One of the freest and most lucrative industries today is the trucking business. It is also currently seeing high demand. The American Trucking Association predicts that 110,000 truck drivers will need to get hired to meet growing freight demands. As long as consumers have a demand for products, moving freight will continue to be necessary. This trend indicates it is a great time to join the trucking industry or for current truck drivers to become owner-operators and start running their own trucking business.
How do You Run a Trucking Business With One Truck?
As an owner-operator, you can arrange schedules according to your convenience and maximize profits from the loads you deliver. However, there are several steps to follow to become an owner-operator and various things to consider before starting your trucking business.
While it might sound daunting, becoming a successful trucking business owner-operator is within reach. It's important not to let larger trucking companies with their armies of drivers, large fleets and access to capital investment intimidate you. In fact, 91.3% of successful trucking businesses operate with a fleet of six trucks or less. It's entirely possible to thrive as a new owner-operator as long as you create a trucking business plan and follow through with it.
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Steps to Becoming an Owner-Operator
When you're getting started on the path to becoming an owner-operator, these are the typical steps you will follow:
1. Decide whether to purchase or lease. One of the toughest decisions for any aspiring owner-operator is whether to buy or lease a truck. The choice between leasing and purchasing a truck will largely depend on which assets are available to you at startup. A pre-used heavy-duty truck in optimal shape could cost you at least $60,000 and possibly as much as $100,000.
2. Negotiate terms (if leasing). If the purchase of a truck is too cost-prohibitive, you could negotiate a lease-to-own option with an established trucking company. While this will relieve you of some of the startup costs, most companies will expect you to haul for them should you lease one of their vehicles.
3. Research truck specs. Your ability to operate a trucking business will be affected by the quality of the equipment you have on hand. You need to consider the specs of each truck, such as the mileage, amenities and warranty. Consider also the area in which you operate and its proximity to highways and resources. Furthermore, be sure you know the probable length of the average trip and how this will impact fuel economy.
4. Prepare a tax plan. To become an owner-operator, you will need to have the legal paperwork and tax planning sorted out before you begin. Consult with qualified professionals in your area to find out what will apply to your situation.
5. Determine operating costs. Creating a detailed approximation of your operating costs will help you get an idea of your profit margin. You will need to determine your startup costs, fixed costs (costs that stay the same no matter how much your drive, such as insurance, permits, etc.) and variable costs (costs that depend on how many miles you drive, such as fuel and repairs.)
6. Secure financing. After you determine which equipment will best serve your operations, you will need to secure the financing. The process involved with procuring equipment is relatively easy — you simply make a down payment and secure a loan for the balance. You then pay off that balance in increments. Providing that you keep up with these payments, the equipment will be yours to own.
7. Frequent load boards. Through it is typical for rookie owner-operators to get their initial customers via load boards, this is not the best route to take for the duration of your operation. With the highly competitive nature of load boards, you must keep the bidding low. Also, load boards will not often bring you in contact with long-term clients, so you have to hustle constantly when you go this route.
8. Build customer lists. While it may be necessary to use load boards in the beginning, you should set about building a customer list from day one. This will involve a lot of work and phone calls, but it will lead to a more lucrative, sustainable business. Veterans in the trucking industry who have built their own lists of shippers will generally earn double that of their competitors who rely solely on load boards.
9. Start placing bids. To get yourself out there and be competitive as an owner-operator, you need to place your bids wisely — not too low but not too high. To ensure maximum profitability, you must factor in your expenses in advance of each trip, from the cost of fuel to potential maintenance stops. Furthermore, you will need to consider the possibility of roadblocks along the way, especially if your route crosses a congested urban area such as New York or Los Angeles.
10. Schedule loads wisely. To ensure dead road time does not eat into your bottom line, try to arrange follow-up loads close to each delivery point. Send out applications to all the best loads that are happening simultaneously in your area and compare the offers you receive. This way, you can claim the best available loads and negotiate the most favorable deals. You can apply for each of these loads with the same owner-operator applications.
11. Set up cash-flow contingencies. At certain junctures, delays in payment can hamper a company's ability to cover immediate costs, such as fuel, maintenance and driver expenses. As such, a company can get stalled in its ability to deliver new and profitable loads until previous payments are received. During such downtimes, nearby competition could easily scoop up customers.
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Your Trucking Business Plan — Establishing Authority
Before you take action on the steps listed above, it's good to know what the absolutely crucial first steps in becoming the owner-operator of a successful trucking business include. While paperwork, documentation and forms are never the most exciting aspect of any business, they are essential in getting your trucking company started and establishing trucking authority. You will need to make sure you are registered and have the correct numbers and licenses and consider more back-end tasks such as record-keeping.
