Why do most owner operators fail?

As Bill said, the first thing I thought when reading the original post was that the question should be "how do O/O's become successful"

The original question has WAAAY too many answers and reasons to why they fail.

 

I don't know if it was stated as of yet b/c I didn't read through 4 pages of replies... #1 reason a O/OP fails is because he will not adapt his business to what will make him money. This industry is ever changing and you must change and adapt with it or you will find yourself burned out from fighting it all the time.

Also business does NOT stop when you park that truck at home. There is maint and repairs, the more of it you can do the better... aren't you worth $100 an hour... get my point ? When I started this business, all I knew was working on my car and changing a fuel filter. Today, if I can lift it, I can fix or replace it... and that is 95% of your repairs.

 

G/Man captured it well.

It's interesting how the thread changed. From giving advice to an O/O wannabe (assuming this means with your own authority) to a leased-on O/O. My own opinion is that there is a distinct difference with some similar fundamentals. I think an O/O with their own authority is a full-on business whereas a leased-on O/O is an advanced version of a company driver that owns their own truck, which is somewhat of a business but minimally.

Now before I get lambasted for that comment, let me point out, a leased on O/O doesn't have the same financial obligations, capital requirements, regulatory compliance management, etc. of someone operating under their own authority. They also do not have all the business functions such as sales, accounting, etc. that an authority holder has. Normally, for a leased O/O, the leasing company provides operating capital coverage for fuel expenses, driver pay, etc. and they know the leased O/O typically does not have the fiscal discipline to develop the reserves needed to cover maintenance, etc. They also cover the initial operating expenses such as apportioned plates, insurance, etc. There are not many other businesses in existence where someone can go into it with such little operating capital beyond a paper route or lemonade stand. Not a dig, just an example. There's a lot of home based businesses too with minimal startup cash requirements.

To be successful as an O/O with your own authority, you need to be successful at all the various functions of a business. I say successful versus experienced because I'm sure someone will respond with 'they didn't have any experience and made it'. Anyway, I think to be successful, being able to perform all the business functions well will be critical to success:

- Executive Management - You have to be able to develop a business plan and manage to it to capitalize on the successful assumptions and make corrections for shortfalls in a timely manner.
- Sales - You have to be able to sell your services and you have to sell your services profitably.
- Finance - You have to be able to understand rearward statements as well as forecast pro-forma statements. You also need to understand your capital structure and manage it
- Accounting - You have to manage A/R, A/P, cash flows and bookkeeping
- Maintenance - You have to manage preventive maintenance as well as repairs
- Compliance and Safety - You have to manage all aspects of these two IAW all local, state and federal requirements
- Operations - Dispatching, route planning, etc.

Believe it or not, every successful O/O with their own authority performs all of these functions to one degree or another. It just so happens that they choose to drive the truck as well. There is no functional difference from what they have to do as a business as there is for Schneider, Knight or any other big business other than the scale at which they have to do it.

Can one get lucky with no experience in business and make it? Sure but the probability of it is very small. The biggest cause of failure is insufficient capitalization. Businesses need operating capital to cover expenses while waiting on payment for services. Too many people that live hand-to-mouth get into business and think it will be different. It will be, it will be worse because it takes money to float what's called the cash conversion cycle, which is from the time you start incurring expenses to perform a service until you are paid for it.

The second biggest factor is lack of business management knowledge. You don't necessarily need experience, you'll get that. But spend the money and buy a few small business management books and at least get the basic knowledge to have the foundational skills to enable success while you get experience.

If you just plan on being a leased O/O, buy a truck and make sure you have $10K in the bank afterwards to keep for unplanned repairs and enjoy the drive without the headaches of running a business. Take Bill's and G/Man's advice and make an informed decision when you're ready.

Good luck with it!

 

I've read some of the posts in this thread, not all, so please don't bash me if I state things that are already been stated.

As some have said, its mismanagement of funds. Though I believe it actually goes a little further then that. I'll explain.

When you own your own truck. You have to have a business plan. You have to set aside money for a lot of different things. For maintance, escrow, fuel, etc but out of all these things. The thing that is least mentioned is the driver (business owner) paying themself. Also, being leased to a company that hauls cheap rate of freight isn't a great idea either. Before I baught my rig. I did a ton of research. I had many people tell me owning a rig is a bad idea. And they had good reason to tell me such advice.

So, I researched estimated costs of repairs on major components. Estimated costs of fuel per month, taxes, permits, insurance, truck payment, etc etc etc. Then I decided what my worth was. Was I going to pay myself a salary per week, or base my wages on per mile. After I added up all these factors, it allowed me to have a overall picture of what I needed to obtain per mile based on number of miles I was anticipating to drive per week. To be able to break even. I did really well owning my own rig and having my own authority.

