Regardless of whether you’re a starry-eyed rookie driver or a grizzled veteran with a million safe miles under your belt, you’ve at least considered the possibility of giving up the security of a guaranteed weekly paycheck for the chance to live the entrepreneurial lifestyle as an owner/operator. This is an achievable goal, but before you pick out a new truck and kick your current employer to the curb, you need to ensure that your ducks are in a row and you have set yourself up for success in what is a highly-competitive business environment.
In order to put yourself firmly on the road to success, there are a number of critical decisions and self-assessments that need to be made. While failing to take all of these steps doesn’t guarantee that your new venture is destined for the trash heap, following this roadmap does dramatically increase the chances that you will look back on this time with fond memories. So use this guide as a general framework around which to build a profitable, self-sustaining business.
1. Personal Assessment
Taking a good, hard look at your work ethic, habits, and other factors can yield solid answers about the likelihood you have of succeeding as an owner/operator. Do you like to spend weekends holed up in truckstops watching races or ballgames, shooting the breeze with other drivers for hours on end, or trolling around on the Internet? If so, you may not be cut out for the rigors of truck ownership. Some of the personal factors you will need to examine include:
- Driving Preferences – How hard do you like to run? Do you prefer to maximize your available hours so that you can run as many hours as possible or is it more important to you that get a choice parking spot and a place in the buffet line while the food is still fresh?
- Hometime – If you prefer weekends at home regardless of what that time off might mean to your take-home pay, you might be better off remaining on the company payroll.
- Family Considerations – Do you have special family considerations – such as a spouse with a strange work schedule or shared child custody – that heavily restricts when you’re available to drive? While it’s possible to successfully manage these issues, there may be times when hometime may have to be sacrificed in order to remain profitable.
- Health Considerations – Is your health generally good? While you may have a current medical card, do you have health conditions that will get progressively worse over time? If so, you might want to remain on the company payroll as an employee because serious health problems can strike a death blow to your business if you’re not financially prepared.
- Insurance – Do you need employer-sponsored health insurance or do you have a spouse that has an employer plan that covers you? If not, in most cases, you’ll discover that insurance can be a costly expense that might be beyond your reach (depending upon your health, age, weight, and other factors). Pending health legislation might change that, but until all the details are worked out there’s simply no good way of knowing how it could impact you.
- Short- and long-term career goals – What are your goals? Are you a “lifer” or do you plan on eventually moving into a non-driving position? If you’re planning on making a move within 3 to 5 years, you probably shouldn’t plan on becoming an owner operator. However, if your long-term plan is to stay on the road as long as possible, your plans could very well include becoming an owner operator.
These are just a few of the practical considerations that you need to think about before making the decision to become an owner operator. By honestly assessing your personal wants, needs, and goals you can ensure that becoming an owner operator passes the compatibility test and is in your best interest.
2. Financial Considerations
Your finances impact every part of your life – and will be a critical component in your eventual success or failure as an owner operator. To help ensure that you’re realistically ready to make the leap into full-fledged truck ownership, it’s important that you examine your financial house to ensure that everything is in order.
- Personal Budget – While some truck drivers tend to think that budgeting is the thought that goes into allocating how to spend their last $20 – three days before payday – it is really much more. A personal budget is a financial lifestyle that allocates money equitably to all of your bills so that everything gets paid and you don’t have to resort to selling your CB for $10 in order to keep from starving. Getting a handle on all of your income and expense items, creating and living by a reasonable budget, and planning for a rainy day by setting aside a little bit each week “just in case” is not only wise – it’s critical to your financial health.
- Eliminate Excessive Debt – Setting yourself up for success as an owner/operator might sound easy, but it can be a challenge, particularly if you’re carrying around excessive debt. Like most Americans, truck drivers tend to carry too much credit card debt, and it chokes off your ability to borrow money for business purposes – and is too frequently the way some truck drivers finance their road expenses if they have a short week. By eliminating most of your credit card debt, you can reduce the amount of money that you have to earn each week, which can improve your bottom line, as well as your chances of succeeding as an owner/operator.
- Emergency Fund – What will you do if you get sick, have a true financial emergency, or need to access cash in a hurry? If you set aside 3 to 6 months of your living expenses, you won’t be dependent upon your dispatcher for cash if something comes up. This is especially important when your dispatcher slips out the door for lunch on a Friday afternoon and then goes AWOL for the rest of the weekend –leaving you high, dry, and penniless until he or she returns the following Monday morning.