How to File for a USDOT and MC Number
To become an owner-operator, you must register with the U.S. Department of Transportation (USDOT) and obtain a Motor Carrier (MC) number. You will need to pay a fee as well. The USDOT number is necessary for a few reasons, such as if you have vehicles over 10,000 lbs. For transporting any federally regulated commodities, having interstate Operating Authority (MC Number) is needed.
Getting an Owner Operator Business License
Becoming an owner-operator and starting your own trucking company requires that you get a business license in your state. Additionally, you will need to have the proper insurance to haul loads and freights by truck.
Federal law requires that you have truck insurance as an owner-operator. This will keep your assets protected and cover liability costs if an accident occurs. The Federal Motor Carrier Safety Administration (FMCSA) places a range of insurance requirements on the trucking industry. The specific policies that would apply to you under these requirements depend on the goods you intend to haul. To learn more about these requirements and to fill out the necessary forms, visit the FMCSA website.
Determine Who Will Be Responsible for Recordkeeping
A trucking operation needs to have a back office to handle all the paperwork the business requires. If you hope to grow your business into a small fleet, the office will need to coordinate the schedules and routes of all the trucks involved. An inefficient back office could eat into your profit potential and inhibit the growth of your business.
As an owner-operator, you effectively become the chief executive officer of your business. That said, it would be impossible to manage every aspect of your business singlehandedly. Therefore, you need to staff your back office with an accountant and a broker who can respectively handle monetary paperwork and contract negotiations.
For expenses related to the operation of your business — fuel, maintenance, equipment, etc. — use a credit card. In the event that an issue arises with an equipment purchase or a maintenance stop, you can more easily dispute the matter if the payment is made on a credit card.
Loads can be secured more rapidly with the aid of a factoring company, who will help you with paperwork, insurance contacts and payment issues. With a factoring company like FactorLoads, truck owner-operator income matters become easier to manage. Experienced factoring agents can help you develop a truck owner-operator business plan.
As your business grows, hire a fleet of newer owner-operators and assign them the hauls you cannot take yourself. Maintain markups on each price negotiation to ensure you get a cut from each delivery.
Finding Truck Loads for Owner-Operators
Here are a few things to look for when finding truck loads:
1. Lease-to-own. A lot of companies that offer lease-to-own programs will provide low payment in return for hauling work. Consequently, you would make less leasing from them than you would as a driver on their payroll. To avoid this type of deal, look for a leasing company comprised of experienced owner-operators. If you are well acquainted with others in the field, you shouldn't have much problem steering clear of these types of leasing entities.
2. Flexible deals. For ultimate flexibility as an owner-operator, seek out a company that lets you choose your loads and freight rates. The thing to bear in mind about freights is that the need for drivers is endless. Never feel obligated to take a load that conflicts with your own schedule without compensation for your troubles.
3. Rare/competitive deals. Some of the best deals in the business are the most competitive. The more established agents have highly lucrative contracts with hauling companies — lucrative enough to catapult any owner-operator into the big league. These deals are near impossible to score, so don't be disappointed if you are unable to procure such deals on the rare occasion when they do become available.
4. Upstart brokers. For the new owner-operator, some of the best working relationships can be found with upcoming brokers and salesmen who are also working to establish contacts. If you are able to establish a relationship early on with newer agents, you could become a priority driver and get first dibs on some of the best loads.
5. Low-expense driving. When you deliver loads, try your best to keep driving expenses as low as possible. To that end, negotiate agreements in which you are paid the highest possible per-mile rate, as opposed to a maximum miles per-day rate. This way, you can drive at an ideal speed that won't stress your vehicle. Preferably, your hourly mileage should be kept in the range of 57–60 mph.
6. Oil changes. To prolong the service life of your truck, change the oil on a monthly basis and have the main components greased once per week. With these steps, you can reduce the need for maintenance and lower the frequency of downtime due to issues with the vehicle.
7. Service. When you take your truck in for maintenance, be sure the parts are only handled by a reputable repair person who works in your best interest. To some degree, this will require an understanding on your part of the functions of the engine components. There are mechanics out there who prey on unsuspecting customers. Don't allow yourself to be overcharged for services you don't even need.
8. Experience. One of the biggest benefits of becoming an owner-operator is that it allows you to set schedules on your own time and reap maximum earnings for your efforts. Before you set off to start your own trucking operation, though, it is best to have some experience in the industry as a driver. You will have a deeper understanding of the factors at play when it comes to dealing with clients and shippers.
