As an owner-operator in the trucking industry, it is important to understand the common pitfalls that can lead to failure. By recognizing and addressing these challenges, you can increase your chances of success and build a profitable and sustainable business. Here are 10 of the most common owner-operator mistakes:
1. Insufficient Capital
Starting and running a business can be expensive, and many owner-operators fail because they don't have enough capital to cover their expenses. It is important to have a solid financial plan in place that includes enough funds to cover your startup costs and ongoing expenses
2. Lack of trust in their dispatcher
Unfortunately, there is a common topic in the trucking industry that dispatchers and truck drivers are rivals. Moreover, the dispatcher's job is to make the life of a truck driver harder. This can't be further from the truth. The dispatcher's job is to help the truck driver on the road to be successful. That happens through trust and constant communication.
3. Waiting on a better Load
Owner-operators often decline loads today, hoping there is a load tomorrow that will pay $200 extra. While the idea of getting $200 extra for the same lane makes sense, waiting one day does not justify it. The driver has stayed on the road, and payments for the truck, trailer, insurance, etc. are not on pause. It is much better to get moving even. Getting another $200 in the next load from a better location is better.
4. Bad Fuel management
Many drivers think that since they drive their own truck, they can unlock it and run 75-80mph when the speed limit permits. This is equivalent to punching a hole in the fuel tank and keeping driving. Most modern trucks are set to have the biggest torque and efficiency at speeds up to 68mph and some trucks are even lower. The extra 10 mph road speed can lower fuel consumption by sometime over 1 mile per gallon. That means the truck will burn more fuel for the same distance. Is it really worth it, to pay over $1000 so you can feel "faster and superior" on the road while being less safe?
5. Lack of planning
Many owner-operators fail to plan ahead, and this can lead to a host of problems down the road. It is essential to have a clear plan in place that outlines your goals, strategies, and budgets. Here is a list of KPIs that Owner Operators can implement that will improve the planning. Vacation and home time should be preplanned ahead. The lack of income during the downtime should be factored into the projections.
6. Poor cash flow management
Inadequate cash flow management is one of the leading causes of business failure. Loads are up and down, so make sure to save money on each load. Taking cash advances is helpful in the short term, but make sure it does not become a habit. Buying shiny and chrome toys from the truckstop with the last money in the bank account is a bad decision. Chrome wheels make the rig look good, but this should be done after everything under the hood is properly maintained and the truck has good tires and brakes.
7. Unreliable equipment
As an owner-operator, your trucks are your most important assets. Preventable maintenance may feel like you are paying money without the need to(if the truck is not broken why fix it?), but it is actually the best thing you can do for your equipment. Simple greasing of the truck and trailer can extend its life and prevent road breakdowns.
8. Not knowing their breakeven number
Every business has a breakeven number. That is the minimum number of units that are sold at certain price, so the business can pay all its expenses. In the world of trucking that means that after the owner-operator reaches a certain number of miles at a certain rate per mile, then it breaks even. Every extra mile that is driven starts to bring the cash. Owner Operators mistake is not to know the minimum miles at the given rate. You can check your break-even numbers in our calculator.
9. Not seeking outside help
As a small business owner, it can be tempting to try to do everything yourself. However, this can lead to burnout and other challenges. Make sure to seek outside help when needed, whether it's from safety, accounting, legal, or operations. Working with a team of professionals can help you avoid common pitfalls and increase your chances of success.
10. Not Keeping an open mind
Often Owner-Operators will take advice from their colleagues who do mostly the same work. While that is helpful in some cases, it is important to keep an open mind for other possibilities. Maybe a dry van is not the best, and you should do reefer, or maybe reefer should be replaced with a flatbed, or car hauler, or drayage. Sometimes the best ideas come from outside our industry.
