Rachelle Biggs is the owner and webmaster of the sucessful site: http://www.newbiedriver.com At some point most drivers at least consider becoming an Owner Operator. Many see it as a "step up" from being a company driver. Others want the challenge of running their own business. No matter what a driver decides to do.....
Some people become very successful Owner Ops. Some go on to buy more trucks, get their own authority and start their own trucking companies. Others barely scrape by with a small income and their name on the door of their truck. Others will face bankruptcy and repossession.
Many people want to dive in headfirst without the proper experience and preparation and they become angry when I advise that they should wait. As an experienced driver of a decade, I would find becoming an Owner Operator a challenge, yet some brand new drivers have an illusion that he or she will jump right in and do better than I would. (I admit it, I find that fairly offensive.) I would like to warn you now that the following series of pages are going to try to convince you that you should wait before buying your own truck. Not only will I try to convince, I will try to provide the best proof that I can. If you are going to buy a truck no matter what anyone says, you probably will not find much useful information here. If, on the other hand, you do not know what it entails, but you want to know more, please keep reading.
A smart business operator will do his or her homework. If you have no experience, you have done little homework. You can read everything you can get your hands on, but we all know that there's nothing like hands-on.
Running a truck is a business. Good business sense, smarts and planning are essential. Knowledge of the subject is imperative.
If there were any one subject that I receive the most email about, it would be about the advisability of a new driver immediately becoming an Owner Operator. I disappoint many people because I almost always advise them against it. I do believe that a person needs to spend at least a year and better yet, two years, in the field that they want to become an O/O, before they take this challenge.
I am also surprised quite often by the reasons people give me for wanting to become an O/O. In all truth, many of the reasons are often not realistic of what really happens. Because of these things, I have put this section together. It may not be what you want to hear, but you owe it to yourself to consider the reality of the major undertaking that you may have in mind.
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They don't want to run certain regions.
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They want the power to say "No" to dispatchers.
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They believe they can be home more often as an O/O.
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They believe they have more control over home time in general: when they will go home, how long they will stay there.
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They want to drive a fancy and/or fast truck.
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They want to be able to refuse any load they don't want to haul.
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They think anyone can ride along with them if they own their own truck.
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They want their pet in the truck.
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They believe the money is much better.
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Bottom Line: They want ultimate control.
Some of these reasons are perfectly understandable and are why many become O/O's. Some of them, though, are absolute fiction.
As an Owner Operator, you will always be choosing between this load and that load and having to decide which is the best load. Many factors are involved in making the decision.... See what you think of the two trips below.
It is winter. It is a Friday afternoon. You are in the Midwest and have been given two choices of loads. They are both loaded and in your yard, where you are. A storm is coming in towards the east coast.
Which load would you choose?
| Load A | Load B | |
| Destination: Connecticut | Destination: Georgia | |
| 1300 Paid Miles | 1000 Paid Miles | |
| $ 1.10 per mile to the truck. | $ .98 per mile to the truck. | |
| 50% of your tolls paid by carrier. | No tolls | |
| Average Fuel Cost Per Gal: $1.53 | Average Fuel Cost Per Gal: $1.25 | |
| Delivers Tuesday at 8AM. | Delivers Monday at 7AM. | |
| Both have good freight coming out of the location you are delivering to. Your truck gets about 5.5 miles to the gallon, underestimating to account for idle time. | ||
Some Considerations:
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If a storm is coming in, it may be worse in the north -- but it may be ice in the south. Northern storms can result in feet of snow but they have the equipment to better deal with them. Since the south doesn't have such weather, they don't have much equipment, either.
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Fuel costs will be higher going into the NE.
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The tolls going into the NE are 50% paid by the carrier, yes, but remember you will also have tolls getting OUT of the NE.
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Although this example tells you about the freight coming OUT of the area you are going into, this is a major consideration when choosing a load. Sometimes it is necessary to take a load you might not want in order to get into an area where freight / freight rates are good.
Which load would you choose?
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| 1300 mi | @ 1.10 | +$1430.00 | 1000 mi | @ .98 | +$980.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (236 gal) | Fuel | -361.64 | (172 gal) | Fuel | -227.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Tolls | -40.00 |
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| a |
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| Total | $1,028.36 | Total | $752.73 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Driver Wage (.36 cpm) | -468.00 | Driver Wage (.36 cpm) | -360.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| s | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New Subtotal | $560.36 | New Subtotal | $392.73 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Looks pretty good, doesn't it? You've paid for fuel, tolls as well as paid yourself, and the truck still has money left over! Gee, isn't that great...! Let's not forget, though, about all of the "other stuff". | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| First, let's factor in TIME... In terms of time, the loads above made: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income per DAY | $476.00 | Income per DAY | $490.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| This makes the loads look just a little different, doesn't it? Load B paid less per mile, but fuel was cheaper, there were no tolls and it was done over 2 days instead of 3. If you automatically assumed Load A was the better load on the basis of the $$$$, you didn't factor in TIME.