- Disability Insurance – It’s important that you get disability insurance, especially if you plan on becoming an owner/operator. If you get sick or injure yourself, you will need cash for everyday living expenses as well as having the means to continue making your truck payment while you are out of commission. You may have an emergency fund, but that money will be siphoned off in record time – especially if you have a truck payment to make each month.
- Life Insurance – If you have dependents or other financial obligations, you need to have some life insurance in place to pay these debts and provide for the future financial needs of your loved ones in the event that you exit stage left before you are old and ready to step into eternity. Term life insurance is extremely cheap and is a much less expensive alternative than signing up for credit life insurance for your truck loan.
- Credit – Finally, your overall credit situation paints a vivid picture about the overall state of your financial health. Just as your blood acts as the conduit for transferring oxygen throughout your body, your credit rating affects your ability to access the capital you will need for equipment, fuel cards, credit cards, etc. Before attempting to obtain truck financing, it is important that you eliminate or minimize any hurdles that could prevent your credit application from being approved. Checking your credit report for inaccuracies, clearing any judgements, unpaid bills, and ensuring that you aren’t carrying too much personal debt can improve your chances of being approved for truck financing – and achieving your goal of becoming an owner/operator.
3. Go Independent – or Lease to a Company?
One of the most important questions that you need to answer is, “Do I truly want to be independent or do I want to lease on to a carrier?” While the answer to this question is neither easy nor short, there is a right answer. Unfortunately, this is a decision that can’t be made for you. Because no two truckers are alike, you will have to weigh the pros and the cons and make the best decision for you and your trucking business.
Some truckers would prefer to be beaten about the head with a hammer than give up their independence by leasing onto a company, while others prefer the security of knowing that they will have a more consistent base of freight from which to get loads.
Major benefits of being an independent owner/operator are that you can:
- Select the loads and lanes that best suit you and your lifestyle
- Not have to deal with company politics, dispatcher favoritism, and policies with which you might not always agree
- Decide when you run and when you don’t
- Take responsibility for load selection and not face possible dispatcher retaliation for refusing a particular load that might not be to your liking
However, leasing your truck onto another carrier has some advantages as well:
- Access (in most cases) to company-provided fuel cards, advances, and money transfer systems
- Company-provided trailers
- Load and freight consistency (and more loaded miles)
- Access (in most cases) to fleet rates on the insurance you will need to operate your truck
- In many cases, company-paid or reimbursed tolls, plates, and permits
- Not having to worry about obtaining your own operating authority
These factors will weigh heavily on your decision-making process because they will also impact the income you can generate with your truck. Leasing onto a large carrier usually means that you will earn less per mile with your truck, but in many cases that deficit can be partially absorbed by reduced deadhead miles, less sitting around waiting for loads, and company-negotiated pricing discounts on certain items such as fuel, tires, and parts.
The only way to know for sure which way is best for you is to crunch the numbers and see how things turn out for you. Because no two drivers are the same, this is your decision to make, based upon a massive list of factors and variables that can vary from company to company, driver to driver, and even day to day.
The type of equipment you choose to run, the type of operation you have, and the way you drive will be a determining factor in your profitability. You might prefer the sleek looks and the classic styling of a long-nosed Peterbilt or KW, but can your business afford to look good at the expense of profitability and fuel economy?
Other factors to consider include:
- Age of truck (including mileage, warranty, and amenities)
- Your area of operation
- How long you’ll be out (more frequent trips home generally means you might be willing to forego some creature comforts in exchange for a lower price)
- Fuel economy
There are no hard and fast rules when it comes to being an owner/operator and selecting the equipment that you will operate. Horsepower, torque, transmissions, engines, driving style, and the cost of tea in China (OK – that might be a stretch but you get the point) all contribute to your bottom line, but the habits and driving style of the the man or woman behind the wheel can also play a huge role in profitability.
5. Legal & Accounting
In order to become an owner/operator you will have to choose a business structure for your trucking business and plan for taxes. Because so much goes into this process that is dependent upon specific professional advice that can only be given based upon your specific situation, you will need to locate qualified professionals that can provide you with sound advice that can help to ensure your success.
6. Before You Buy Your Truck
This article is designed to guide you through many of the decisions that you will need to make in order to succeed as an owner/operator. Give careful consideration to each item and make the decision that you feel is right.
While there are a lot of truck drivers making the determination that now is not a good time to become an owner/operator, thousands of truckers have found a way of remaining profitable – regardless of a sluggish economy, low freight rates, and high fuel costs.
There is money to be made in the trucking industry if you make sound business decisions and with common sense, sound planning, and a little luck, you might be one of the thousands of truck drivers living your life’s dream as a profitable owner/operator.