There are several key performance indicators (KPIs) that truck owner operators can use to measure their success and identify areas for improvement in their business. Some examples of KPIs that may be relevant for a truck owner-operator include:
Miles per gallon: This KPI measures fuel efficiency and can help the owner-operator identify opportunities to reduce fuel costs and increase profitability.
Utilization rate: This KPI measures the percentage of time that the truck is being used to haul cargo. A high utilization rate indicates that the owner-operator is maximizing their use of the truck and generating revenue.
On-time delivery rate: This KPI measures the percentage of deliveries that are made on time. A high on-time delivery rate is important for maintaining customer satisfaction and building a reputation as a reliable trucking company.
Load acceptance rate: This KPI measures the percentage of loads that the owner-operator is able to successfully secure. A high load acceptance rate indicates that the owner-operator is able to find and secure profitable loads consistently.
Revenue per mile: This KPI measures the amount of revenue that the owner-operator is able to generate for each mile that the truck is on the road. A high revenue per mile indicates that the owner-operator is able to secure high-paying loads and optimize their routes.
Operating expenses: This KPI measures the total costs associated with operating the truck, including fuel, maintenance, insurance, and other expenses. Monitoring operating expenses can help the owner-operator identify opportunities to reduce costs and improve profitability.
Many company drivers dream to become an owner-operator who has their truck and drive for themselves. After all, America is the land of opportunity, and good trucking service is always in demand, so there is money to be made by working for oneself. Most of the drivers that fail in owning a truck do that because they are not prepared for all that will come towards them. We have seen excellent drivers losing their savings and owing money because they were surprised by some of the expenses that come with buying and operating a truck. Future owner-operators must think about their cost of the commercial truck, type of trailer, revenue per mile, truck insurance, etc. The list is long.
We hope that this article will help, the future owner-operator. Better to read it now, than to pay the high price of learning it down the road.
First things first - Cost of commercial truck
You need a horse. There are two ways — you can buy or lease.
Buying a truck is easy
Walk in the first truck dealer you see, and the salesman will do everything possible to sell you one and help you finance it if you have any credit history. You should consider how much the monthly payment will be for that truck. A long time ago a friend of mine told me that a truck without a monthly fee does not exist. If you buy a brand-new truck you will have the apparent loan payment, then immediately after you pay it off, there will be a new payment in the form of higher maintenance expenses.
The cost of a commercial truck, in that case, would be the price + the accumulated interest. From a tax perspective, the owner-operator can write off the insurance as an expense along with the depreciation of the truck.
Leasing a truck
As a future owner-operator, you can rent a vehicle from Penske/Ryder, as well as most of the big dealers like Freightliner, Volvo, Peterbilt/Kenworth, and International, or even most of the truck financing companies. The first two companies would charge a certain amount per month + charge per mile. They will cover most of the maintenance. However, they will not cover damages due to the driver’s fault, which includes anything from a flat tire due to nail, cracked windshield, or even if someone breaks your mirror at the truck stop and runs away, etc.
The other type of lease is called “Lease to buy” by lenders. It works similarly to a loan, but the truck is owned by the bank until you “pay it off.” Essentially, you are paying rent (lease payment) to the bank, which in the end transfers/sells it to you for $1. The sales pitch for such loans is that you can write off the payments as an expense and pay fewer taxes. If that is the only reason to choose it — don’t. It is true that a lease payment of $2000 a month can be written off at the end of the year and a loan payment of $2000 cannot be in the same way. However, when you have a lease payment the maximum that you can write off is $24000, compared to the loan type, where you can write off depreciation and interest.
Owner Operator Financing
Next time when you have to talk with a loan officer about financing a trailer, for example, they will look at your financials or tax returns. It is much better to have a depreciation expense than a lease expense if you want to get a better loan rate.
A few things that the financing agency will ask you are — how much experience you have as a truck driver, how much (if any) experience you have as an owner-operator, and for which company you will be driving. The first question is so they determine whether you can drive a truck. The second is to determine if you can operate a business, and the third one is for them to know that you will be doing actual work with the truck.
After all the paperwork is done, and you are ready to drive off the parking lot, you must show the dealer and the lender proof of insurance.
Owner Operator Insurance
Big rig truck insurance is very different than car insurance. Future owner-operators must know what they are paying for. Check this article for more detailed information.
To haul any load on public highways, you need to have a truck registration. This is the next costly part of owning a truck. The plate can be a state registration or IRP (International Registration Plan). The first would permit you to drive only in the state where the truck is registered. It is usually more expensive than the other, but you don’t need to pay IFTA (International Fuel Tax Agreement). The second permits you to haul freight in North America (hence International Registration Plan) except for the Mexican and Canadian provinces that don’t border with the US.
We have seen drivers that take money from IFTA, but for the most part, it is around $100–200 per quarter. State permits depend on how much you drive through OR, KY, NM, and NY. Oregon charges you $0.1638 per mile driven in the state. You can offset the extra charge by fueling there since fuel is cheap. NM, NY, and KY charge around $0.05 per mile driven in the state. Other states don’t have such charges, but they do have toll roads, so one way or another you pay. You can read about all the permits in your truck folder here.
After December 18th, 2017, the trucking industry changed. Owner-operators should know how to choose their elog device or go with the trucking company they decide to work for.
Pick up the right freight segment
The horse is here, but where is the carriage? There are four main freight types and everything else we will put in the group Other Freight.
This is the most common freight out there and the easiest to haul. Most of the TL carriers include this type of service in their business model. Dry Vans are the cheapest trailer to buy, maintain and load. Most of the time you spend on the road. Almost all companies that pay per mile pull exclusively dry vans. However, dry van loads do not pay as the others.
Refrigerated or temperature controlled
For this type of freight, you need a reefer trailer. It costs twice as much as a dry van trailer, and you need to maintain the reefer unit. It is like having another car attached to the trailer all the time. Oil changes, belts, AC compressors, etc., are things that you need to be aware of and concerned about. The majority of the loads are foods, which means extended pickups, deliveries, and special appointment hours. Reefer is easy to load like a dry van, but you must sleep with the unit on most nights. Some drivers are ok with it; others hate it. You make more money with the reefer loads, but you also have more expenses.
Crane or forklift load that type of freight from the top or the side of the trailer. The most commonly used trailers are Flatbeds (obviously), Step Decks, and Conestoga. Flatbeds cost almost as dry vans, where step decks and Conestoga are around 10k more expensive. However, as an owner-operator, you must buy more supporting equipment — chains, straps, tarps, to name a few. You must also use the equipment, to brace and strap the load. Chains are heavy, and you should move them around when you are securing steel coils. Tarping is not fun for many drivers as well. However, you are getting paid better for the loads.
Тhe previous three load types can be Hazmat as well. That means that they need to follow the Hazardous Material Transportation Regulations. Most of the time this type of freight is loaded in dry van and reefers, but occasionally you will see a flatbed with such cargo. It pays more than other cargo for the given lane, but you must be more careful.
These include tankers, auto carriers, livestock trailers, dump trailer, etc. People usually do not come from driving school and get immediately with Livestock or Tanker truck. They come with their specifications. Livestock is not easy, nor is it easier oversize load or a car hauling trailer.
Choose the right trucking company for yourself
Everyone says that they are one of the best owner operator companies. This is the hard part. How do you decide which trucking companies are good and which one is bad?! Trucking companies pay their owner-operators in a couple of different ways:
Revenue per mile
Most of the big trucking companies pay per mile to owner-operators. They usually have a base rate per mile + fuel surcharge(fsc), and you don’t have to have a trailer in general. Signing with such company relieves you from the burden of thinking about other charges that you will have — liability insurance, trailer rent, permits, trailer maintenance, etc. The fuel surcharge changes with the average price of fuel in the US, so it is the same for everyone. However, the base rate changes with the different companies. Some will pay you one rate for loaded miles and another (lower and often without fsc) for empty miles. The other will pay a seemingly higher price for all miles, but you must pay for IFTA, KY permit, NM permit, etc. And in general, these companies will have stricter rules for you to obey.
