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Adapt or die: Tough advice for small trucking companies

Small transporters need to adapt to thrive in a cut-throat environment, Ferrier Hodgson says

By Ruza Zivkusic | December 7, 2010

Struggling transport businesses that find cost pressures hard to absorb should consider a restructure plan, according to a transport specialist firm.

Ferrier Hodgson partner Brendan Richards believes many of the country’s smaller businesses are running on low margins. They are competing on price and have been under strong pressure following the global financial crisis, he says.

“The burden of compliance for any transport operator is high, to say the least. It comes at a cost and that cost is increasing against decreasing freight rate, which means the bottom line is just getting skinnier by the day,” Richards says.

He believes the country is subject to a two-speed economy, and any business that services the resource industry is doing well due to China’s demand for Australia’s minerals.

But Richards believes times will only get tougher for smaller businesses as the industry is merging towards the “big players”.

“There are a lot of people that are operating as a sole operator with one truck, companies are going broke and I would expect to see a significant spike in those numbers for the next 12 months,” he says.

“The first thing people need to stop doing is work for the sake of keeping busy; a lot of people are continuing to operate their business on a zero margin.

“If you can’t achieve margin and if you don’t have assets utilised then seriously you should be looking at selling your business and doing something else; that’s the reality rather than just continuing down the road which will ultimately end in ruin.”

Richards says family-owned businesses need to accept that the nature of the road transport task is changing.

“You need to adapt to those changes to position your business to survive, let alone grow in a totally different landscape to what it was when it was first established. The heyday of the 1950s and ’60s of trucking in Australia is a different memory.”

However, Richards says businesses competing with the likes of Toll and Linfox will struggle because they lack the flexibility of the larger firms to adapt to changing requirements.

“Customers these days need the transport operator who can interface with their own systems and usually it’s only the larger players who have the capability of providing that,” he says.

“They have the deep pockets and can meet the market with those technology needs. That and compliance are two key reasons why the big players are getting bigger and everyone else is suffering.”

But Richards adds that it is not the mindset of bigger companies to push smaller operators out of business.

“I think their mindset is about growing their own business but I think the consequence of it is that smaller players are exiting,” he says.

“The bigger players are starting to compete in areas that are impacting the little guys and the little guys find it very tough to compete with them.”

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