Going from company driver to owner operator can be profitable but certainly not guaranteed. Exchanging regular pay as a company driver to the increase in revenue as an owner operator does have it’s risks. You can mitigate these risks, however by taking into account a few precautions. The trucking industry can be volatile so the goal is to smooth out this volatility as much as possible. Here are some things to think about.
First consider where your business is going to come from. Do you have a contract with a company? Are you working with brokers? Lets look at these in more detail. Having a contract offered to you as soon as you get a truck is a great thing but what happens if that contract gets broken? What’s your back up plan? A reoccurring theme in this post is to not have all your eggs in one basket. If the company you’ve signed on with suddenly goes out of business or otherwise goes a different direction you could be in a tough spot if you don’t have a back up plan. Keep lines of communication open with brokers and other carriers. You’ll know who is looking for more drivers if you keep your “feelers” out there. Hauling for more than one carrier may be an option as well. Conversely if your main source of business is through brokers make sure you diversify by hauling for two or more brokers. This way if one cuts back on you, you have the other to keep you going.
Second, don’t buy more truck than you need. Every day potential owner operators call us to finance that shiny brand new $130,000 Freightliner. For most people, and especially people with less than perfect credit, this is a bad move and most people will struggle or fail with that kind of payment. The truckers we see that have the most success are the ones that are buying that $20,000 to $40,000 truck. Their payments are lower and keeping your expenses down as you start up is critical in the beginning. We also encourage them to purchase a warranty and roadside assistance so their downside is covered in case of a breakdown.
Third, work out a pro forma budget so you know you can cover your overhead. Don’t be shy on this one. Guess high on everything and add 20% to your fuel expense so you can be protected from fluctuating fuel process. Also be sure to include money for future repairs each month. On income be conservative on what your monthly gross is going to be. Revenue also fluctuates so be sure you account for that as well. Work in a savings plan in your business budget as well as your personal budget so you have money when your down during illness, etc. Basic money management will do the trick.
Forth, compare your pro forma budget to your current situation. In might make sense to stay where your at. I know some company drivers that clear $60,000 a year or more. Compare that to the net income you would make as an owner operator. Not much different and when you include the added management headaches and risks it doesn’t make sense to make the move. Other things to take into account are things like lifestyle and work load. Many company drivers are home most nights with days off, benefits, and opportunities for advancement. As an owner operator your work load tends to be more demanding and everything is on your shoulders. For some people this is good thing for others it weighs them down. It’s helpful to have some self reflection on this. Know thy self!
Fifth, know your long range plans. Becoming an owner operator is a long term proposition so this is not something you want to do if your planning on retiring in five years. Assuming your making an acceptable living currently it might make sense to stay where your at if your only going to be driving for a few more years. On the other hand if your ready to make the leap becoming an owner operator can be life changing. Starting with your first truck and expanding out to a fleet can create a opportunities that you have only dreamed of. Assuming, of course this is your goal. Many guys buy one truck and “own the road” or at least their destiny; preferring to drive for who they want and when.
There’s a lot to think about when considering owning your own truck. There are great rewards as long as you manage the project correctly. Be sure to join OOIDA if you haven’t already. They have a lot of resources for owner operators, new and seasoned. Good luck!