Trucking is a tough business and owner operators in trucking are some of the smartest businesspeople around. From making the right truck purchase to effective money management to proper maintenance schedules, owner operators have a lot on their plate. And while running their business, they are also rolling over the road.
It’s 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 an employee to owning your own business. Now you’re not an employee with a trucking company – you are business partners.
Once you have skin in the game you need to change your thinking. You now have a bottom line to worry about, cash flow to worry about, and costs and margins to worry about.
If you’re thinking of taking the next step in your career as an owner-operator, we have some basic tips and advice.
Buy the Right Truck
It begins with the purchase of the truck. What do you need from this equipment? Do you need a shiny show truck? Do you need a big motor with lots of power?
The answer is you need a quality, efficient truck. Your profit will be determined by your margin – the difference between money coming in and money going out. Like every business, you need to be efficient with your money. Trucking has tight margins to begin with and very little upward pressure on rates – efficiency is critical in the trucking business.
Should you buy new or used?
There are advantages to buying used rather than new.
Buying a used truck is more affordable, especially for the first-time owner-op. New trucks depreciate the most in the first few years 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 may come with a larger upfront price tag but a new truck comes with some 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. A manufacturer’s warranty can save you a lot of financial problems.
A new truck is more reliable and has lower repair costs. You invest more upfront, but a new truck will have less downtime due to repairs.
Another thing to consider is a new truck will have higher resale value if you trade it in (or sell it) to get into another new truck. You’re in this for the long haul so you should be thinking ahead and managing your assets.
Trucks and Specs
You should look for a truck spec’d to the utility. Dry van requires a different truck than pulling triaxle or B trains.
“You want to buy for what you’re planning to haul. Your truck is a business tool. And your business needs to maximize earnings.” Says John Cole, our Safety Manager and Driver Recruiter at Len Dubois Trucking. “Flashy chrome and a big motor will make you feel great. Your bottom line won’t feel too great.”
“A big thing to consider is the weight of the power unit if you’re pulling dry van, like what we do here at Len Dubois Trucking. You’ll want your unit to weigh 20,000lb or less. You need to be able to haul 45,000lb of freight, which is what a lot of shippers require.” He added.
Devon Palmer, Used Truck Sales Manager at Beaver Truck Sales says, “Think like a good tradesperson – the right tool for the job. For regular dry van, you should look at 455hp with a 2.47 ratio and direct drive transmission. If you’re planning to pull something that needs more muscle, like a B train or Turnpike, you’ll look at 500hp with a 3.42 ratio and an overdrive transmission. Of course, your needs can change with the topography. Mountain driving might change your requirements.”
After the purchase of your truck, you need to operate it profitably. Preventative maintenance (PM) will largely determine if you’re successful. Owner operators need their equipment to run properly and last for a lot of miles. 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 and a lower resale.
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 habit of successful Owner Operators. It is so important that almost this entire article will somehow lead back to this one point.
Successful owner operators will track and budget their money. They will keep separate accounts, and they ensure that they always have enough money for when and if it is needed. You may not hit the road as a new owner op and be in this position, but you can be, with good money management.
Successful Owner Operators tend to divide their money into categories such as:
- a tax account – used to pay your yearly 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 – to act as the just in case account
Remember the revenue coming in is not “your money.” It’s the money you use to run and GROW your business.
Successful entrepreneurs in every industry constantly learn. They have mentors. Entrepreneurs read and learn.
If you are starting the process of becoming an owner-operator you can speak to someone at your company for money management advice if you lack business experience. Knowing a question for which you don’t have an answer is exciting. It means you can learn something new.
Here at Len Dubois Trucking, we have plenty of experience and our owner operators shouldn’t hesitate to ask John or Jason or Gerry, or any of the experienced people here questions about how to improve their business. Owner operators are our partners and we need them to be successful.