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Owner Operator 411

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11 February 2009

FAQ for the Owner Operator - Top 10


Top 10 FAQ
(Frequently Asked Questions) 


Here are the "short and sweet" answers to some of the most popular questions.  For details to these answers and a lot more information, read the appropriate post. 

1.  Q:  Can being an owner operator make you a millionaire?
A:  No.  Probably not, although there is always an exception. If you operate your business correctly, you can make enough for it to support you. 

2 :  How much does it cost to start an owner operator business?
A:  There is no set answer to this.  It depends on the equipment you buy (new or used?), what states you run in, and whether you lease on to a company, or have your own authority.  If you lease to a company, it depends on what they pay for (permits, fuel taxes, etc.).  It depends on whether you (or your spouse) does your own bookkeeping, or if you need to hire an accountant.

You need approximately 10% to 20% down payment for your tractor and trailer.  If you are buying your own permits, you have to pay for them upfront.  Insurance companies want from 1 month to 3 months worth of payments in advance.

If you buy used equipment, what does it need before you can put it on the road?  Does it need tires? brakes? other repairs?  If you are leasing your truck to a carrier, you may be able to charge your fuel, but if you have to buy you own, you will need to pay for that before you can haul a load (200 - 300 gallons of fuel times $4.00 or more per gallon (as of August 2013).

If you are getting your own authority, you need to pay for that. Whether you are getting your own authority or not, you will have to pay for business licenses, and equipment licenses. 

3. Q:  How much does an owner operator make?
4. Q:  How much does a company pay an owner operator?
5. Q:  What is the average net income of an owner operator?
6. Q:  How much per mile should an owner operator get?
A:  What do you mean by "make"?  Do you mean gross or net?  Are you talking about being paid by the mile, or percentage?

Loads can pay anywhere from $1.00 to over $3.00 per mile gross, to the truck, but a good average figure to use is $1.50 per mile (I wouldn't run for less than that, but you need to make more per mile than your expenses per mile).

If you are leased to a company that pays a percentage, the average ranges from 65% to 75% of the freight bill.  (You still need to figure how much that translates to per mile.)  It also depends on what you haul.  The average net income is about ¼ of your gross (fuel will cost you about 40-50% of your gross).

You need to know if the carrier you will be leasing your equipment to will pay for deadhead miles (empty miles: running without a load - such as going from a delivery point to a pick up point). 

7. Q:  What is a good business plan?
A:  There is no set rule for a business plan.  A business plan is really a blueprint for what you expect your business to be financially.  What it needs to do is show a realistic income, and expenses.  This needs to be based on research.  You can't just go to a bank and say, "I can make $2.00 a mile, run 175,000 miles a year, and I will have $20,000 in expenses.  You need to show where these figures came from.  You need to break down your expenses (start up costs: down payments, licenses, permits), and ongoing expenses (insurance, fuel, maintenance).  This needs to laid out in a logical, easy-to-read and -understand manner.  Keep in mind that most bankers don't know anything about the trucking industry, so add supporting documents to show what you are talking about.  You might even want to add a "glossary" page, as some of the terms you will use will be unfamiliar to the financial officer.  Put everything you want them to know on paper, as you may not have the opportunity to speak to a person and explain what you mean. 

8. Q:  What kind of insurance do I need and how much will it cost me?
A:  It depends on whether you have your own authority or are leased to a company.  If you have your own authority, you will need to buy all of your own insurance.  If you are leased to a company, they will cover what is needed for a carrier, but you will probably have to buy a minimum of bobtail and liability.  If your equipment is financed, you will probably need additional coverage.  How much will it cost?  Just like your car insurance, prices vary depending on who you insure with and what type of insurance you need.  A minimum cost will be at least $1,500.00 a year, and can run to $10,000 a year if you have your own authority. 

9. Q:  Is now a good time to become an owner operator?
A:  Unless you really know what you are doing, probably not. 

10. Q:  How much do I need to have in the bank before I become an owner operator?
A:  Lots!  In addition to the cost of equipment (down payment, getting it road ready before putting it in operation), insurance, permits and other expenses, you need to have enough to live on until you start turning a profit, and you need to have enough to pay for a major breakdown (and to live on while your truck is being repaired).  You need at least enough for your first month's equipment payment(s).

You should have at a minimum enough to operate on and live on for at least two months. 

Have other questions not covered in this blog?  Add a comment.  I check this blog almost every day and I will try to answer quickly.

Be sure to subscribe to this post so you will get the latest and newest information.



I am sorry I have to do this, but due to spam "comments"  I feel I need to moderate comments from now on.
I am sorry for any inconvenience this may cause to my legitimate commenters.

16 comments:

Anonymous said...

I'm one of those who is thinking of going to a truck driving school, and driving for a company for a year and then buying my own truck. This info is extremely helpful. I've already been crunching some numbers and came to the conclusion that after everything is paid, I'm not going to get rich.

