15 Steps to Become a Successful Owner-Operator
There are two types of professional truck drivers out on the road: company drivers and owner operator truck drivers. A trucking company employs company drivers while owner operators run the business themselves.
Both career paths are a great way to earn a living, but there are some key differences. Most truck drivers are commercial drivers, while one in nine is independent. You’ll need to assess your skill set and personal and financial needs before deciding which route is best.
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Here’s everything you need to do to become an owner operator and jumpstart your independent trucking career.
What is an owner-operator?
In general, an owner operator owns a small business and runs its day-to-day operations.
In trucking, an owner operator is a self-employed truck driver who transports goods for customers. Owner operators are independent drivers that don’t work for a specific company. Instead, they might have multiple regular shipping clients, or they may use tools like the Truckstop Load Board to find regular work and earn a living.
Owner operators typically own or lease their trucks and equipment. Many drive a single rig, but it’s not uncommon for owner operators to have multiple trucks and employ a few other drivers.
Owner Operator vs. Own Authority
If you’re currently a company driver, but are considering getting your own authority to run your own business, make sure you know what you’re signing up for. Getting your authority gives you the freedom of making all your own decisions, but it also requires business savvy and all the responsibilities of owning and running a business.
Another option is becoming an owner operator without getting your authority. In that case, you own your own truck but work independently under a larger carrier’s operating authority. Before you decide, make sure you understand the benefits and challenges that come with both. If you have all the facts, it’s much easier to decide which option is best for you.
Owner-operator vs. company truck driver
If you’re currently driving for a company but are considering becoming an independent owner-operator and going into business for yourself, it’s important to understand the differences and their unique functions in the trucking industry.
Here are the main ways your role would change.
- A company driver drives equipment owned and provided by the company they work for. An OO (owner-operator) owns the truck or trucks independently.
- A company driver is assigned loads by the company dispatcher. OOs find and choose the freight they will haul, either from the spot market or be leasing on with a trucking company. Most OOs find their loads on load boards like Truckstop, which makes finding loads right for you fast and easy.
- The job of a company driver is to pick up and deliver loads assigned by the company. OOs are responsible for everything that goes along with running a small business, from finding freight, to hauling loads, to bookkeeping and paperwork, and making financial decisions.
- Company drivers are not responsible for paying for fuel, truck maintenance and repairs, or insurance. Those costs are covered by the employer. OOs are responsible for all expenses of owning and running a trucking operation.
- A company driver is paid by the mile and might receive other pay in the form of a raise, bonus pay, or pay for duties that extend beyond driving the truck. As business owners, OOs make money by negotiating rates with brokers, whether on a load-by-load basis or payment terms set by a contract.
15 steps to becoming a successful owner-operator truck driver
Many owner operators get their start as company drivers before leaping into independence, but that doesn’t mean you can’t start your trucking career as an owner operator. The driving knowledge and skills you need for each job are essentially the same.
Still, there are risks and benefits to each approach. As a company driver, you won’t have to buy or lease your vehicle or manage your business expenses. But as an owner operator, you can be your own boss, take the loads you want, and potentially earn as much as you like, but you’ll also need to invest in trucks and equipment.
Here are the steps you need to take to become a successful owner operator truck driver.
1. Evaluate your personal situation.
Becoming an owner operator — and truck driving, in general — is more than a career. It’s a lifestyle choice.
Over-the-road (OTR) truck drivers may spend weeks on the road away from their families, friends, and homes. That makes it a difficult career choice if you’re a single parent or if you’re caring for an older family member.
Experience also matters. Many owner operators get their start as company drivers because driving for someone else is a great way to get road experience without taking on too much personal or financial risk.
As an owner operator, you don’t have the built-in resources of working for a large company. Be sure you’re ready to take on the responsibility of driving and running a business, from keeping the books to regulation compliance.
2. Assess your finances.
Striking out on your own requires personal investment, which could mean taking on additional debt. Before buying or leasing a vehicle, evaluate your financial situation.
If you have a family who depends on your owner operator income, build up emergency savings before going on your own. This creates a safety net if you have slow months, or it takes a while to get regular loads.
Put all your financial information into a spreadsheet to figure out how much you’ll need to make each month to pay for your expenses. You’ll have to estimate how much you can earn on your routes, so use low estimates to be on the safe side. This should give you a good idea of how much time you’ll need to spend on the road to make your business work.
3. Get a commercial driver’s license (CDL).
If you don’t have one already, you need a commercial driver’s license (CDL) to become an owner operator.
It’s not difficult, but it can be a little more involved than getting a regular driver’s license. You’ll need to pass a physical exam, determine your license type (most likely Class A), take a knowledge test, earn your CDL permit, and then take a CDL skills test to be fully licensed.
To start, get the CDL handbook for your state. You can get through the entire process by studying independently, but many drivers prefer to take a CDL class at a trucking school.
Once you have your CDL, you can legally drive a heavy commercial truck as a company driver or owner operator.
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4. Form a business.
Before you apply for your USDOT Number, you need to form a legitimate business, as the Federal Motor Carrier Safety Administration (FMCSA) will ask you questions about your business operations.
First, go to your state’s secretary of state website and search the database to see if your business name is available. You’ll then need to decide on a business structure.
If you’re on your own, you’ll likely be creating a sole proprietorship or a limited liability company (LLC). But there are other business structures to consider. You can get more information on forming a business from the Small Business Association.
A sole proprietor is a single-person business with no employees, and the business is not separate from the individual.
