Many company drivers face the same debate – they wonder if it would be more profitable to go out on their own and buy a truck. It is often stated throughout the industry that the profits are better for owner operators, but being an independent may not be as simple as it appears. Drivers definitely get paid more per load when they operate as an independent company, but those considering venturing out as owner operators must also understand that by doing so they are taking on all of the expenses and risks, too.
Every month I receive calls from folks who want to buy a truck and start trucking. They usually want to know what is the least amount of money they need to get started. Immediately, I say to myself, “Well, here’s another one that won’t make it through the year.” If you fall into this category then just STOP – you won’t succeed! Save your money and your sanity. But, if you think everything through and are willing to do it right the first time, you just might make it.
Start by setting up your business with a proper name and email address. I know that sounds simple, but it is important. Think about what structure you want. If you’re smart, you will incorporate. I guarantee that you will get more work once you incorporate, and you will get hundreds more business deductions. You need to have some sort of business plan. Are you going to run local or intrastate? If you stay local you will be home more, but there is no money in local freight unless it is in volume. But remember, you will only have one truck (at least at first).
The bigger money is when you cross state lines or run interstate (usually). Now, you have to pick what traffic lanes you want to run. You have to do your research. Let’s look at the Los Angeles to Las Vegas freight traffic lane. Nevada is considered to be a “freight destination town” – there is a high amount of freight going into Las Vegas but not much going out. Your rates into Las Vegas should be higher to compensate for the lack of freight coming out. Now, are you starting to get the picture? You just can’t run all 48 states helter skelter hoping to get freight here and there. Remember, if you take a $2,000 load to some place but have to come back empty, you have, in reality, made two $1,000 trips.
A driver needs to consider many things before buying their own truck and deciding to start their own business. There are a variety of expenses that a trucking company will regularly incur including maintenance, road taxes, permits and truck payments. Beyond this, a self-employed trucker will now be responsible for tolls, fuel, liability and cargo insurance, occupational accident coverage, and self-employment taxes. Company drivers also, sometimes, have the opportunity to get paid for the time they must sit and wait for a load and they could be paid to come home empty. On the other hand, as an independent contractor, if there is no load, there is no payment for that run, and no money is made by sitting and waiting. This means that while a driver may be making more per load, there is a chance that after paying all of the trip expenses and covering any lost time, the amount that actually goes into the driver’s pocket may not amount to much more than they were making with a company.
This is not to say that there are no real benefits to working as an owner operator. It does provide more flexibility – an independent can often choose their route or load instead of simply being handed an assignment. Before making the decision, though, it is necessary for the driver to examine some of their own habits. This will determine their likelihood of succeeding as an independent contractor. Drivers should ask themselves, “Am I willing to sit for days at a time at a truck stop just watching races or ballgames, shooting the breeze with other drivers for hours on end, until I find a good-paying load?” As an owner operator, this can often be the case. So, ultimately, it is important to honestly examine one’s wants, needs and goals in order to determine if becoming an owner operator is actually the best decision for you.
Obviously, one of the most important factors to consider is finances. The truck itself can cost more than a hundred-thousand dollars, and although there are programs that allow drivers to lease to own their vehicles, a driver must still be fully willing to take on this commitment. Therefore, examining one’s finances, possibly with a financial consultant, may be beneficial before making that leap. One should also consider their own financial maturity – do you have a healthy respect for money and paying your bills on time or have you lived paycheck to paycheck your entire life? Owning a truck and your own business can bring great success, but with it comes great responsibilities, too – make sure you are ready for that task.
A driver who is planning to set out as an owner operator must ask themselves a few other important questions, as well. One main factor to consider is whether their goal is to truly be independent or if they, ultimately, want to lease their services to a carrier. This decision is complicated, and the answer varies for each driver, mainly due to the fact that leasing on to a carrier has advantages and disadvantages. For example, a driver who leases to a carrier will usually earn less per-mile than they would on their own, but with that being said, this deficit is often made up for through reduced deadhead miles, less wait time for loads, and company-negotiated discounts on items such as fuel, tires and truck parts. In the end, when making this decision, it is necessary for a driver to sit down and compute which option will be more profitable for their particular situation.
Being independent can be a rigorous task, but it is definitely not impossible, and if one manages their business correctly, there is money to be made. But, it is important to first consider all of the factors and project all of the profits and losses before making that final decision to join the ranks of America’s successful owner operators. There is money to be made in the trucking industry if you make sound business decisions. And, with some common sense, a good plan and a little luck, you might be one of the thousands of truck drivers living your life’s dream as a profitable independent contractor. If you need help and/or advice to get started, I can be reached at the NTA at (562) 279-0557.