Becoming an owner-operator is most truck driver’s dream come true. To some, being an owner-operator is synonymous with freedom -- the freedom of the open road and the freedom to run your business as you choose. However, running your own trucking company has its challenges, and there are both advantages as well as some possible disadvantages, depending on your skill set and preferences.
As the owner-operator, you’ll have to wear several hats, with roles ranging from accounting to marketing, in addition to your primary role as the driver. Naturally one of the most frequently asked questions is “Should I become an owner-operator?” Below are some of the pros and cons of having your own trucking company to help you decide if becoming an owner-operator is for you:
Advantages of being an owner-operator
- Potentially higher pay. As the owner-operator, you own the truck, find your own loads, and run and operate your trucking company under your own authority. This means that you have a greater opportunity to earn more because you have the chance to negotiate for the best payment rate. Plus you can take advantage of tax cuts and other government discounts dedicated to owner-operators, which can greatly add to your income.
- You get to choose the types of truck you want. Because you will be buying your own truck, the choice is all yours to decide the one that best suits you. You can choose based on things like your truck’s fuel economy, and even personalize it according to your needs and comfort. You also get to choose better quality tires to ensure your safety on the road.
- Time is yours. This is what most truck drivers are attracted to – the flexibility. You control your own work schedule so you can schedule hauling whenever you like it. This could mean that you can set aside time off to be with your family or for some other reason, since you won’t be spending long periods of time on the road.
- You’re your own boss. In general, because you’re running your own trucking business, you have complete control over everything: profit, time, loads, etc. Your income depends solely on you and how much work and effort you put into your business, meaning that you rely on yourself and are directly responsible for your own fate.
Disadvantages of being an owner-operator
- Greater financial risk. Starting a trucking company requires thousands of dollars for a down payment and initial expenses. While running the business, there’s also the monthly payment for the truck and other maintenance costs and repairs, and other out of pocket expenses.
- Stress and pressure. Because you handle everything, you’re the one who has to think about everything like your monthly financial obligations, unexpected expenses, and your load board. You will have to find and network with a trusted customer base to see which trucking companies offer the best rates.
- Time isn’t really yours. It’s certainly true that being the owner-operator gives you more flexible time. However, a big portion of that available time might be spent maintaining and repairing your truck. Keeping business records also takes up a substantial amount of time.
Being an owner-operator may not be for everyone, much like running a business isn't for everyone. All the responsibility that comes with it is challenging. The buck stops with you on a wide range of responsibility from compliance and proper accounting to maintenance decisions. As a company driver, someone else takes care of all the details, leaving you to focus on driving. As an owner-operator, it’s all up to you. You’ll also learn how to wait for loads or other delays, and during those times you likely aren’t making money because your truck isn’t moving.
However, when well-managed, an owner-operator trucking business can be lucrative. In addition to bringing in a potential six-figure income, you can also be always on the lookout for greater opportunities. The key here is managing your owner-operator expenses. Margins can be razor-thin, though, with expenses often eating up to 95% of income which leaves little room for error in managing your expenses, but it’s still possible if you know exactly what these owner-operator expenses are.
Owner-operator expenses are all expenses incurred while running your trucking business. Five of the most common expenses are fuel, maintenance and repairs, food and drink, professional fees, and insurance. These owner-operator expenses are inevitable – they’re recurring and you cannot avoid them. However, by carefully analyzing and understanding these expenses, you can manage them and reduce them so you can add more to your profit.
Check out our “How to reduce your owner-operator expenses” article.
Aside from these recurring expenses, running your own trucking company involves some other factors, too, that you would also have to consider for your business to become successful.
Owner-operator business considerations
It takes more than just a desire to be successful in the trucking industry. Being the best driver doesn’t necessarily mean that you’re automatically a good owner-operator. The following are several components of a trucking business that you should consider:
- Cash reserve. If things don’t work out the way you plan them, do you have a buffer to keep you afloat and keep the business running?
- Mechanical skills. Do you, know how to fix some things on your truck so you can save on the cost of repairs?
- Trucking know-how. Is your experience as a company driver enough for you to learn and understand the various things in the trucking industry so that you can start on your own?
- Network. Do you know a solid trucking company that would offer you the best rate?
- Financial obligations. Do you know exactly how much you should be making in order to pay the bills?
Most importantly, before starting your business, you’ll want to research ways to protect your business. The first step is choosing a business entity to provide some protection for your business and to help insulate your personal assets. You’ll need some trucking insurance policies to protect your business. Your insurance needs will differ depending on whether you are operating under your own authority or if your truck is leased to another trucking company.
Building a business plan for your trucking business
The importance of a business plan can’t be overstated. You’ll have some large fixed expenses, including the truck itself and fuel to keep rolling, as well as a number of smaller expenses like insurance and routine maintenance. Efficiency will be part of your key to success. Choosing the right jobs will also play a large role. Jobs that don’t pay enough or which can’t be done efficiently may generate some cash flow but could also leave you spinning your wheels financially. You’re selling service, but the currency you’re exchanging is your time. Committing to the wrong jobs will take away time you could have used to do work that will turn a bigger profit.
Although it’s a big risk to purchase a truck and set up a trucking business, there are still numerous truck drivers who take a leap of faith and just do it. So, after considering all the extra responsibilities and after doing the math, should you become an owner-operator? You’re the only one who can answer that. Just remember that, as the owner-operator, you’re the maker of your success, so make sure that you’re armed with careful planning, a lot of research, and sheer determination before you embark in this industry.