permits, Tires, Tolls||6%||$ 9k|
Driver benefits, repairs, permits, tires, and tolls are fairly self-explanatory. Let’s dive into the other categories.
In most cases, driver pay is directly tied to the number of miles they’ve driven on a weekly basis. There are three main categories: self-employed, lease-on, and company drivers.
Self-employed drivers are also known as owner operators (which we’ve gone over above). They’re responsible for finding loads and bearing all costs involved in transporting them. A dry van owner operator makes between $2 to $3.5 per mile, before expenses.
Lease-on drivers own their equipment, but are running under another carrier’s motor carrier authority. CloudTrucks, TrueNorth, and LandStar are carriers that operate with a high percentage of lease-on drivers. By leasing-on to an established carrier, drivers get lower insurance rates, dispatching help, and the support of a larger organization on accounting, tires, fuel, and more. The carrier takes around 10-20% of the driver’s earnings for providing this support.
Company drivers simply drive. They don’t own the equipment or any of the costs involved with trucking. Generally, they drive ~1,500 miles a week and earn $0.5 to $1 for each mile.
Trucking isn’t very fuel efficient - it’s nearly 9x worse than rail. Rail fuel efficiency ranges 196 to 1,179 ton-miles per gallon while truck fuel efficiency ranges from 84 to 167 ton-miles per gallon. 
But like we discussed above, trucks have significant infrastructure and flexibility advantages over other methods of freight transportation. Truck stops are plentiful, strung all over the nation’s highways to support truck fuel consumption. Pilot Flying J, one of the largest truck stop chains, has over 720 truck stops alone. Love’s Travel Stops has another 550+ locations.
Truck stops are such great businesses that the Pilot Flying J is the 5th largest private company in the US with $42 billion in revenue annually. Love’s is the 10th largest private company with $26 billion.
Part of what makes these truck stop companies so dominant is their scale. At a certain size, the economics of a gas business closely resemble those of software. Lots of infrastructure costs like operations, land, and buildings are fixed costs, while fuel and snacks as high-margin products.
An average class 8 truck costs anywhere from $150k to $250k new. A 53’ trailer costs $50k to $100k. All told, a standard dry van truck costs the carrier around $250k. Most carriers don’t have a cool quarter million just lying around.
So, they’ll go and get a commercial truck loan with a payback period of 24-84 months. Interest rates for truck purchases are far above market. Usually, they’re 8-10% APY with a 20% down payment. That means that just the interest payments on the truck is around $15-$20k a year. If we factor in principle, that number becomes somewhere closer to $25-30k per year.
There’s not a lot of opportunity in the actual manufacturing of trucks. Freightliner, International, Volvo, Peterbilt, and Kenworths are some of the most popular brands in trucking and the sales motion for these trucks looks surprisingly similar to the average retail car-buying experience: truck dealers, show-rooms, and lots of negotiation.
One of the fastest-rising costs for carriers in recent years has been insurance.
Most trucking insurance providers look at fairly basic factors like credit score, authority age, equipment type, safety rating, and driver experience.
Of these, the most important factor usually is authority age. The longer a trucking company has been in business, the safer it is to insure that company. After all, if 90% of trucking companies go out of business in their first year, an insurance company will want to price out that risk.
Disparity between insurance costs between a new carrier and an established one can be high - upwards of $10,000 per truck per year. That’s a hefty chunk of the driver’s earnings.
It’s also a key reason why virtual carriers and lease-on driving is so popular.
So you want to build in trucking…
Now that we’ve laid out the basics of trucking, it’s time to talk about the opportunities. Trucking’s a big industry and there are a bunch of million to billion dollar opportunities on things as mundane as paperwork. Let’s walk through a few opportunities/startups along with my assessment for each:
- Virtual Carriers
- Fuel Cards
- Digital Brokers
- Load boards
Carrier life is all about how many trucks you have.
Unlike software, it’s quite hard to build a carrier that’s significantly better than your competition. After all, carriers sell a single commodity - transportation of goods in a timely manner.
As a result, the primary way for carriers to scale is to buy more trucks. More trucks mean better lanes, better rates from brokers, and higher discounts from everyone. As a result, most mega-carriers have decades-long lifespans.
There’s also a different way for carriers to scale: building a virtual carrier of lease-on drivers.
These are carriers that don’t own any assets themselves. Instead, they sign on owner operators (trucking companies with fewer than 5 trucks) and provide all the necessary backend support
By pooling various owner operators together, virtual fleets get the advantages of a larger fleet without having to go through the motions of building a fleet from scratch.
Most of these advantages have to do with costs.