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| These numbers assume: | |
| Book Miles for Year | 126,000 |
| Out of Route Miles, 8% additional | 10,080 |
| Average fuel price | $1.35 |
| Average MPG | 5.5 |
| Driver Wage | .36 cpm |
| Truck Payment | $2000.00 per month |
| Annual Expense Breakdown |
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| Expense: |
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| Amount: | %: |
| Fuel | 24742 gallons | @ $1.35 = | $ 33,402.00 | 28% |
| Truck Payment | 12 payments | @ $2000 = | $ 24,000.00 | 20% |
| Insurance | $ 6,000.00 | 5% | ||
| Maintenance | $ 5,000.00 | 4% | ||
| Accountant | $ 1,500.00 | 1% | ||
| Tolls, Pallets, Misc | $ 2,400.00 | 2% | ||
| Escrow | $ 1,500.00 | 1% | ||
| Driver's Wage | $ 45,460.00 | 37% | ||
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| Total: | 100% | ||
Do you notice that there is nothing left over? (And we have not even
mentioned the basic road expenses such as food, snacks, etc)
What do you think happens when fuel prices rise above and beyond
what has been budgeted?
In this scenario, the average price for fuel for the year was $1.35. If you've
noticed, that wouldn't have probably been high enough for the year 2000 and
2001 so far.
If the average price per gallon were instead:
| $1.38 | over the course of a year, the increase would be: | $741.00 |
| $1.42 | over the course of a year, the increase would be: | $1731.00 |
| $1.45 | over the course of a year, the increase would be: | $2473.00 |
| $1.48 | over the course of a year, the increase would be: | $3215.00 |
| $1.52 | over the course of a year, the increase would be: | $4205.00 |
Does this make it clearer why...
The "leftover" money is not yours to spend on vacation
and
why many Owner Operators have gone broke in the past few years...?
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Do you have or know of a lawyer and accountant who can help you decide and set up your business? (Sole proprietorship, corporation, etc) Furthermore, do you understand the legal and tax ramifications of the different choices?
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Do you know where you can get the best rate on insurance? Considering that insurance will cost you around $500.00 per month, (not including health, dental, vision, life, occupational/workman's comp, etc) it pays to shop and to find the best rate. What shape is your driving record in? This will directly impact your insurance costs.
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Will you buy new or used? If buying used, do you have at least several thousand dollars put back for a maintenance/emergency fund? Is there any warranty left? If buying new, do you have any down payment money? If you do not buy your truck, you won't be able to use the tax deductions that are inherent with owning it.
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Do you understand how to figure your CPM (Cost Per Mile) ?
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Do you have any kind of record keeping method in place?
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Do you know an honest, reputable mechanic?
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Do you have any mechanical knowledge at all? Are you at least able to do simple diagnosis of equipment problems so you don't get completely ripped off if you go into a shop? For instance, do you know what a growling throwout bearing sounds like? What a clutch going south acts like? The difference between an air leak and a suspension adjusting? Will you run recaps? Do you know a good recapper?
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Have you spoken with any Owner Operators? Do you know of any that might be a sort of "mentor"?
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In which states is it best to buy fuel? Cheapest, lowest taxes?
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What does the carrier pay and how does it impact your bottom line?
In closing I would just like to say that you are obviously going to be the one to make the choice and the one who will have to live with it.
Buying a truck is definitely not something to do on the spur of the moment. Many experienced drivers would be in over their head buying a truck so be assured that you will really be overwhelmed. Obviously, I am trying to dissuade you from even considering doing such a thing --- but what else would you expect? :)
In one last attempt, here are just a few reasons why you should wait until you've spent at least one year and preferably two years over the road:
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Getting a truck loan will be difficult without job experience in the field. Getting anything other than a bank loan is asking for stress and financial trouble later. (Do not even think about getting in on one of those "Lease Purchase" programs.)
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Make sure that you actually like it. Just because dad or brother drives/drove a truck doesn't mean that you really know what the life is all about, nor that you will enjoy living that life.
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Learn the regions that you like to run. Don't take other drivers word for where the "good" freight is or where the "bad" freight is -- figure it out driving someone else's truck.
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You need to be at least familiar with more than one brand of truck. The more you know about it's tendencies and peculiarities, the more informed decision you will make when the day comes that you do buy one.
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Learn what different types of freight are like.
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Make sure that your family will be able to deal with this new career.... Because it is NOT a career, it is a LIFESTYLE. Is the ownership of a truck worth the loss of a family? Not hardly.
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In the first six months or so, and perhaps on up to a year, a "newbie" is more likely to have a fender bender of some type. It may not be "nice" to say so, but wouldn't you rather have a fender bender with someone else's $100,000 piece of equipment?
Did You Know That...a
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Just because you own the truck, you cannot necessarily and automatically have a legal rider onboard? If the company does not have a policy, whether it is your truck or not, it's no dice for the rider unless you want to purchase your own policy. (Get out the pocketbook)
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You will have to pay your own: Health, Dental, Life and Vision insurance? You will also have to pay at least some of the following (depending on the carrier - some offer to pay some of these) Cargo, Liability, Physical/Comprehensive, Bobtail.
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Tire expenses alone will cost you in the neighborhood of $3,200.00 each year?
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Pallets can cost you up to $7.50 or so each - and most loads require at least 25 of them. Do you think the carrier absorbs this cost???
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Your base plate can cost you something over $1,000.00 per year, depending on the state where the truck is registered and whether the carrier pays any/all of this cost.
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You can claim a "home office" for purposes of taxes, but NOT if you live in the truck? You must have a residence in order to claim this. There goes any dreams of living in the truck and saving money on rent. Otherwise, you are probably giving up a huge tax deduction.
Owner Operator Resources
There are a great many sites for the Owner Operator, but the two best are: