How much do owner-operators make?
This is one of the most common questions for considering a change from the company driver to an owner-operator business. The average owner-operator income is $221,039, according to Indeed.com. But this varies widely depending on experience, the type of loads a driver will specialize in and carry, and how much time they spend on the road.
While that may sound like a lot of money, a word of caution: That is the average owner-operator salary, but they often take home much less than that when you factor in expenses. You have to dig much deeper to figure out a true owner-operator salary — what you’d net each week and annually after paying those expenses.
Many owner operators will only take home $45,000 to $80,000 a year with a much lower average for the first year. We’ll explain why, but the most important thing to remember is that to increase your net take-home pay, you need to maximize income (AKA revenue) and minimize expenses.
Also important: 87% of owner operators don’t have health insurance benefits, so they rely on insurance through a spouse or partner. So why would you want to be an owner-operator? Let’s break down the numbers.
Owner-operator vs. company driver salary
There are two ways to look at salary: gross and net. The gross average owner-operator salary is three times what a company driver makes. But that’s before expenses and taxes — net is what’s left after those.
Expenses are fixed and covered for most company drivers. Taxes are based on the tax bracket they’re in. The more specialized and experienced a driver is, the more they will make as a company driver. The biggest advantage of being a company driver is everything is handled for you. There’s no overhead, so you don’t have to worry about owning a truck or paying employees, and taxes come out of your check automatically. You also don’t have the startup costs of being a business owner.
Owner operators have to buy or lease and maintain their trucks, manage their own schedules, and keep track of their own taxes and business expenses. After initial startup costs, though, owner operators have much higher earning potential. You control your schedule, your time at home, the routes you take, and the type of truck you drive.
The upshot: The more responsibility you take on, the higher your earning potential will be. The more you let a company handle by working for them, the less control you have.
How do owner-operators get paid?
There are two main ways: a percentage of the load or mileage. Earning consistency is the biggest difference between the two.
- Percentage of load: Drivers take between 25-85% of the load revenue. So if you get a high-paying load or a valuable load, your pay can be excellent. But a low-value load can hit you hard — sometimes you don’t break even on those.
- Mileage: You get paid a set amount for the miles you drive regardless of the load’s value. It’s more consistent than the percentage-of-load-pay method, but you may miss out on some potentially large paydays.
Which method should you choose? It depends on your situation. If you save your money well, manage cash flow efficiently, and budget conservatively (based on average vs. best-case scenarios), the load percentage could work well for you. When you have valuable loads, you can bank a percentage of that money for leaner load times.
If you need a more consistent pay schedule, especially if you have a family at home, you may want to opt for the mileage route. Your salary will be more consistent and predictable over time.
Because many owner operators sign on with a carrier to get consistent loads, they may have to choose one payment method or the other. You can combine the two if you work with more than one carrier; it makes bookkeeping and figuring profit and loss more complicated.
To decide what will work best, you need to understand expenses and what they mean to your bottom line.
What kind of expenses do owner-operators have to deal with?
Several expenses go with a trucking business. Some are obvious, and others are a little harder to figure out.
Buying a truck. First, you’ll need to buy or lease a truck. Determine these before you purchase a truck:
- The type of loads you want to haul
- The lanes you will operate in (which may affect emissions testing)
- Your budget and the best truck you can afford
- Whether you will lease to a carrier, fill your own loads, or a combination.
In figuring what you can afford, remember that an older truck will need more maintenance and repairs, and a newer one will cost you more upfront. Consider all those things when choosing which truck to buy and how to pay for it.
Maintenance. Even a brand new truck will need things like oil and fluid changes, tires and wheels, regular grease jobs, compressor maintenance and repair, brake checks and replacements, and regular fuel filter replacements. Regular maintenance can prevent larger problems, but don’t forget to include these expenses in your budget.
Fuel costs. Over time, you will get an average fuel cost for your lanes. This expense never goes away. While there are reward programs and other ways to save money, they have their limits. Budget for fuel based on the mileage you will travel, and budget for the worst-case and highest-cost scenario rather than the ideal one.
