Becoming An Owner-Operator

The decision to own and operate an 18-wheeler is a serious one. Too many people enter trucking hastily, without sufficient planning or forethought. If you’re thinking about buying a truck and starting your own business, spend six to 12 months researching your options.

You’ll have to decide what freight to haul; whether to run locally, regionally or nationally; what type of company to lease to; and how many days you are willing to be away from home at one stretch. You’ll have to choose a truck, come up with a down payment and create an emergency cash fund. You’ll also need basic recordkeeping and bookkeeping skills.

Becoming your own boss
One of the biggest challenges you will face is making the change from thinking like an employee to thinking like a boss. Being your own boss can mean freedom from supervision, setting your own hours and taking time off whenever you want. But it also means setting your own financial goals and rules of conduct.

Being in business for yourself requires much more energy than you might imagine. But for the person who is willing to assume the responsibility, the rewards can be great.

Qualities of a good owner-operator
It takes many qualities to be a successful owner-operator:

Motivation. To make money, you have to want to make money. It’s OK to want to own a truck for the freedom, but without the drive to earn money, freedom won’t mean much when creditors come knocking on your door.

Strong desire to control your operation. You have to decide what company to lease to, develop your own business systems and set up a regular truck maintenance program. You have to plan for the hard times when times are good. You have to set specific goals for where you want your business to go. An owner-operator who does not take control of his business won’t realize the potential financial rewards of owning a rig.

Mechanical aptitude. Although you probably won’t be doing major work on your truck, it helps to understand a truck’s systems and components and how they work together. Every dollar you save by doing simple tasks yourself goes straight to your
bottom line.

Willingness to learn. You have to be willing to learn something new about your business all the time. Seek knowledge. Let experience be your teacher and learn from the experiences of other owner-operators.

Part of being successful is knowing your limits and learning to overcome them. Before you plunge into trucking, determine where you lack expertise and work on those areas.

Another important thing to do before you become an owner-operator is to talk to other people in the industry. Make sure you get a variety of people – those who have just started and those who have weathered the storms. Most owner-operators are willing to share their experiences. When you encounter someone whose experience is negative, ask what he would do differently if he could start over. If he complains about his carrier or industry regulations, take it lightly. Plenty of independents operate legally and make a good living.

Talk to several accountants who have trucker clients. Find out what it takes to keep good records.

Talk to several companies you might lease to. Ask lots of questions.

Talk to truck dealers about financing options and down-payment requirements.

Talk to your family about their needs and desires. Determine how your being an owner-operator will affect them and gain their support for your decision.

Finding the cash
Raising money to buy a truck is the first thing you must consider. If you try to get into trucking with little cash and poor credit, it will be an uphill battle. One of the main reasons new owner-operators fail is lack of operating capital. Successful new truckers have reasonable down payments and enough cash to hold them over for a few months when freight is slow or for unexpected repairs.

The amount of startup or reserve cash you need varies with your circumstances. If you buy a used truck with little or no warranty, you will need enough cash to pay for an engine rebuild. If you buy a new truck, you should have enough to make your truck payment for at least two months.

You should set up an emergency fund before you start your business. If you have already bought a truck and have not set up an emergency fund, start saving now. Put aside the most you possibly can every month until you have the cushion you need.

Your cash needs vary from month to month, and are particularly high when you start. Here is an example of the expenses you should plan for as you launch your operation.

Some truckers may tell you they started on a shoestring budget and became successful. They are the exception. Don’t gamble. There are no shortcuts to success in trucking. Build up your cash position before becoming an owner-operator. Success takes working hard, controlling costs, keeping good records, leasing to a good company, establishing a good relationship with your dispatcher or broker and having a solid knowledge of the owner-operator market.

Not everyone is able to come up with a sufficient down payment. Not everyone has the credit it takes to finance a truck. If you fall into these categories, you should wait until you have saved a reasonable down payment and put several thousand dollars in reserve.

Don’t go into trucking expecting that it will get you out of debt. Typically, it does the opposite, at least until you build up your business and start earning a profit. In the early years, expect to live below your means. Until you learn the ropes of being your own boss – acquiring equipment and paying for fuel, tires, truck upkeep and other expenses – you might have to scale back your lifestyle.

The most successful owner-operators start modestly and manage well. They forgo big sleepers and chrome extras until they have built up equity in their businesses; can make their truck payments and meet other expenses easily; and can still put some money into savings.

Finding a company
You can look for a truck and a company to lease to at the same time. If you get a truck and then look for a company, you’re leaving yourself open to serious trouble. Once you sign for that truck, the payment meter starts running. Also, the type of truck you choose might not fit the type of hauling offered by the fleet you want to lease to.

Like people, companies have personalities. Talk to enough companies, and you’ll find several that appeal to you.

Some will want to control your actions rigidly; others will give you plenty of rein. Listen to all of the comments from different companies and weigh the information against your own sense of fair play.

When you narrow your search to three or four companies, talk to the dispatchers. Talk to the people in the settlement departments. Talk to owner-operators who are leased to the companies. Before you sign a lease, find out what the companies deduct from your settlement. Some companies pay for plates or tarps and then charge them back to you; others absorb those costs. Some pay fuel tax; others don’t.

Identify all your settlement chargebacks as outlined in the contract and keep all of your records. Keep notes on the carriers you talk to; otherwise, you might forget who told you what. Record the name and telephone number of each company and the name of the person who was your primary contact.

List things about each company that will help you make comparisons: rate of pay, expected number of deadhead miles, freight lanes and items paid for by the company – such as plates, fuel tax, tolls, equipment and insurance – but deducted from your settlement.

Finding a truck
It’s often better for a new owner-operator to buy a good used truck rather than a new one. If you decide later that running your own trucking business isn’t for you, it will be easier to sell a good used truck than to get out of a new one without taking a big loss.

It is crucial to get the best price and the lowest interest rate possible. Buy from a reputable dealer. If you’re
buying used, check out the truck’s complete history before you put your money down. Ask for an engine analysis and certification. When you find a truck that seems right for you, have a dynamometer test run on the engine and chassis. This test will cost $150 to $200, but it’s a small price to pay to ensure you’re getting a roadworthy truck.

Unless you are very well capitalized, steer away from trucks that have lots of chrome and extras. Ego and the desire for a fancy truck can cost thousands of dollars that you can’t afford. Extra chrome, a custom paint job or a deluxe sleeper won’t earn you more income or more respect.

Look for a safe, comfortable, serviceable truck. As your business grows, you can set your sights on a fancier rig.