7 Tips Vital To Becoming
A Successful Owner Operator
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1. You Should have at least $40,000 saved up!!!
A substantial down payment between 15% - 20% will help keep the equipment payments lower and more affordable. It can also help you secure the loan. On the other hand, some experts say, go into an equipment purchase with little or no money down. and there are a few factors to consider if you want to try this route as well. For one thing you will have higher truck payments. But it will leave you with a little more working capital, when you’re first starting out:, for things like insurance (if you’re an independent trucker), meals, oil changes, & unexpected repairs. Sometimes this works, sometimes it doesn’t. but these are factors to consider.
2. You’ll Need A Good Credit Rating.
A mistake by many want-to-be-owner operators, is getting into the trucking business with bad credit or excessive personal debts. Unfortunately, there’s lots of financing companies that can still get you into a new truck, even with poor credit. However, the future is often very dismal for these truckers. They often lose the truck because they don't have enough credit or working capital to carry them though the hard times. Whether an older model truck or new. New rigs DO break down. Down time can be a killer. Yet, it’s surprising just how many truck owners consider this a low priority in their business.
Now if you have decent credit, and you plan to charge your expenses to a credit card, be sure to make budget allowances to pay these charges, and not carry them long term on your credit card. If you do, it could be the ‘death of your career as an owner operator’
3. You Should Create A Budget.
The most common and biggest mistake owner operators make, is NOT constructing a budget or cash flow projections for their trucking business. Record keeping and reviewing the numbers, should be of the utmost important to the owner operator.
Constructing a budget is a wise move. In fact, it’s a must do, for a successful owner operator. The budget should include your personal expenses along with your business expenses from your trucking operation. The budget should include measures for ‘back up funds’ (reserve money) for unexpected costs such as truck breakdowns, lack of miles, freight delays, personal needs etc.
The Power of A Budget, Profit & Loss
Statement and Cash Flow Calculations
A projected budget and cash flow calculations are simple ways for owner operators to make decisions for the following:
According to your contract and number of earning miles, it can be estimated how much you can earn in a month or a year
A way to see how the business is doing. Is it profitable? If not what changes are needed
Helps to determine an affordable truck payment
How many miles do those wheels need to turn each month?
Is there a decent profit to be made running the optimum number of miles each month, or will you be left in just a break even situation? You may need to rethink the contract you are considering or perhaps becoming an owner operator is not for you.
Will the carrier contract you are considering pay sufficiently to meet your needs? Is the fuel subsidy offered sufficient? Pay package sufficient? You’ll need to know who you’ll lease on with to determine your projected profitability.
Are your personal bills too high to also support your owner operator business? Is the projected net profit too low to sustain your business or personal expenses?
Are the current fuel costs too high for your older model truck with high gallon/mile usage?
'One thing you’re bound to see, is that a high mileage rate doesn’t necessary result in a high profit.
4. You Should Get Accounting, Legal & Business Advisers.
Get some sound advice when making a decision to go into business. What works for one person, may not work for another. You may know the ins and outs of trucking. But your Legal and Accounting issues are best left for the experts in their field.
It may be worthwhile to have a reliable accountant, legal adviser, and business banking contact to help you with business structure, record keeping, income tax returns and various legal issues…. this is a must.
5. Be Prepared For A Long Term Financial Commitment.
You are committing the next number of years to paying for your new investment. You’ll need to make several decisions concerning your purchase of your first big rig.
New or used truck?
How to ‘spec’ a big truck for longevity, reliability and for different types of work.
Cost...”‘how ‘much truck’ can I afford?”
Fuel economy. Now more than ever before, this is a very important factor. Whether buying a new or used truck, be sure to do your homework. Find out what the various diesel engine manufacturers say about fuel mileage. Talk to other owner operators with similar trucks and engines to see what their experiences have been. Even a single mile to the gallon in fuel economy, can mean a big difference in a truck owner’s bottom line.
One of the smartest moves you can make, that I would highly recommend: is establish a solid working relationship with a truck sales person and a trailer sales person (if you’re buying a trailer, too)
Find a sales rep that is mechanically inclined, or an ex-trucker who knows something about the product they are selling. They should be able to help you make informed decisions on which features you’ll need on your truck. Their knowledge will pay big dividends for you.
It’s imperative to have a contact who has your best interests in mind and WORKS FOR YOU. They can often give you good leads for competitive truck financing, too. If you’re looking at used trucks, be careful. Buying used equipment is certainly a viable option, but buyer beware. A truck that’s a lemon, can end your career as an owner operator in a heart beat. Check out the warranty carefully. If you’re considering owning your own rig for just a short time, running hard and making the big bucks, think twice.
Depreciation and resale on big trucks can be brutal. You could loose your cash down payment and not recover it on the resale. If this is your plan, consider being a company driver instead, where you can just quit and walk away from the job. If you are the personality type that gets bored easily and moves from job to job, or relocates often, don’t buy your own truck. Ditch the idea of becoming an owner operator.
Jumping from carrier to carrier is costly, too. There’s hold-back money involved which you may very well loose, should you not fulfill the time commitments and obligations of your contract. This isn’t just a trucking job that you can easily walk away from. You’ll be committed financially by a lease agreement to a carrier or a customer.
6. Independent Owner Operator or Leased to A Carrier?
A new owner operator is best to start out being leased to a carrier.
The carrier has the responsibility of providing operating authorities and permits, securing insurance (although the owner operator often gets stuck with the insurance premiums!), license plates, trailers and of course, the freight.
Carriers often provide credit card systems such as Commdata for cash advances and fuel purchasing. Purchasing fuel on a company fuel card often has the benefit of decent fuel savings, too. Depending on your owner operator lease agreement, you many be reimbursed for some expenses such as road and bridge crossing tolls.
Becoming an independent owner operator, with your own truck and trailer, operating authorities, and insurance, comes with it’s perks.
This means that you don’t have a boss, you set the rules for yourself, and you decide how to operate the truck.
The most appealing aspect of owner-operator truck driving is the promise of better pay. But, there’s a lot of risk involved too. Slow customer payment is often the norm in the ‘trucking industry’. Invoice factoring is a method used by some truckers and trucking companies to expedite payment. However, I do not personally recommend it for a one truck operation.
Another excellent advantage is that you’ll have more flexibility in the routes you drive. This means that you can accept or decline a route by deciding to sign a contract or turning it down.
All things considered, I’d highly recommend starting out leased to a carrier.
Then if you trip across a good deal running your own freight, take a closer look at it then, after you’ve had a chance to get the feel of working as an owner operator.
7. You Must Have A Stable Relationship Or Non at All!!!
**Relationships and Families. This is an area of concern that many truck drivers just don’t put enough thought into. Being away from a spouse, partner and family can cause an endless multitude of issues and problems.
Long periods of separation can be destructive for even the most stable relationships. Long absences can be devastating for families, too.
Also consider any child custody issues. You’ll need to consider driving time available, scheduling driving time around your ex’s time off, weekends etc.
If there’s too many scheduling hurdles and you’re constantly turning down loads from the carrier you’re leased on to for personal reasons, you may well find your rig sitting in the driveway for long periods of time.
Think about what’s important to YOU. You have people in your life that you love and respect. You need their support too.
Being a long haul trucker is tough on a family.
Don’t just assume ‘everyone’ is on board with you. This is one of the most important difficult decisions of becoming an owner operator.
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A Few Tips For Owner Operators