Insurance: You’ll need the right insurance for your truck, but you’ll also need insurance to cover cargo loads in the event of a loss, theft, accident, or other damage to your load. These claims are part of the business, no matter how smooth your operation is.
Truckstop’s CargoShield LTL program offers low per-load insurance. Payouts are based on the invoiced cargo value up to $50,000, rather than another released value or some other formula. This can help with the cost and uncertainty of what load insurance will cover in the event of a claim.
Before you buy truck insurance, talk to an agent who understands OTR work and your state’s specific legal requirements and states in your lane. Make sure you’re not paying for coverage you don’t need but that you have enough to meet legal requirements and cover your own needs.
Taxes and paperwork. Everyone’s favorite! If you were a company driver before, you probably had taxes taken out of your check automatically. Now, you will have to track and pay them yourself, including self-employment taxes and Federal and state income taxes.
A few simple rules will keep you out of trouble with the IRS and your state tax authority.
- Put away 20-30% of everything you earn in a tax savings account (TSA). This guarantees you have the funds to pay your taxes when due.
- Pay quarterly taxes. This keeps you legal with the IRS and prevents a surprise tax bill on April 15.
- Hire an accountant. Unless you or your spouse are really good with numbers and the tax code, hire someone to help with your taxes. They’ll know about specific deductions and how to minimize your tax liability.
- Track everything, including mileage and all expenses, in accounting software like QuickBooks Self-Employed. At the end of the year, give your accountant access, and your tax prep will be faster and cheaper.
Also, remember: In most states, you have to file an annual company report (usually online) and might have to renew your LLC or other corporate licensing. You could also be subject to other local business taxes.
Keep these expenses top-of-mind as you create a budget and determine your salary.
Pro tip: Once you’re making enough money, your accountant can recommend ways to set yourself up as an employee of your own company. You can deduct taxes and issue yourself a paycheck and bonuses, draw benefits you can deduct from your taxes, and increase your contributions to a 401K to plan for retirement. These are just a few extra perks of being a small business owner.
How can owner-operators make the most money?
Considering all these things, how much does an owner operator truck driver make at the end of the day? Again, to make the most money, increase your income, and reduce expenses. The first step is to maximize the money you’re making, which you should outline in your trucking business plan. Here are some money-maximizing ideas:
- Keep your truck moving loads. Use load boards to find quality brokers and loads. That way, your truck will always be working to make money for you. See how load boards work here.
- Get your own authority. It will take a couple of months, so plan accordingly. Your authority is your own motor carrier number, which gives you permission to haul freight with your own trucking company. It’s the first step to becoming your own boss.
- Simplify how you get paid. Truckstop Pay ensures that you get paid right away when you deliver a load, with no waiting period. Funds are automatically deposited in your bank account, so you don’t have to deal with paper checks and pick up mail.
- Use factoring to maximize cash flow by getting payments quickly. Truckstop pays you now; the broker pays us later, giving you operating cash right away.
- Sign up for ITS Dispatch to keep moving loads rather than looking for them and doing manual paperwork. We have affordable dispatch solutions, no matter what size trucking operation you have. The less back-office paperwork you have to do, the more time you can save, and the more money you make.
- Protect your business with cargo insurance. When something gets in the way of delivery, or cargo is stolen or damaged, you are protected, and you don’t have to pay out settlements on your own.
The more money you make, the greater your profit margin should be. Reduce expenses to maximize profit.
Keep more of the money you earn by reducing expenses.
There are countless ways to save money. Regular maintenance, fuel reward programs, shopping around for the most affordable insurance, and protecting your assets are just a few of them.
You can make a lot of money as an owner operator, and being your own boss brings a lot of freedom. But you also have to manage yourself to make sure you are maximizing your time, making the most money possible, and reducing your expenses to increase your own salary. Be sure you are running on time, that you and your truck are reliable, and that your equipment can get cargo safely to its destination. In the end, it’s your job to pay your own salary. Make sure you’re getting the money you deserve.
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