Road King said...

Anonymous,

Thank you for your comment. It sounds as though you have a pretty good plan. It is a good idea to drive for a company before buying your own truck. This helps you to learn the ropes (and who knows, maybe you won't even like being on the road).

You are right, you won't get rich, but if you manage your business well, a decent living can be made. It takes a lot of dedication and hard work, though.

I am glad you are crunching those numbers before jumping into buying a truck.

Good Luck!

A hollar in Kentucky said...

My husband and I are thinking about buying a truck. He recently went through truck driving school and he got his CDLs. He has a misdmeanor charge on his record and we've found it very difficult to find a company willing to hire someone with a charge like his on their record. We feel that it may be best for us just to buy our own truck and book our own loads. We're young and he doesn't have much experience. I think it is nice that your wife has been able to work from home for your trucking business, thats what I would like to do myself. What do we need to do to get all of this started? Is it going to be any easier for us to begin his trucking career with his criminal history if we buy our own truck? Why is it that trucking companies have such a strict policy against hiring people with a criminal record? He's a good man, willing to work hard. He made some stupid decisions when he was younger but things are much different now and while I do understand that is probably the excuse out of most young mens mouths, I truly feel we've been sideswiped by these trucking companies for no reason. We spend hours filling out applications just to be denied in a matter of minutes. What do you suggest? Do you see success in our future? Are we wasting our time? Thanks for reading and responding to this long comment.

Thanks : )

Road King said...

A hollar in Kentucky,

Sorry for the delay in responding, but I have been having some health issues and have been out of commission for a while.

First, let me say that what you and your husband have been experiencing shows that "life ain't fair!" I don't have an answer about how to get someone to hire your husband.

People will tell you things like, "you need to work hard and prove you have turned your life around." BS! How can you do that if you can't get a job so that you can work hard and prove you make a good employee?

You two may be able to get work if you own your own truck, but you should know that if you try to get loads, or get a contract to haul freight on your own, a lot of the companies you will be dealing with will run the same background checks as they do for an employee. In my opinion, if someone is prejudiced against your husband because of his mistake, having his own truck won't help.

People don't like to hire someone with a criminal record because in today's economy there are 10 people without a record wanting the same job.

Truck drivers are responsible for loads worth thousands, and sometimes hundreds of thousands of dollars and an employer wants to know he can trust his employee.

I wish I had a magic answer to your question, but I don't. I will suggest that instead of just putting in applications (don't stop doing that), that you do what you have done here. get on some trucking sites, forums, MySpace, and FaceBook, and post what you wrote here. Set up a separate email account and post it so that if anyone sees it and would be willing to hire your husband, they can contact him.

There are employers willing to help people in your situation but I don't know who they are. You need to make yourself visible so that they can find you.

One other thing he might try (if he hasn't already) is to get a non-driving job at a trucking company, or maybe even in a warehouse or somewhere else with access to trucks. If he can get that job, then people will get to know him and his work habits and he may be able to get his foot in the door that way.

I would suggest that you buy my ebook which tells you everything you need to get started, but I really don't think buying your own truck would be a good option.

You sound like a sensible, level-headed young woman, and I wish you both the best of luck.

Anonymous said...

Road King,

I know that this is an older post but I have a question. Is $10,000 enough start up money? This what I will have in my business account after I purchase my road ready truck.

Thanks,

K

Road King said...

Anonymous "K",

I am pleased to see that you said you will have $10,000 in your business account for start-up costs after the purchase of your tractor.

I hope you also have money in your personal account. The reason I say that is that after you start your business, if something should happen, you need enough in your personal account to buy food and pay your personal bills.

"What could happen?" you ask. You could have an accident that puts your truck out of commission for a few days to weeks, your truck could break down and need repairs that take a few days to weeks, or you could get sick or injured and be unable to work and unable to hire a driver.

So, in addition to having enough money in your business account, you also need enough in your personal account.

Now -- is $10,000 enough start-up money? Yes, it should be enough to pay for your licenses, insurance, permits, and other start-up costs.

Don't forget, depending on your type of operation, you may have to buy extra equipment such as load chains, straps and tarps.

Even so, you should still have some left over for a "rainy day", such as minor breakdown.

Does any owner operator ever have enough to cover any situation? Probably not. To replace a blown engine can cost up to $25,000. A blown tire can cost $600 or more to have it fixed on the road (including labor), and you may also need to replace a rim if it was damaged by the tire when it blew.

A good business person will have enough to buy a blown tire, have an oil leak fixed, or some other "minor" problem.

Successful OO's will save for major routine expenses such as new tires or a scheduled overhaul, but few will have enough for major unexpected expenses, such as having to replace an engine -- most will have to take out a loan.

By the way, when figuring an expense, unless you do the work yourself, figure the costs of parts and then double it to cover labor. This won't be exact, but it is a pretty good rule of thumb.