Look Into Freight Factoring Companies
When you are busy moving loads to destination points, it is can be challenging to manage all of the back-end operations as well. To relieve yourself from some of these tasks, hire the services of a freight factoring company, like FactorLoads, that will help you secure load payments and cash advances. With FactorLoads, there are no contracts and no minimums involved, either.
If some or all of this is new to you, don’t worry! Starting a trucking and freight business is an important decision and you can’t be expected to know it all from the get-go. That’s where our experience here at FactorLoads can help.
With over 20 years in the load factoring for trucking company industry, we have learned all about starting your own trucking company. Our team can help you prepare everything and avoid the common mistakes and pitfalls some owner-operators make when they try to figure it all out on their own.
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We all have our dreams in life. Yours might be to start your own owner-operator trucking company. If that’s the case, make your dream a reality and give yourself the best shot at success with help from our team here at FactorLoads. Every one of our customers has their own reasons for starting a trucking company:
- To get away from the constraints of working for someone else.
- To create value and employment for your community.
- To build a business you can pass on to your family and children.
- To cover a segment of the market that is underserved in your area.
It doesn’t matter what your reasons are — we’re here to help you understand the ins and outs of how to create your own trucking company. When you trust FactorLoads for advice, you know you’re getting two decades’ worth of experience and knowledge. We started our business working with small-sized trucking companies and have been there from the beginning with many of them. Your success is our success, so let us take a load off and guide you in all of the nitty gritty details of successfully starting your own freight transportation business.
With a start-up program from FactorLoads, it takes less time to get your trucking company up and running:
- We help you figure out what’s needed for your company.
- We help complete and file all the paperwork for you.
- We help you set up with the right insurance people.
- We can get you paid faster.
While we're always happy to help existing trucking companies get access to their cash with our comprehensive load factoring programs, it's even better when we can get in on the ground floor and be part of your success story right from the beginning. Avoid getting lost in a maze of invoicing and accounting work that distracts you from creating your trucking business and finding customers.
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Things to Consider Before Becoming an Owner-Operator
Is being an owner-operator right for you? Be sure to consider these components of the job in making your decision:
1. Driving desire. One of the most tell-tale signs of a driver's likeliness to succeed as an owner-operator is their desire to drive. In this business, you need to be willing to sacrifice a bit of comfort to maximize efficiency. Are you committed to driving as many miles as possible within a set timeframe, even if it means working overtime?
2. Days off. As an owner-operator, you need to be willing to sacrifice some of your spare time. Basically, you need to think of each hour as an opportunity to earn money. If you have the choice between a day off without pay and an extra day on the job with a fatter paycheck, which would you choose?
3. Family obligations. The hours required for the operation of a trucking business can be unpredictable. If you have a significant other who also works an unpredictable schedule, the differences can be troublesome. Factors such as children, visitation and scheduling conflicts must also be taken into account, and you must be willing to sacrifice family time, at least sometimes.
4. Health. How is your personal health? As an owner-operator, you need to be in good health. If you were to suddenly find yourself facing a health crisis, your business could end up taking a hard hit, especially if you don't have anyone lined up to cover for you in case of an emergency. If you have pre-existing conditions that are bound to get worse as the years pass on, you might be better off on a company's payroll.
5. Insurance. You will also be responsible for your own health insurance coverage. Will you be able to cover this expense, or do you have a significant other with an employee plan that can cover you? Keep in mind that the coverage can be expensive on your own, especially when you consider factors like age and pre-existing conditions.
6. Career goals. How long do you intend to drive? If you are hoping to transfer to a non-driving position within a couple years of starting a trucking business, this might not be for you. However, if you intend to stay on the road as long as necessary, you might just make the perfect kind of owner-operator.
7. Personal budgeting. In this job, it is crucial to be mindful of your personal budget. Beyond your basic operational expenses, a dollar should be put in the bank for every dollar spent on leisurely matters. This way, you will be covered for the periods where you make less money.
8. Debt elimination. Credit card debt can be a noose around an owner-operator's neck. In a field where money is sometimes borrowed for business expenses, debt can put severe limits on your ability to function. Keep your debt as low as possible at all times when you operate a trucking business.
9. Emergency funds. In the event that you have a financial emergency, you will need to have an account set up to keep yourself covered. This way, you won't have to rely on your dispatcher when things go awry. In all practicality, you should have a minimum of three months of basic living expenses covered — better yet, six months — for any possible emergency, be it family, health or cash-flow related.
10. Disability insurance. As an owner/operator, you must have disability insurance. This way, you can keep up with your truck expenses in addition to your living expenses — which could otherwise consume your emergency account in just a short length of time.
11. Life insurance. It is important to have a life insurance policy in place to protect what you might leave behind. From personal dependants to financial obligations, you want to be sure the people and entities that rely on your income will not be suddenly out in the cold if you are out of the picture.