Fleet insurance is far cheaper when you have an older motor carrier number and more trucks in your fleet. Purchasing trucking equipment is also cheaper in bulk and software investments can be amortized across the entire fleet.
Some of the largest virtual carriers include CloudTrucks and TrueNorth.
However, virtual carriers thrive in good times and hurt in bad times. With higher freight rates, more truck drivers buy their own truck and strike out on their own. That’s great for virtual carriers. But when freight rates lower, owner operators park their trucks and go back to company driving.
Additionally, safety starts to play a large factor as virtual carriers scale up. With more trucks, a fleet becomes inherently less safe.
Most carriers use a rigorous testing/training system to maintain good safety ratings (an official statistic with FMCSA). Virtual carriers don’t have that luxury. Growing their fleet requires them to sign owner operators with varying degrees of skill. This means that they’re exposed to higher risk of road accidents, and when something does go wrong, that leads to higher insurance premiums. Higher costs eat into the scale benefits that come with more trucks.
Neither of these problems are fatal. Another way to think about virtual carriers is expensive customer acquisition cost. Once a virtual carrier signs on a driver, it becomes easy to integrate vertically, offering factoring, dispatching, business intelligence, and more.
That’s the exact model CloudTruck is pursuing. Owner operators that sign on the CloudTruck’s virtual carrier offering are incentivized to use other services that CloudTruck offers. The more touchpoints CloudTrucks has with its drivers, the more opportunities there are available for monetization.
A single truck will purchase 10-15,000 gallons of fuel a year. Even a 10 cent discount makes a material impact.
That’s where fuel cards shine.
Fuel cards are debit (or credit) cards that discount 5 to 50 cents off per gallon. Some, like Wex, even offer cost plus fuel options (pay the base cost of fuel plus some fixed rate per gallon).
These discounts are primarily a function of the number of trucks in a fleet. More trucks = bigger discounts.
Fuel card providers derive most of their business through fuel volume. With enough volume, they can strike partnerships with truck stops for better rates and pass on a portion of these discounts to their customers. Incumbents in the fuel card space include Wex ($7b public company) and TCS.
There is a massive opportunity to build a better fuel card.
Mudflap is one of the most promising startups in the fuel card space, offering up to 40 cents off per gallon. Their strategy focused on striking pre-purchasing deals with smaller mom & pop truck stops with their own POS scanner/code, getting the best discounts while building up their coverage.
But discounts isn’t the only way for fuel cards to win.
Interchange rates for cards is anywhere from 2.5% (debit) to 3.5% (credit). That’s a $2.15 to $3.01 billion opportunity, for fuel transactions alone. 
Expanding further, fuel cards can easily extend into general purpose cards and take on more of a driver’s spend, including maintenance, meals, and parking. Traditional fuel cards from Wex and Fleetcor are “closed networks” that work in specific truck stops or vendors. By building an “open network” card, startups can drive towards easy adoption.
Atob is a leader pursuing this strategy. They’ve gained significant traction with drivers with their general purpose, net-7 card.
The traditional brokerage activities market, which is roughly $99 billion, is also ripe for innovation. 
There’s a fair amount of margin in the brokerage industry and plenty of room for automation, so the easiest opportunity is to create a better, digital brokerage.
Convoy and Loadsmart started with exactly this thesis. More specifically, these two digital brokerages bet that the smartphone would transform how brokers and carriers work together.
The smartphone would lead to two distinct shifts.
First, load discovery. Previously, carriers had to call brokers or dispatchers over the phone to find loads. With smartphones, these carriers could easily access all the brokerage’s loads in one place, then place high-intent calls to book loads that they were most interested in covering. In the case of Convoy and Loadsmart, drivers can book directly through the brokerages’ app.
The second shift was a decrease in servicing costs. Whenever a shipper asked their broker for an update on their load status, the broker needed to manually call their driver and pass on the information. With smartphones, brokers can automatically track their driver’s location and expose that information to the shipper.
But a natural consequence of the digitalization process is a decrease in quality of edge-case service. Convoy as a brokerage works great - until the driver runs into an issue. And drivers run into plenty of issues while trucking.
Further, brokering isn’t really about load discovery or servicing costs. Those are great to have, but the real difference maker is broker relationships with shippers. To shippers, it doesn’t really matter whether the company is digital first or phone call only. All shippers care about is how easy the brokers are to work with, their reliability, and how cheaply their loads can get covered.
Digital brokerages have a lead against traditional brokers on price - but not enough to convince shippers to switch over en-masse from traditional brokers like CH Robinson, TQL, and JB Hunt.
