Success as an Owner Operator
Show me the money! Being an owner-operator has plenty of benefits, and one of those benefits is more money. On the flip side of the equation is risk. You can lose your shirt if you don’t do it right. You don’t need to be in trucking too long to hear horror stories of owner-operators going under.
Trucking is a tough business, but owning your own truck can be a great move forward in your trucking career. Truck ownership has plenty of financial potential. Plus, there’s nothing like the freedom of entrepreneurship!
Taking the leap to become an owner-operator is a natural progression in a truck driver’s career. It’s a big step as you transition from being an employee to owning your own business. As an owner-operator, you’re not an employee of a trucking company – you are business partners.
While the trucking business is complex, let’s talk about some of the big things to focus on and some things to avoid. If you do these things properly, you’ll have a much greater opportunity for success.
Buying Your Truck
Should you buy new or used?
Buying used rather than new has advantages. A used truck is more affordable, especially for the first-time owner-op. New trucks depreciate the most when you drive them off the lot.
Your down payment on the lower-cost used truck allows you to have more equity in your business. Plus, payments on financing your truck purchase will be your highest fixed cost. A lower payment or shorter financing term will help you run profitably. Purchasing a used truck can be a good option for first-time owner-operators.
Purchasing a new truck, on the other hand, may come with a larger upfront price tag, but a new truck comes with advantages.
The most obvious advantage is the warranty. A warranty offers a lot of protection on your largest asset. Powertrain, EGR, and after-treatment system problems can be costly. The manufacturer’s warranty can save you from a lot of financial problems.
A new truck is more reliable and has lower operating costs. You invest more upfront, but a new truck will have less downtime and costs due to repairs.
Another thing to consider is a new truck will have a higher resale value when you trade it in or sell it to get into another new truck. You’re in this for the long haul, and you should be thinking ahead and managing your assets.
Know Your True Operation Costs
As an owner-operator, you need to know and completely understand your true operational costs. Fuel is the biggest expense where you have some control. You can reduce fuel costs by reducing short and long idle time, setting a lower cruising speed, properly maintaining your truck, and taking advantage of fuel discount networks your company has in place.
Other costs include maintenance and repair, taxes, labour (mostly you), third-party services such as an accountant and lawyer, insurance, and more. At Len Dubois Trucking, we can help our owner-operators figure out their costs and help guide you through the business of trucking. After all, your success is our success too!
After the purchase of your truck, you need to operate it profitably. Preventative maintenance (PM) will largely determine if you’re successful. You need your equipment to run properly and reliably. Keeping your truck in tip-top shape will increase profitability.
It’s easy to cut corners and try to be more profitable, but poor maintenance will come back to bite you hard with avoidable breakdowns, which means more downtime and much higher repair costs. A poorly maintained truck will have a lower resale value.
Speaking of resale, document your maintenance and repair. A full history of the truck will increase the value when it’s time to sell it. Buyers want to see a solid history of PM and repairs.
Manage Your Money Well
This is, without a doubt, the single most important thing any business person needs to get right. It is so important that almost this entire article will somehow lead back to this one point.
As a business, you need to track and budget your money. Keep separate accounts, and ensure that to always have enough money to operate your business. You may not hit the road as a new owner-operator and be in this position, but you can be with good money management and a little bit of time.
Think of a few ways to break down the revenue your business earns into categories such as:
- a tax account – used to pay your taxes
- a repair and maintenance account – to have the funds available when the truck needs work
- a fuel account – to pay the fuel bills when they are due
- a retirement account – so that you can live comfortably when you’re done with life on the road
- a general savings account – cash reserves are healthy for any business
Remember, the revenue coming in is not “your money.” It’s the money you use to operate and hopefully GROW your business. Keeping and reinvesting in your business isn’t sexy, but you will love the freedom down the road when you have a money-making business.
Know How to Trip Plan
Trip planning is essential for every driver. Before you even leave the yard, you should know where you’re stopping for fuel, find parking, find food and rest areas, etc. Successful Owner Operators rarely miss their delivery times, giving them the advantage of getting the best return loads.
Logical with Personal Spending
A common mistake many new owner-operators make is adjusting their personal spending level. When you are making more money as an owner-operator, it can be so very tempting to run out and buy the “toys” you’ve always dreamed of having. This can be and is a very slippery slope, especially if you are not setting aside money for the very basics of your owner-operator expenses.
Successful owner-operators tend to live below their means. That isn’t to say they aren’t living quite comfortably; it just means that they are not overspending on items just because they can. This goes beyond the big purchases like vehicles, boats, and houses; but stretches to watching how much they spend on over-the-road meals and coffee purchases. Realize that every dollar adds up.
Take Care of Yourself
As an Owner Operator, your own personal health and wellness is a big factor in determining how successful you will be. Successful owner-operators take care of themselves. This is more than just exercising and eating well. Take vacations and days off to unwind and reset; develop hobbies and participate in activities over the road that help you reduce the stresses of everyday life over the road.