12. Credit. To ensure your financial resources are as fruitful as possible, it is important to maintain good credit throughout your time as an owner-operator. With good credit, you can access money when needed to cover equipment costs. Additionally, good credit will make you eligible for fuel cards and other perks. Be sure your credit report is free of debt, unpaid loans or any inaccuracies, as these can negatively affect your ability to borrow as needed.
13. Truck functionality. There are many expenses that factor into being an owner-operator, and everything from the engine and torque of your truck will affect your bottom line. While none of these factors are likely to make or break your business, each will contribute to your profitability over time.
14. Payment delays. Many owner-operators run into cash-flow difficulties sometimes due to the delayed nature of payments in the industry. The majority of shippers do not pay for loads up front. Instead, payments are made on a 40-day or 60-day delay. Consequently, a trucking company will generally have to wait six or eight weeks to receive payment for most newly delivered loads.
15. Personal presentation. Once you become known among the brokers, carriers and dispatchers in your industry, they will all associate you first and foremost with your company name. As such, your demeanor will play a large role in your reputation within the industry at large. You will want to do your best to maintain a positive attitude and reasonable tone with everyone you come into contact with, even in situations where you must dispute a particular set of terms.
What are the Benefits of Becoming a Trucking Owner-Operator?
The choice between leasing to a carrier and being an owner-operator should all depend on your own needs as a driver. Do you like the security of having a constant, guaranteed freight supply? Or would you more enjoy the freedom and greater profit potential that comes with independence? As an owner-operator, you could enjoy the following benefits:
1. Independence from company policies. As an owner/operator, you have freedom from the company policies and biases that often come into play in leaser/carrier arrangements, sometimes at the expense of drivers. You don't have to deal with the politics or conform to the company culture of an established trucking company because you get to decide those principles for yourself as an owner/operator.
2. Work according to your own schedule. As an owner/operator, you get to decide which hours to operate and take off. No longer do you have to be asleep all day, out all night and away for weeks on end from your loved ones — not if you don't want to be. As an owner/operator, you can arrange hours that best suit your own lifestyle.
3. Do the loads that you want to do. Accept only loads to your liking without facing consequence from a dispatcher for turning down an undesirable load. If you don't like a load because it's a product that you don't want to handle, politely decline the load. If you don't like the route that a given load entails, let someone else take that load.
4. Be in charge of your own income. The freedom that comes with being an owner/operator allows you to decide how much you will ultimately make. If you wish to make as much money as possible in this field, your success will ultimately be down to your own will and determination to make your business large.
5. Establish a business to pass down from generation to generation. Once you establish your owner/operator business, you could build something that ultimately grows into a major institution that will last for many decades. In 25 or 30 years, you might pass this business down to your son or daughter, and then they'll pass it down to their children. An owner/operator business could be a lucrative source of family income for many years to come.
6. Provide goods for your community. As an owner/operator, you bring products to the shelves of stores in your local community. You make life easier and more enjoyable for your local businesses. A town of any significant size has an endless need for products in a vast range of categories — and your business will help fill that niche.
So is being an owner-operator worth it? If the aforementioned benefits sound exciting to you, then definitely.
What are the Disadvantages of Owner-Operator Trucking?
For all the benefits that come with being an owner-operator, there are also some disadvantages that come with the territory, namely:
- You have to get your own fuel cards, secure your own advances and establish your own money transfer system — all of which would be supplied and pre-established in the leaser/carrier relationship.
- You have to get your own trailers.
- Loads and freights can vary, and the mileage is less predictable and often lengthier.
As an owner-operator, things such as tolls, plates and permits — which are typically company-paid in leaser/carrier arrangements — are your responsibility. Furthermore, you will have to secure your own operating authority when you choose to go independent.
With any industry, there are benefits and disadvantages of striking out on your own and the trucking industry is no different. Just because you've spent time thinking about the pros and cons doesn't mean the negatives outweigh the positives.
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The period of starting your trucking business can be a stressful time, but there are ways to set yourself up for success. By adhering to the information detailed above, you can rest easy knowing you are following business plans that cover all aspects of becoming an owner-operator, starting a successful trucking company and growing your business.
Now that you are ready to become an owner-operator, make FactorLoads your freight factoring company. We help secure truck loads for owner-operators so that you can focus more on accomplishing as much as you aim for within your working schedule. Additionally, we'll help you:
- Get set up with insurance people.
- Fill out paperwork.
- Get paid faster.
If you are ready to begin the process, contact FactorLoads today to learn more about our Trucking Start-up Program and be on your way to becoming an owner-operator.