Revenue per percentage of the freight
This type of trucking company pays the owner-operator percentage of the cargo that they book for the truck. Usually, the FCS is part of the gross rate. Smaller companies pay 80–90% of the freight revenue, where large fleets pay you around 70%.
Companies with pay range 86–90%
These carriers will not cover expenses such as permits, insurance, trailer, etc. in the percentage they charge. However, you have the most freedom of being an owner operator with them. Some drivers misinterpreted that freedom with changing their company once a month. Not a good idea! When companies do a background check (as required by DOT), they see that and will not take you seriously because they will know that you will work only for a limited time. There are shady companies out there (Chicago has a bad reputation), but if an owner-operator must change three carriers in 6 months think about the way you choose them or the way you work.
The Owner-Operator usually pay $700–1000 for “cargo” insurance, which is liability and cargo policy in one. On top of that, he will have the option to choose to pay an additional 5% from the truck revenue or $500–800 a month for trailer rent, insurance, and brake/tires wear. The new owner-operator can purchase its trailer, which will save him money every month. An additional charge would be for IFTA and state permits.
These charges should be in the back of your mind when you pick a load, but should not be your primary criteria.
Buy vs Lease Truck is one important decision future owner-operators must take. Both options offer benefits as well as drawbacks. There are many different situations that apply to different people. Always keep in mind that a truck is a tool for work first, and a vehicle second. Potential business owners should consider the job at hand to make the best choice.
Lease a Truck
If you are starting your trucking career, leasing a truck makes sense or you if lack good credit. It does not require a significant down payment, and the monthly or weekly amount is generally smaller than that of a loan. The driver will own the truck, as the lease agreement ends. There is a type of lease where a downpayment is required. Monthly payments are generally low because the balloon payment at the end of the contract matches the value of the truck at the time. For example a 10 percent down payment on a $130,000 vehicle with $2000 per month for 60 months and a balloon payment of $24,000 at the end. This is a sweet deal for a new truck if you plan to keep and use it for longer than five years.
The most common lease is directly through a trucking company. Weekly payments will be deducted from the driver's check. A required down payment of around $5000 will be needed. It shows good money management skills and establishes good faith. It also allows for lower weekly payments.
Drivers are responsible for the maintenance of the trucks unless the lease is from Ryder or Penske. These two companies charge between $0.12 and $0.20 per mile for regular maintenance. This, however, does not include accidents and or incidentals. If you hit a deer or a rock cracks the windshield, repairs come out of your pocket.
Buy a Truck
When a future owner-operator purchases a truck and finances it, the bank takes the title as collateral for the loan. The driver owns the vehicle, and like in the lease (unless the lease is from Ryder or Penske) all responsibility for the ownership falls on him.
Financing a loan is a cheaper option. Also since the driver is the owner, he can build some equity in the truck. If the market is strong, an owner-operator can make extra principal payments towards the loan, thus paying it off early and saving on interest.
Drivers need a credit score of over 630-650. That puts those with less than perfect credit at a disadvantage. The higher your credit score, the better the interest rate on the loan will be.
Many banks require down payments when credit history is an issue. Ten percent is standard, but some will only ask for five. Almost any lender will agree to finance a truck driver with 20 percent cash in pocket. Putting down a substantial down payment secures lower monthly payments that won't put a toll on the driver when the market is slow.
A major factor in improving the odds of financing a truck is the previous owner-operator experience. Many banks will deny even 20 percent down payments if the future truck owner cannot provide past truck payment history. That is probably the main reason why many drivers start off with a lease. Experienced truck drivers are not necessarily experienced business owners, and banks know that. Previous owner-operator experience shows knowledge of how to manage a business and offers banks more security.
