If you have been a truck driver for a couple of years already, there may come a time when the idea of being a business owner of a truck may occur to you. It is true that being an owner-operator can have so many advantages, but owner-operator truckers also come with so many big responsibilities. If you have been working in a truck company for quite a while, then it also means that you have an idea how trucking business works and how much costs come with having this kind of business. If in spite of having knowledge about the costs and responsibilities of being in a trucking business and you still feel that you are unfazed and willing to take the challenge, then perhaps being an owner operator of a truck can really work well for you.
Is it worth becoming an owner operator?
The answer to this question can only be answered by you especially if you have been in a truck company for a long time and you have so many years of experience. Being a trucker owner operator would make yourself your own boss and along with this comes several advantages such as being able to be in control of your own time and you can lead your company in the direction where you want it to go, but another side of being an owner-operator are the challenges that come in being in the trucking industry.
Before committing yourself to the trucking business, there are some factors that you need to know about yourself such as your priorities as well as your current situation. Aside from these, there are also other more things that you need to consider prior to taking the plunge in the trucking business. One of the things that you first need to carefully think about is how you will finance your truck. You have to weigh your pros and cons whether to get a leased truck or get a new one and would you consider getting financing? You need to ask yourself if you are ready to commit yourself to a long-term financial situation.
Having your own trucking company can either result to one of two things, it can either be a highly lucrative business for you or it can also cause your bankruptcy. Ask yourself if you can handle any of these outcomes. Because trucking is considered a high-risk business, the required downpayment for a truck is between 10% and 20% and you would also need to have a very good credit rating. When buying your own truck, getting feedbacks from other owner operators about their trucks can help you decide which one is the best and is the most cost- effective.
After financing the truck, you surely would need to keep insurance in mind and this includes having your personal insurance too. Not all insurance companies would have an insurance for the owner operator that is why finding a reputable company that can give you the best option is also very important. The East Insurance Group is an independent insurance company that can help lead you to a carrier that can provide you with the best option for yourself and your business.
When you have sorted out everything, you will then need to file for the necessary permits that include the IFTA (International Fuel Tax Agreement), UCR (Unified Carrier Registration), Heavy HIghway Use Tax and other special permits that you might need depending where you need to travel. These examples of permits are necessary if you would be crossing borders in the United States, and the costs for these do not come cheap so you have to be really financially prepared. In a trucking business, you would need to have some additional finances because you will definitely need it to pay for other costs. The suggested amount of capital for owner operators would be to have at least 60 days to cover the operating costs.
Apart from the endless list of permits, owner operators also need to register in a testing program for drug and alcohol and if you will be delivering and picking up goods and items across the borders, you will also need to have an Interstate Operating Authority. All these seem daunting indeed, but if you are able to do it properly as an owner operator trucking, then you can also expect to reap good rewards.
This kind of business is not just about financial costs because being an owner operator, you will also have to deal with other aspects such as invoicing, logistics and truck maintenance and repairs, etc. You may not be able to handle it all by yourself so you need to hire some extra people to help you out with these other variables.
Owner operators who have done this business successfully can potentially earn about $100,000 to $150,000 USD per year.
Costs and expenses of an owner operator of a truck
The main expenses that you need to pay for in this industry are: corporate or personal taxes, truck maintenance, road taxes, fuel costs, tires, insurances and other variable costs as well as fixed costs. To come up with successful numbers, you should be able to have a list of your fixed costs that may include permits, insurances, and your monthly payment for your truck and also have your variable costs such as maintenance, food, lodging, fuel cost. Being able to breakdown your expenses in these groups will help you identify which ones you can reduce the costs of. This way you can have the opportunity to control your margins and give yourself bigger profits. Aside from cutting down your expenses and costs, another way to gain more profit is to create more opportunities for revenues.
The biggest expenses in the truck industry are: first the fuel cost, the average total per year is around $50,000 to $70,000 which is why knowing the fuel cost of your truck per mile is essential so you can multiply it with the number of miles that you usually travel and you get to have an idea how much you will be spending per gallon, and you can have a way to reduce your cost on fuel.
The second biggest cost is the maintenance of the truck which includes the truck itself and its tires. For the tire expense, you may need to pay around $1,000 to $4,000. Then comes the insurance which costs around $5,000 to $10,000 depending on your plan and coverage.
Another big chunk in the list of expenses is the food cost, with this in mind, you can now figure how to lower this expense, and if you are traveling overnight, lodging is also considered part of the expenses so you might want to reduce this cost as well.
Being an owner in this type of industry, you really have to shoulder so many expenses, but there is a way to lessen these burdens and stresses, and another option is to lease. If you are on a lease, you can have discounts on fuel and tires if your carrier is generous, and you can save yourself from having to deal with permits and other paperwork.