I hate to keep harping on this, but even if you have enough in your business account to cover whatever, if you don't have enough in your personal account to see you through until you get back on the road, you will start "borrowing" from you business account to live on, and that is a good way to get into trouble.

I don't mean to sound absolutely discouraging, but these are things a lot of people don't take into consideration when planning their finances.

On the other hand, with $10,000 in a business account, you are far ahead of most people who try to start a trucking business and barring any major problems, you should do fine.

Good Luck! I hope this helps you make your decision.

Anonymous said...

Buster owner operater ,
Yes you are wasting your time. If his conviction is bad enough to keep him from getting hired on as a company driver what makes you think it's going to be different as an o/o? Stupid decisions can and will stay with someone forever. He is being held accountable for what he's done. We as people are all accountable for what we do. And it's very expensive to become an o/o. You can't just go get a truck and grab freight. If it was that easy everyone would be doing it.

Robert Jacko said...

Thank you for sharing the information.

Driving a truck needs a lot of skills. I would like to tell that I recently came across a site called non forced dispatch who are providing the service of truck driving jobs.
Owner Operator Trucking Jobs In Top Landstar Agency to become an owner operator.

Road King said...

Robert Jacko,

Thank you for the information.

Jay Anderson said...

Hey Road King

I am a 24 year old man interested in join the trucking industry, currently I do not have my cdl but enrolled for school in September. My question is what would be advice for me being a company driver or drive OO leased to a company with my father (he already own his own truck)? His truck currently isn't in action so he needs licenses and insurance but maintence is prime

Thanks in advance

Road King said...

Jay Anderson,

First, there is a reason your father isn't running his truck - the question is why? Not making enough money, burned out, Illness? Talk with him and find out why he quit driving.

Second, I recommend that if you do get your CDL, try being a company driver before jumping into being an OO. Who knows, you may not even like being a truck driver. If you do, you can learn a lot by being a company driver that will benefit you greatly if you decide to be an OO.

My first thought to respond to you was to tell you to get a refund on your tuition, then run as fast as you can, but you probably don't want to hear that!

Being an OO has many problems and expenses that being a company driver doesn't have, so try that first.

Good Luck.

If you have any other questions, please fell free to post them here, or drop me an email.

Anonymous said...

Hey there. I talked to a company about leasing on with them and they said my truck payments would be about $880 a week. Is this overkill or doable? No d you this doesn't include my insurances and the like. Hope you are still here.

Road King said...

Anonymous,

Thanks for reading this blog.

You really didn't give me enough information, but this sounds way too high to me.

In general, I do not advocate lease/purchase. There are too many pitfalls. First is it a true lease purchase, or a rental purported to be a lease purchase?

Carriers will tell you all kinds of good things about how much you can run/make, and what a good deal you are getting; however, the reality is very different. There are all kinds of hidden costs and stipulations hidden in the contract. Even if everything is on the up and up, carriers often give you less and less freight, so that you are ubable to meet your payments, and you end up losing the truck, and all that you have invested in it.

If you would like to give me more details, or ask more questions, please feel free to do so.

Road King said...

Anonymous,

I ran across this and think it might help answer the last reader's question: http://www.ooida.com/EducationTools/Tools/lease-purchase-calc.asp

Anonymous said...

I live in Canada and I have been driving truck from BC to Alberta for about 2 years now, there are opportunities for me to obtain a truck and have family with good connections for getting loads, I am well educated and organised with finances, is becoming and OO going to be a good way to make a living and in future obtain more trucks and grow from there? Or is it wiser to partner with someone with almost a lifetime of experience (and investor) to move forward?

Road King said...

Anonymous,

Thank you for your question.

IF you can get good loads, then you MAY be able to make it as an OO and make a livable profit. As to being able to expand, I would say that is probably not feasible. Of course, it is possible, but so many go into trucking, thinking of doing the same thing, only to find they are barely able to support one truck, much less several.

Partnerships can be tricky. There MUST be a very high level of trust and respect. It is easy for one partner to cause loss for another partner, whether intentionally or not. Disagreements over the direction to take the partnership, money, investments, and control, are just a few issues that can cause dissension.

I hope you are not thinking of partnering with a family member, as there is an axiom that one should never go into business with a family member.

If you do partner with someone, would it be 50/50? Other than experience and money (both valuable, of course), would the partner contribute anything else? Would they be an active or passive partner? Would they be a general or limited partner? (I'm not sure of Canadian laws, so these questions may not apply.) Will your business be profitable enough to provide adequate income to each partner?

Personally I would rather try to go it alone than to have a partner. If you are just considering a partnership for the investment, I would try to gets the funds some other way. Perhaps you could still get their experience advice, if they are a friend. If they are unwilling to help you without compensation, you could offer to pay them for their advice as a consultant, or get the information from another source.

Hope this helps. If you have more questions, don't hesitate to write,

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