People don’t always think of glamour and glory when they think of the trucking industry. It’s a job that requires hard work, long hours, and the ability to drive long distances. Truck drivers are often underappreciated members of the US workforce. They perform their job every day and often don’t receive the respect that they deserve. Truck driving may seem like a grueling profession, and many may wonder what exactly motivates somebody to commit their life to the road. While there are indeed some challenges that come along with being a truck driver, there are many great reasons that people decide to take up the occupation.
They Enjoy Traveling
Travel is an important part of many people’s lives, and truck drivers are no different. For the free spirits that enjoy seeing everything that the country has to offer, driving a truck can be the perfect vocation. Truck drivers get paid to experience the different cities and change of scenery across America. If seeing different cultures and trying new, unique regional cuisines interests you then you may benefit from getting behind the wheel of a truck and embarking on their cross-country journey.
Traveling is a major perk but with that comes a job to be done. Drivers can often choose the shipments they want to take them to the places they’ve always dreamt of seeing. During long stretches of highway, drivers can enjoy the views and the sense of adventure that comes with hauling a big rig to new, exciting places.
They Prefer the Open Road to an Office
Most people don’t enjoy performing the same routine tasks over and over again in an office setting. Drivers benefit from the luxury of never having to worry about sitting at a desk for hours on end while staring at a computer screen. Instead, they can fire up their truck and head to a new location every single day. Truckers are always willing to accept adventure since there is always something new and exciting over the road.
For those who don’t want to fill out spreadsheets or send emails all day long, the open road provides a different kind of job. Drivers may have to battle against thunderstorms, blizzards, or low visibility, but these are challenges that they genuinely enjoy. There is a certain sense of victory that comes with completing a shipment despite the literal and figurative roadblocks that may make things more difficult.
People that make good drivers are the top that is always looking for a challenge, and the road is ready to provide them with plenty of these. They can put their problem-solving skills to the test in an exciting environment rather than sitting in an office all day. In this sense, drivers can sometimes be thrill-seekers who have a strong desire to succeed.
They are Looking for Success
In many regards, drivers are ultimately responsible for how successful they can become in this profession. They can make decisions that will determine how profitable they will be on their runs. The driver alone decides to work as hard and as often as he or she sees fit in order to meet their financial needs or lifestyle desires.
There is no single way to be successful when it comes to driving a truck, but the freedom afforded by making your own decisions is a significant selling point for truckers. They can seek out the shipments that they believe will help them advance both financially and personally. In a sense, a driver is running his own business while moving that truck across the country, and he must make sound decisions and remain motivated to do well.
It is this drive to succeed that keeps so many drivers on the road. They know that they can make a life for themselves by choosing wisely and working diligently. Although a suit and tie aren't typical attire, truck drivers are often just as business-savvy as some of the sharpest-dressed financial gurus and executives. It’s just that they prefer to practice their business skills from inside a cab rather than behind a desk.
They Seek Out Adventure
From the weather problems to potentially treacherous terrain, there is always the adventure that is about to happen. Imagine hauling a massive shipment into the high-altitude ski towns in the Rocky Mountains. This is not an easy task! However, those towns need to get their goods somehow, and somebody needs to be willing to answer the call. Truck drivers are the ones that keep these places in business. Their ability to and willingness to take on these difficult loads makes this possible.
We might think these shipments would ruin our day, but the adventurous drivers out there enjoy being assigned to these tasks and proving that they have the skills and dedication to carry them out. There is a major sense of satisfaction when these jobs are finished successfully. A truck driver can be seen as somewhat of a hero when he delivers essential goods to the towns that need them.
For those that enjoy all of the above things – adventuring, the open road, independence, and travel – driving a truck can be an excellent way to be financially successful while maintaining a healthy work-life balance. When you enjoy your career, you are far more likely to find happiness and satisfaction in life. Drivers who enjoy venturing out and delivering goods are keeping themselves in better health. They are also
doing a great job to provide for their needs and the needs of their families. Trucking can be a highly lucrative career for any person who believes in hard work and adventure.