As a sole proprietor, you can independently make every business decision without input from a partner or board of directors. The downside is that all the business’ financial and legal aspects are tied to you, so your personal assets could come into play if your business faces a lawsuit or you have issues with your debt.
With an LLC, you get the same benefits of pass-through taxation you’d have with a sole proprietorship but without the personal liability risk. With an LLC, only your business is liable, and your personal assets are protected. You can have a single-member LLC, a partnership, or a multiple-member LLC.
Finally, you could form a corporation. This might be a good option if you want to form a larger trucking business or if you intend to grow and add employees. But this creates a separate entity from a tax perspective, so you don’t get the benefits of pass-through income.
Once you’ve decided on a business structure, complete the application and pay the registration fee to submit it.
5. File for USDOT number.
Your U.S. Department of Transportation (USDOT) number is assigned to you by the FMCSA. It identifies you as a carrier operating in interstate commerce. You can apply for your USDOT number through the FMCSA website.
Note: Before you apply for your USDOT Number, you’ll need to form a legitimate business, as FMCSA will ask you questions about your business operations.
6. Get your trucking authority.
Your motor carrier (MC) number identifies you as a carrier “for-hire” who transports goods on a contract-by-contract basis. Unlike a driver employed by a company, you’ll operate on your own and be your own boss. This is what truckers refer to when they talk about “trucking authority” or “operating authority.”
You’ll need both a USDOT number and an MC number to pursue opportunities as an owner operator. In general, items that have been changed from their natural state (such as wood that has been made into furniture) require an MC number to transport.
You can usually apply for your MC number through the FMCSA website as well. Or, let Truckstop.com do the heavy lifting. Sign up for our Carrier Package to get your trucking authority and get two months free of Truckstop.com Load Board Pro.
7. Purchase truck insurance.
Owner operators with authority are required by FMCSA to have liability coverage. FMCSA requires general freight carriers to have $750,000 in liability coverage, but most shippers and freight brokers require $1 million in coverage.
You can also purchase other insurance types to protect your business, including cargo insurance, personal property insurance, roadside breakdown coverage, and more.
8. Decide whether to buy or lease a truck.
Buying your own truck is usually the best option for owner-operators, but it can mean a hefty down payment upfront. If you can afford a down payment, get a loan for a new truck or a used truck, then pay it off over time until you have full equity.
Leasing a vehicle is cheaper, but then you don’t own it, so you won’t build up any equity and may end up paying more in the long run.
To figure out which is best, answer these questions:
- How long will I keep the vehicle?
- Do the financing options work for my budget?
- Are there any tax implications or benefits?
9. Outline a business plan.
Before forming your business, you may need to submit a business plan. Most business plans include the following components:
- Executive summary
- Company overview
- Marketing plan
- Goals and milestones
- List of staff (if any)
- Financial plan
An executive summary is a short description of what your business does, where it’s located, and who the business serves.
A company overview tells a story. If you need one to get financing, highlight your previous successes here. Detail who you are, how you started your business, and why that business will be successful.
Your marketing plan should include details about how you intend to find business. If you have a website, are active on social media, or belong to any networking groups, add them here. You can also add that you intend to find loads on load boards.
Your goals and milestones don’t have to be set in stone, but it’s good to have them. You should also list any staff you have and develop a financial plan for your business. This should contain detailed numbers on profits and losses you’ve had in the past, but also revenue projections, cost projections, and any investments and debts you’ve acquired to start your business.
10. Use load boards to find freight.
Once you’ve formed your business and obtained your authority, you can start browsing load boards. The Truckstop Load Board makes it easy to negotiate rates, find routes, and monitor paperwork, so you can keep your business running smoothly. Truckstop.com also provides a complete set of tools for managing your owner-operator business.
11. Get an electronic logging device (ELD).
To comply with regulations, you’ll need to buy an FMCSA-compliant ELD. Create accounts as a driver and as a fleet manager since you technically fill both roles.
You must physically or electronically connect your ELD to your truck to record hours of service information.
12. Increase cash flow with invoice factoring.
Factoring helps you increase cash flow by getting your invoices paid quickly.
With Truckstop Factoring, you can follow this plan:
- Haul a load.
- Submit your invoice to Truckstop.com.
- Get paid right faster for a flat fee.
- Your broker pays Truckstop.com in 15-30+ days.
Instead of waiting a month for an invoice to process, you get paid almost immediately.
13. Follow the golden profit ratio.
To know if your owner-operator business is performing well, you need to know that it’s profitable. That means knowing your profit margin.
First, calculate your gross profit. This is the difference between your revenue and operating expenses.
For example: $200 revenue – $150 expenses = $50 gross profit.
Divide that by your total revenue, and you’ll have your profit margin, which you can represent as a percentage:
$50/$200 = 0.25 or 25%
So, your ratio is 25%.
There isn’t a set “golden” ratio in this equation, but most experts say you have a healthy business if it’s between 10% and 20%.
14. Make your health a priority.
If you are the sole proprietor of your business, you’ll need to take care of yourself to keep it operating. You won’t take sick time since you work for yourself, so any time you spend off the road is time you aren’t bringing in revenue.
Prep healthy meals for your routes and get regular exercise while you’re on the road. Take breaks when you need to, and take time off to spend with family and friends.
Being on the road for days on end can get lonely sometimes, too. Pay attention to your mental health, and don’t hesitate to reach out for help from your doctor if you don’t feel well.
15. Create a system for managing finances.
Finally, you’ll need an easy way to track your finances, both for tax purposes and to make sure the business runs smoothly. You can manage this with a simple spreadsheet, but software programs can also help you do this.
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