Advice Setting Up Contract

Hi,

Just looking for a bit of advice to help me think through a situation and work out best way to proceed.

I run a single 18t rigid crane truck with margin for another.

I have a regular customer, a restricted licence holder in a yard on the same Ind. Est. as my parking. I also drive his truck for him occasionally.

He has suggested before now, putting his truck on my national licence so we can work it when his deliveries are slow and split the profits.

That is a bit of a minefield though, as I explained to be on my licence I would need to be in control of the maintenance, records, etc. etc. basically everything, and his input would only have been a knackered old truck (shaped money hole). He had hoped he could carry on the (shoestring) maintenance himself and promise to me he would keep it up to spec. So that was a non starter.

He has a single 26t which has really had it. It is an ex Highways vehicle with only 76k on it but the body is so bad I’m not willing to drive it for him any more. My vehicle is not really ideal for him as the payload is only 9.5t which is too low for all but his smallest orders. Also Euro 4.

With Ulez coming in a couple of months (a year earlier than he thought) and now drivers refusing to take it out… It is time for him to replace it.

He is a scaffolding supplier so his gear is heavy and often goes straight to site, so plenty of residential streets

I have suggested an ideal replacement would be something like a low roofed 4x2 unit with a short 1 or 2 axle flat.

He’s very keen on the idea and is now suggesting we go halves on a set up like that.

Having dismissed the idea previously, this time it makes more sense.

Advantages to me would be investment to help with a Euro 6 vehicle which I could do with as well. His stake in the purchase also means the vehicle will come with guaranteed work. At mo he is doing 3-4 days deliveries per week but it fluctuates a lot. He can park it in his yard so no need for extra parking charges. He also has plenty of contacts who could make use of a vehicle like that, so lots more potential work. Being an artic incorporates a bit of flexibility to take on a range of external work.

He is not interested in running a vehicle and wants to concentrate on marketing and sales which would leave me to run the transport side which sounds very good to me.

I’d like to make it work but it throws up a number of questions.

How best to go about splitting the costs/profits in a straightforward way.

Whose books will the new asset be added to?

We may be discussing a contract shortly and I am trying to think how best to proceed with suggestions that won’t end up being too complicated.

I’ve considered putting it all in my name and treating his input as a loan, repayable with interest over say 2 years or so with an agreement to prioritise his deliveries… but suspect he’s going to also want a cut of any other work he gets for it as well so just not sure how to do it for the best.

There are probably other pitfalls and/or benefits of this possible arrangement I haven’t considered.

Any advice or suggestions gratefully received.

L

This depends on how much work you have got for the vehicle and the profitability of that work. The simplest thing would be for you to own/rent the vehicle, have it on your licence and do his haulage for him. It has many advantages for him, the increase in his haulage costs will be will be offset by no longer needing to be involved with the vehicle or drivers, thus allowing him to concentrate on his core business. However his lack of interest in the expense of maintaining his own vehicle may well be an indication of whether you wish to get into bed with him at all.

The proposal you mention seems to have all the advantages in his court, you will end up with all the bills and he gets use of a nice new vehicle. You can be sure that he will want the vehicle as his asset, but your responsibility.

Edit add:

I would also be looking up on Companies House any details about this company and the history of its directors. Without wishing to get out the tar brush, my own experience of anything to do with the building and road repair trades has not been good.

cav551:
However his lack of interest in the expense of maintaining his own vehicle may well be an indication of whether you wish to get into bed with him at all.

The proposal you mention seems to have all the advantages in his court, you will end up with all the bills and he gets use of a nice new vehicle. You can be sure that he will want the vehicle as his asset, but your responsibility.

Without wishing to get out the tar brush, my own experience of anything to do with the building and road repair trades has not been good.

1. Yes, this being my primary concern. We are going to have very different priorities, given it’ll be my liability and he’ll only want to maximise profit doing everything on the cheap.

2. That is true. I could set it up independently and sort a contract guaranteeing the work but not sure that’ll happen without his stake in the truck.
   Like a lot of Restricted holders I’ve come across, the truck and everything that goes with it is a big hassle and expense to him. Obviously he is very keen on the idea of dispensing with all that, but then I think he has visions of reaping great profits hiring it out to others if it is on a non restricted licence.

3. Point taken, and proceeding with caution. From my experience of his work it is tight margins in a “competitive” market.

youtube.com/watch?v=Zpa-dk0A-ZQ

You are going to end up not being able to do your own work because he might have a load for it this afternoon or his mate Jim says he wants it. Meanwhile it is steadlily getting wrecked because every time he has a load he insists that one of his drivers does the driving.

The only guarantee you’ll get regarding work is: “as and when required”. By all means keep him as just one of your customers, but you have to be in total control of your vehicle and keeping a very sharp eye on how much you are owed. Never let his invoices owing slip out of contracted terms.

At first sight it seems like it could work well. He has the work and it could be a good opportunity.

But yeah, on closer inspection it is hard to see how that would happen in practice.

I need to be in full control of the vehicle and that kind of puts the kibosh on it being any sort of joint venture.

I can’t commit to upwards of £20k set up without a pretty binding deal.

Just a correction though, he has no drivers to wreck the kit, only me as a temp fill in and that is why he is kinda desperate. Sending orders out on random external transport.

Maybe not as sketchy as I’ve made out, he wants to up the image and quality (as well as payload) which is part of the reason he is keen on a new vehicle. That and Ulez.

Thanks for your input.

I appreciate I may be talking to myself a bit here, but anyway… it is nice to think out loud

I’ve been thinking of a way that I might be able to do this;

1. He buys and maintains the trailer only. I buy the unit and retain full control of it, maintenance etc.

I do his deliveries at traction only rate.

2. He finds other work for his trailer. (since original post appears a number of his contacts say they have plenty to keep it busy)

I do that work at traction plus trailer hire rate. He keeps the trailer hire fee.

3. I find work for the trailer

I do the work at traction plus trailer hire rate. He gets the trailer hire fee.

This means that;

1. His costs drop to trailer maintenance only. He gets his goods delivered at a good rate.

2. He gets a flat rate for all other work he finds. The trailer rent becomes his cut. Simple to administer. Gives him an incentive to find external work but also to keep his trailer hire rate reasonable/competitive.

3. I get the use of the trailer for any work that I source independently. I add the trailer rent to my rates. The trailer rent is again his cut.

In order to secure some assurance the set up will be worth the investment we contract that;

He provides at least x % of the projected work (via a combination of his own deliveries and other work he secures) or pay the shortfall.

So. Questions this throws up. What is the O Licence situation if he is keeping a trailer only? Been reading around and saw this thread about trailer only operators.

viewtopic.php?f=4&t=78871

He’d become a trailer only operator.
He’d need to keep the thing maintained obviously, but would he need to keep his O Licence?

Securing the other work he’d kinda be acting as an agent and the trailer hire would be his fee.

I need to add a trailer to my licence. I’d be doing traction only work. I see threads discussing whether you need to add a trailer in that situation, but certainly for any work I secure myself it is not traction only, it is just me with a hire trailer.

Interested in the legalities of this arrangement.

To run a tractor unit on traction work the operator needs at least 1 trailer on his own licence and is also responsable for daily checks