As a result, growth by Convoy and Loadsmart has slowed as they’ve saturated their initial target market. This also shows in their capitalization, Convoy has raised $930m while Loadsmart has raised $346m.
Rather than being capital light software businesses, digital brokerages have found themselves looking more like traditional brokerages and competing on shipper relationships rather than product differentiation.
Another massive digitalization opportunity is the load board market, probably net $1 billion per year. 
The average truck driver is 46 years old, with most used to using the phone to book loads. But, the reality is that drivers will always go to wherever the loads are. Trucking is a market where supply (trucks) follows demand (loads).
If demand is on the load boards, that’s where truck drivers will also be. In the past few years, load boards like DAT, Truckstop (acquired for north of $1b), and 123 have seen explosive growth.
On average, these load boards charge anywhere from $50 to $300 a month for access to loads posted on the boards. Assuming a 15-24 month active subscription (roughly the lifespan for most carriers), that leaves an LTV of at most $7,200.
When we consider that the average truck is seeing roughly $342k in transactions per year , that leaves quite a bit to be desired. This also gets reflected in how brokerages have a much larger market size than load boards.
As a result, startups like Trucksmarter have a thesis that you can use load boards as a loss-leader to attract drivers. Once the drivers are on the platform, you can then monetize with various methods such as fuel cards, insurance, and even becoming a new digital brokerage.
But most trucking startups go vertical. Factoring is a heavily contested space now with multiple trucking startups in the fray. Insurance, fuel cards, and digital brokerages also have dozens of players. While offering load boards is an easy way to gain traction, it remains to be seen if the attach rates will remain high across products.
And that brings us to our final opportunity, factoring.
Factoring is an interesting business. The motion is as follows -
- Carrier completes a load and pays for transportation costs (fuel, food, tolls etc.) out of pocket
- Load is on a net 30, 45, or even 60 payment schedule with the broker
- Factoring company loans 96 to 98 cents on the dollar to the carrier
- Factoring company tries to collect money from broker
- If successful, factoring company will keep the extra 2-4% of the broker payment. If unsuccessful, factoring will ask for their money back from the carrier.
Essentially, a factoring company is making a bunch of short-term loans to carriers and taking on the accounts receivable function of the carrier.
Assuming a net 30 day payment and 3% factoring fee, a factoring company can earn ~36% on their capital each year. That’s a pretty great business.
There are just two problems with this business model.
First is incentives. The best customers for factoring companies are carriers that work with reputable brokers, have a rainy day fund, and are generally well run. These are also carriers that least need factoring. After all, why pay 3% of gross if you have the capital reserves. So, factoring companies have a natural dilemma of good customers churning and bad customers coming in the door.
Second is the cost of operations. Trucking is a highly fragmented and sometimes, difficult industry. Brokers will delay payment, only pay a portion of the promised rate, or even refuse to pay for a load. The responsibility for collecting the payment falls primarily on the factoring company. That means a lot of paperwork and dealing with problem brokers. Fraud rates can be as high as 15% of total payments.
As a result, the effective capital return is somewhere closer to 5-10% yearly (after we account for cost of capital, fraud & operations, and customer acquisition cost). It’s not a bad business, it’s just not a great business either.
My time in trucking was an incredible experience. I made some great memories visiting truck stops and seeing truck drivers believe in my vision was marvelous (thank you Jeff & Tina).
I believe that trucking is an industry that needs and is ready for change. Hopefully, you’ll be that person that changes everything.
Special thanks to Dan Bogachek, Jeff Zhao, Kevin Huang, and Michael Ip for generously donating their time and looking through crappy first drafts of this post. Wouldn’t have been possible without ya.
 Data from the American Trucking Association
 Page 9 of this report
 State and local government spent $155 billion, while the federal government spent $48 billion on highways and roads in 2019.
 Based on a federal report from 1979. With a near full load, trucks weigh around 70,000 lbs. Across five axles, that’s an average axle load of 14,000 lbs. For comparison, a Toyota Camry weighs around 3,600 lbs and has an axle load of 1,800 lbs. The formula for measuring relative weight damage is (w2 / w1) ^ 4.
 Rail abandonment from 1977
 In 2020, that figure was 2.979 million from the Office of Highway Policy Information. Averaging data for the 6 years from 2015 to 2020 (small table below), we can assume growth in truck tractors at roughly 46k new truck tractors each year. So, 2.979 + 0.046 *2 gets us to 3.071.
DOT shows roughly 7.2 million registered trucks as of 12/18/2022. But this figure includes hotshots and box trucks which generally earn less than traditional semi trucks.
