So you’ve decided to leap from employed trucker to becoming an owner-operator.
There are definite advantages to having your own authority and being your own boss: setting your own schedule; choosing loads and lanes that suit you; leaving company politics, rules and dispatcher favoritism in your rearview mirror. But where much freedom is given, much responsibility is required. Following these tips from others’ been-there-hauled-that experience will improve your chances for success in your first year on your own.
Set realistic expectations.
Even though becoming an owner-operator offers the opportunity to make more money, take off the rose-colored sunglasses. In your first year, expect to lay out a lot of cash for working capital, out-of-pocket expenses, insurance, meals, oil changes, repairs and many other expenses. Do a lot of research to get an accurate handle on both expected income and expenses.
Live within your means.
Your spending habits and money management will drive your success as an owner-operator. It’s good to set ambitious goals, but you can’t spend anticipating future growth. Budget based on yearlong averages, not the best of times. Buy or lease a truck you can afford, and set aside money for insurance, repairs and maintenance – even for a brand-spanking new one with a warranty.
Choose your truck wisely.
Spec it to squeeze out every penny of profit. Align the engine with the loads you expect to haul. Whether buying new or used, do your homework. Consider the truck’s fuel economy and its age (including mileage, warranty and amenities) for the money. Research fuel economy with the diesel engine manufacturers. Get real-world input from other owner-operators with similar trucks and engines. Also focus on reliability and longevity as well as maintenance requirements and overall performance.
Credit matters.
Avoid the common mistake of becoming an independent trucker with bad credit or excessive personal debts. Minimize your credit-card debt. Maintaining good credit supports your ability to keep rolling and access necessary capital for equipment, fuel cards, and investment in your business.
Set aside money for downtime and emergencies.
Plan for a rainy day by setting aside a little bit each week “just in case.” Work can dry up. You could get sick. Costs and revenue fluctuate. Build up your emergency fund – a good 3-6 months of living expenses – to tide you over in case you experience a real financial emergency, you can’t work, or you need ready access to cash. Even new rigs break, and downtime can be devastating.
Pay for professional expertise.
Consult with professionals on accounting and legal issues to set up the most appropriate business structure for your trucking business, keep proper records, plan for taxes and address various legal issues. You’ll also need a responsive and knowledgeable business banking contact. Seek out reputable professionals who can advise you properly for your specific circumstances.
Keep yourself healthy.
If you’re going to be on the road for long periods of time, your body and mind need to be in good health. If you have downtime because of health issues, you aren’t making money. If you’ve got health issues, plan for getting medical attention even while on the road. Also keep in mind that being a long-haul trucker is tough on relationships and family, stresses that can affect your physical health. Make sure you’ve got a decent health insurance policy and be prepared to pay for travel coverage.
Continue to learn.
You may be new to the industry or you may have been leased on to a company for years, but to stay one step ahead of your competition, continue to learn. Connect with industry leaders and learn from them. Those connections can help grow your business in the future, too. Don’t ever become complacent with your knowledge. You’ll also need to continue your professional training. If you plan properly, you can do this while on the road without taking hours away from your home time.
Think like a business owner.
Trucking is a business and your truck is your tool. It takes an intense work ethic and hard, smart work to be successful. In the beginning, after becoming an owner-operator, you’ll need to drive 70 hours a week and spend extra hours behind the scenes to keep the business running. You have to be prepared if something happens to your truck or you need more money for fuel. Those are now your responsibilities, not someone else’s. And, when evaluating loads, strike the right balance between home time and having enough cash coming in.
Go into carrier relationships with eyes wide open.
Know what you’re getting into before you sign – from the business sector you’re getting into to specific carriers. Rates, costs, customers, safety records, internal relationships all affect your operation. Focus on building long-term relationships with good customers.
Be prepared.
Even if you weren’t a Boy Scout or Girl Scout, you need to be prepared for whatever happens in your business. If your brokers or shippers pay slowly, you may want to consider factoring through Triumph Business Capital. Freight bill factoring helps you manage your cash flow so you get paid fast without incurring debt.