Where I think most fail, is that they dont calculate in the paying themselfs portion. Also, at times I think some don't take into account book keeping to maintain an understanding of the funds they do and do not have available in seperate sectors for different types of expenses. If you have an account that your using for your taxes for example, don't dip into it until after you have paid your taxes. (I set aside a little more money than what was needed, just so at the end of each quarter I could give myself a very small bonus if I met all my projected calculations) It does come down to management to a degree. The other part of this is self discipline to be able to maintain your accounts and your funds, and what you will accept as acceptable freight based on a per mile. And if you do deviate from that number, then don't deviate from by a large degree below it. Above is always good. But once you deviate to a much lower amount per mile, theres a great chance that you will continue to do so many many more times. The end result of this is your losing money and your expeneses are going to end up controlling your life. Also, I think some do not calculate into the calculation of how much it costs for your rig to be parked while your taking your time off. Because the loan still needs to be paid, and insurance still wants they're money as well along as with other things do to.

Another issue some have, is understanding where their type of freight is. And how to obtain it. Some don't want to be in X area to grab their type of freight. But if that X area has your type of freight that takes you to your favorite X area, then I do not understand the "why not go there". Sure it may be a arse pain to travel around your least favorite place. But it may take you to your favorite place. Additionally some don't want to do those runs that are short. But again, if a short run, pays what your looking to gain, an maybe puts you in a better position to gain a same pay per mile run, but at a much further distance, why not just do it. Theres many of these types of factors that some don't include. Some drivers even have issues with multiple stops. But by unloading frieght, which opens space for new frieght, another why not could be mentioned.

So overall, know your numbers. Know what you need to make per mile to be able to be satisfied and to continue the cycle of money replenishing in your accounts. Know how many miles you need to drive on average per week, per month to allow time off. Know all these types of things. If your able to maintain this sort of understanding, you "should" be ok.

 

you guys can call BS all you want. i drive the truck. i know what it does. not you guys.

and by the way. it's a w9. NON aerodynamic. and does 5.6.

 

My son just started to drive for SWIFT and wants me to go team with him after he lease's or buy's ( with payments ). I have been around trucks and the R.R. all my life and retired early, My father -in -law owned the oldest Ryder ( now budget ) dealership in the U.S. up until he's death, And I owned a Penske dealership ,-- To own your outfit you must NEVER !! count or think of your time spent on your behalf , hold back ever paycheck something for repair, and at least one weeks pay and payment for outfit. When home CLEAR your mind and chill . And the family MUST understand, ---- While working for the R.R. ( 4 --10's ) my wife got sick and I had to take a weekendjob ( 2-- 11's ) to make up for her lost pay check , the only day I had off was Friday , So we went to the beach on that day. did it for a year. You WILL come up against that brick wall , that reads why am I here. The trick is finding a away around it

 

Your truck insurance must be sky high to get into trucking right off the bat with no prior expierence. What insurance company covers new drivers? And do they put a restriction on how far you can haul? Just curious. I'm a numbers watching type . If it's that easy and affordable to get into trucking. I'll start getting things in order and be out on the road shortly. From what I've read, 10k to 12k for insurance on a new driver is common. With those kind of rates just off the bat you would need to, at least, average around 2.50/mile or more just to make a descent living.

 

It's hard to show a profit in trucking. Play the game right and become a multimillionaire, play it safe and make a living, do what the broker or dispatchers say and go broke. Being an owner operator will give you a spine eventually.

 

She has owned that truck since dirty was shinny...... no stories there at all.

As for your comment about going faster equaling more revenue, that might be the case for you, who is paid by the mile. But for the majority of us, who run freight at a higher rate, fuel is just an added bonus. I do not need to clock in 3,000 miles a week to make ends meet. I do just fine at 63mph getting 7.2mpg and only getting 2,000 miles on a bad week. I shoot for 1,500 or less if I can. My truck, which is as areodynamic as a brick, gets 5.7mpg at 75mph, which equates out to $300 extra in my pocket at the end of each week. Your situation might be different, but to be honest your truck sounds like it is causing itself some bad MPG. That front end has some major issues if your chewing up 3 sets of steer tries. Most likely a bad bushing, shock, leaf, bearing, or kingpin. With the cost of the 3 sets of steers, you could have had that front end completely rebuilt already.......

 

12k is right on with the insurance. I could only find one company to insure me and that was progressive. I was able to get an unlimited radius though. One more year and my rates should go way down. If you base it on 100,000 miles per year it takes right at .12 per mile to cover it.