$340k per truck per year is calculated from 89,358 * 1.646 / 0.85 / 0.8 / 0.85/ 0.75 = $339,292 and (59,498 * 0.473 + 110,000 + 80,000) / 0.85 / 0.75 = $342,184.
Let’s start by looking at the 2021 ATRI trucking report. Average miles driven per truck per year in 2020 was 89,358 with the average motor carrier cost per mile at $1.646. Multiply the two numbers together, and we get a yearly operating cost of $147,083.
Let’s assume that a carrier spends 15% of costs on internal operations, including factoring costs, back-office wages, office rentals, accounting, and payroll. That brings our yearly cost to $173,038.
Then, let’s say that a carrier targets a 20% profit margin per truck. A bit on the higher end, but humor me here. $216,299.
Now, we can add brokerage costs. Generally, brokers earn about 15% of the gross, bringing the total up to $254,469.
And finally, we can tack on the shipper costs, including loading/unloading, personnel scheduling with warehouses, contract negotiations, tracking, and more. There’s some more complexity with the various types of freight, dry, reefer, flatbed, special, and local but for the purposes of this post, we’ll smooth over these complexities. Let’s call this an even 25%, totaling up to a net cost per truck at $339,292.
But the average yearly mileage number from ATRI is higher than FMCSA (59,498). So using the FMCSA data, we can find - (59,498 * 0.473 + 110,000 + 80,000) / 0.85 / 0.75 = $342,184.
Let’s start by figuring out the cost per mile per truck.
There are two ways to calculate this. First is to find the sum of both total number of tractor trucks (easy) and find the total amount paid to the drivers of those tractor trucks (near impossible). We won’t be using this method.
Second is to start at the fuel costs and build up from there. On average, a tractor trucks gets 6 miles per gallon of fuel. Average price of diesel in the past 6 years is $2.838. So, the fuel cost per mile is $0.473 or $28,142.
Let’s then put a target salary and benefits of $110k per year per driver. This is quite a bit higher than the ATRI driver pay. A flaw in the ATRI survey is that most respondents had more than 5 trucks, with fewer truckload respondents than the national percentages. As a result, I use the base pay of Walmart drivers as a benchmark for driver pay.
On top of fuel + salary, let’s look at costs such as truck payments, insurance, repair + maintenance, truck and tractor depreciation, eld, tolls, and more. Truck payments is around $25-30k a year, insurance is around $15-20k a year, repair + maintenance is another $15k a year, everything else combined is roughly $20k a year. Combined, we get $75-85k a year. Let’s call it $80k a year (See expenses section for a more detailed accounting of trucking costs).
So now we get 59,498 * 0.473 + 110,000 + 80,000 = $218,143.
We then go through the same math with broker and shipper costs. 15% and 25% margin respectively. So, we get a net earning per truck of $342,184.
 I know someone’s yelling at me that hotshots or box trucks are technically part of tucking. And well, they’re kind of right. But humor me here. This is a pretty long post and talking about every detail means that we’re going to be stuck here all night.
 Gotta love all these studies done in the old days. Here’s a 1991 government study on The Relative Fuel Efficiency of Truck Competitive Rail Freight and Truck Operations Compared in a Range of Corridors.
 So we start with 3.071 million truck tractors on the road. On average, a truck will drive 59,498 miles per year. And the fuel efficiency of an average truck is 6 miles per gallon. So 3.071 * 59,498 / 6 = 30,453 million gallons per year. We’re also not counting other types of trucks like box trucks or hotshots.
Multiplied by the price of diesel at $2.838, we get $86.4 billion spent on fuel.
 Data from Ibis world.
We can also run some hand-wavy math on stock valuation. Let’s take a company like CH Robinson - they’re the largest freight brokerage in the US and most of their revenue is derived from truckload freight. They also currently have a roughly 3-5% market share on truckload brokerage.
Their spread between revenue generated from Transportation and expense paid for Purchased transportation and related services was $3 billion for 2021 (historically, it’s been around $2.5 billion). So, we can put the freight brokerage market at anywhere from $60b to $99b.
Assuming the upper end of that gets us to our $99b market size figure.
 Since most load board companies are private, it’s hard to discern figures here. But ICONIQ capital made a majority investment into Truckstop at a $1 billion valuation in 2019. Assuming that Truckstop has since then growth 15% YoY (especially given how hot the trucking market became during the pandemic), that valuation is now likely to be $1.75 billion. Assuming a revenue multiple of 6x (low software, high trucking multiple), we get their annual revenue to be $291 million. DAT is likely double Truckstop’s size, so let’s call it $600 million. And then the last $100 million is taken by smaller players in the market.