Trucking: Going into a Trucking Partnership, control oversight, leasing trucks

Question
I have been approached by my cousin's boyfriend who has his own trucking company. He has been in business for about 2 years and is looking for partners to help expand the business. He has 2 - 3 drivers and a few trucks, and does a range of local dump truck assignments to interstate runs. I live on the East coast and he is on the West Coast, which is a concern for me due to the distance and potential lack of control / oversight by me. I've been in a few business partnerships before but never in the trucking industry, so this is new to me. He seems to be very flexible as far as how we structure our partnership (i.e. I can write up whatever I want as far as the agreement). He said that I could buy the truck and either lease it to him or have him manage it and the drivers and we would split the profits from each run. I suggested to him that I would start off with a dump truck and do local runs, since that seems like the easiest to do. Do you have any recommendations on how I could make this type of partnership work? If there is any way to do it, I would like to try. Not being located in the same area is a big concern to me, as well as how to maintain control over my investment. Any ideas or comments you have would be helpful. Thanks!

Answer
Hi Eric.

It is a tough call.  I wouldn't be in a partnership where I was so far away from the operation, unless I REALLY trusted my partner.  The fact that your not too familiar with trucking is another issue.  If you trust this guy completely, then you have a good start.  If your unsure, this is a problem.  Only you know.

I like the idea of leasing trucks to him.  My first thought is, does he run over-the-road (all 48 states)?  If so, then you hire drivers locally and lease them out to him on the West coast.  This way, you can keep an eye on your equipment and talk with the drivers.

There are a few problems that can happen in partnerships like yours.  I've seen guys take tires off of the partner's trucks and put it on their own.  Then they call their partner up, four states away, and say, "send money, your trucks tires are bald".  Or the partner A's truck runs 9 loads a certain week, but only gets paid for 7.  The other two loads got covered (in the books only) by partner b's trucks, so he collects the money.  There are a million ways to scam, so trust becomes a big issue.

Whatever you decide to do, have a lawyer draw up some papers.  I always tell people, "Nothing personal, this is business."  We live in a time where EVERYTHING has to be on paper.  Who pays for repairs?  Who will pay for fuel, drivers, insurance, etc?  You can't get too detailed!  It will save you headaches later.  Have a lawyer write up who is responsible for what.  If the company goes under, who gets what.  Also, what percentage of the company do you own?  If it's not on paper, people always forget in their favor!  It's happened to me and that's why I write everything down now!

Whatever your decision, also demand a load sheet at the end of every week.  You want faxed, once a week, the loads that your trucks carried that week and the drivers pay for that same week.  You want to make sure your partner doesn't "forget" about a load that your owed.  If your truck only has one load for a certain day, but the driver got paid as if he had two, it would raise a red flag.  It's nothing big, you just want to keep track of income and keep him honest.  You want to be informed of everything with your truck(s).  Breakdowns, accidents, new drivers, bad loads, it doesn't matter.  Tell him to call you and keep you updated.  This is your money and your truck, you want to be informed.  The more hands-off you are, you better your chances are at failing.

I would look into incorporating your own company and leasing out to him.  I like the idea of getting long haul trucks and having their base near you.  He can run the loads and manage the drivers from the West coast.  Maybe all these drivers do is run from coast to coast.  If this doesn't work for you, then get a dump and let him run it, but tell him in advance, you want to know EVERYTHING going on and don't forget to draw up that paperwork!

Good luck!

Bob Stephens