Is next year the right time to pursue your dreams and start your own trucking business? It could be. With an estimated shortage of 60,000 truckers nationwide (with estimates it will hit six figures by 2024), there will be plenty of opportunity to become an owner-operator over the next five years.
If you’re a company driver, you already know that transportation is different than other industries. There are a lot of requirements and investments that need to be made before you can earn that first dollar.
It’s not complicated, but the more you know, the better decisions you can take to make Year 1 successful.
Ultimately, the choice to start your own trucking company comes down to you. Are you ready to take the plunge and work for yourself? Have you been driving for someone else for so long that you haven’t considered going out on your own?
If you’ve already started your own trucking company, be sure to check out our other helpful blog on getting through your first year as an owner-operator.
Let’s take a look at some of the benefits of starting your own trucking company.
Do You Want to Be an Owner-Operator or Lease On?
As an owner-operator, you’re king (or queen) of the road. You choose your loads, set your hours, decide who you want to work for, and for the most part, don’t need to ask for permission about anything.
Plus, as an owner, you stand to make more money. You have full control to negotiate rates and you’re not kicking up a percentage of every load to the company you’re leased on to. New business owners need money coming in right away to keep up with new expenses.
The biggest difference between an owner-operator and a company/leased-on driver is your responsibility. Company drivers don’t have to worry about regulations, businesses taxes, reporting, insurance, etc.
For example, owner-operators need to set up their operating authority (MC number), USDOT number, insurance and follow other regulations.
On the other hand, you can lease on with a larger carrier, and you won’t have to worry about compliance issues or a majority of the paperwork. Your main focus is driving.
Remember: working as a leased-on-operator is not the same thing as leasing your equipment. You can lease equipment, and find your own loads, or you can work as a contractor for the carrier you’re leased on to.
Are You OK with Up and Downs in Work?
Most people who want to start a trucking business have experience as a company driver. In these cases, you’ve got a good idea of when and where you’ll be driving, and the work tends to be consistent.
You focus on driving without having to find your loads. As an owner-operator, you’ll need to find your own loads, and as anyone who runs the spot market can tell you, there are no guaranteed loads or consistent freight to rely on.
As you gain experience, you can build relationships with certain brokers or shippers who can help keep your trailer full and avoid going home empty.
Most owner-operators use load boards to easily search for freight. But load boards are also great sources of information, including lane averages and the number of loads going in and out of a state. That’s helpful when you’re worried about getting stuck with no load going home.
Very few, if any, new owner-operators have contracts with shippers, so you’ll need to have a strategy that includes using load boards and working with brokers.
Are You Prepared for the Costs?
As an owner-operator, you’ll be responsible for purchasing a new or used truck, getting your trucking authority and other regulatory concerns, insurance, and, ultimately, billing for your services and collecting payments.
Without adding in the cost of your truck, you’re looking at a minimum investment of about $6,000 to $10,000 to get started. Tack on insurance for a new authority, and that can get up to over $30,000.
Can you afford to wait weeks to get paid?
Here’s a not-so-secret secret about broker payments: they can take a long time. How long is long? On average, between 21 and 30 days, but it can take as long as 90.
The truth is, most startup owner-operators can’t afford to wait a month or more to get paid. If you are leased on or a company driver, could you make it for a month without getting paid? But as an owner-operator, you have expenses that have to get paid, or you’ll be out of service.
Some startups might have great credit and savings that can help them through these payment gaps. But the majority of startups won’t have either. That’s why many trucking companies use a freight factoring service to get paid on their loads.
Freight factoring companies buy your invoice, and advance you the majority of your balance in one business day. It’s pretty simple: you deliver the load; submit your documents to your factoring company, and you get paid.
Let’s look at an example of how invoice factoring works for owner-operators: you deliver a load on Monday, submit your paperwork that same day, and by Tuesday your money is in your account.
Factoring companies also work with your broker on payments and offer credit-checking services.
What you need to know to start your own trucking company
We’ve covered some of the basics of starting your own trucking company. If you decide that becoming an owner operator is the right choice for you, here’s a quick checklist of what you’ll need to do to get started:
- Get your authority
- Get trucker insurance
- Buy or lease a truck and trailer
- Get an ELD
- Sign up for a load board
- Figure out how you’re going to get paid
Are You Ready to Get Started?
Triumph Business Capital has worked with owner-operators since 2004. As one of the largest freight factoring companies, we can speed up the time between dropping off the load and getting paid. Contact us today to learn more about our freight factoring services.