Anyone who’s ever worked for someone else has dreamt about becoming their own boss. From setting their own schedule, being in control of their own income, and not answering to anyone but themselves. It’s an alluring concept but one that requires careful consideration, significant investment, and being comfortable with less stability. Consider these factors when deciding to make the transition from being a company driver to being a truck owner-operator. Read more
Truck driving and family life is not an easy thing to navigate. Most people work a job that allows them to come home to their family at the end of the day. Whether it’s in an office, factory, or retail shop, their work location is usually within an hour of their home. For over the road truck drivers, however, this is not the case. The unfortunate reality of life for them is that they must be on the road for weeks at a time, often leaving their families behind without certainty as to when they are going to return. Such life can be stressful for both the truck driver and his wife, creating many difficulties that drivers must face when pursuing a career behind the wheel.
Uncertainty of Schedule
When a driver embarks on a trip across the country, he doesn’t always have a direct route back home. In many cases, he must rely on several backhauls to move from location to location until he eventually gets a shipment that brings him back to his destination. Sometimes, a driver may be able to set up his schedule so that he has a clear route back. This still comes with uncertainty, however, as shipments can be canceled, reconsigned, or significantly delayed. When that happens, there is no guarantee that a driver will be able to find a profitable replacement shipment that will get him where he wants to go.
Inclement weather, accidents, and traffic can also contribute to this uncertainty. With the United States being such a massive landmass, it can be hot and sunny in one city while a blizzard is ravaging a location only a few hundred miles away. Drivers can’t expect regular weather patterns if they are driving over the road, so they can’t always accurately predict when they are going to be home. They also have to account for their DOT hours of service.
While many truck drivers enjoy the “lone ranger” lifestyle that the open road affords them, the fact remains that it can be stressful to be isolated for such long periods of time. Many drivers report that they miss their families immensely when they are driving, causing them emotional distress and contributing even more to their feelings of loneliness. This one of the most significant difficulties of choosing the independence that comes along with being a truck driver.
Drivers can make friends on the road, and they often do. However, this is not quite the same as being at home with a loving family and permanent companions. They can’t expect that they are going to be creating long-lasting bonds when they are always moving in different directions and running on separate schedules. This lack of attachment can cause feelings of isolation and depression. Most people want to connect with others, and it is increasingly difficult to do so when you must continuously be shuttling off to different locations.
An Empty Home
Drivers aren’t the only ones who are negatively affected by life on the road. Their partners at home can feel just as lonely and stressed out if they are gone for long periods at a time. A driver’s wife at home may experience the same feelings of sadness and isolation while her husband is driving across the country for weeks at a time. This stress on both parties can lead to arguments when he does eventually make it back home.
These problems are even worse if a driver has children. Kids want to be around their mother and father frequently, and they can become very disappointed if they find out that their parent will be delayed even longer than expected. Younger children don’t understand that some things are out of their parents’ control, so they may feel neglected or let down even though their father or mother is doing his or her best to get back home in a reasonable amount of time.
While there are many issues that can put a strain on the family life of a driver, there are also ways to work around these. As with any job, there are going to be ups and downs, but it is up to the individual to work through these and focus on the positive aspects of the job. These are some of the things that drivers can do to reduce the stress caused by their position.
Set Realistic Expectations
A driver should talk with his or her spouse and be honest about the reality of their job. He should not set unrealistic expectations that will only serve to let his partner down. When the partner at home knows that the truck driver will not be back soon, he or she will be more accepting of their absence and able to plan around it. It will take some work, but couples must strive to understand each other and know what to expect in the future.
Focus on Scheduling
As mentioned, a driver can’t always rely on getting a direct route back home. However, he can be proactive about finding the right loads and taking better routes to increase his chances of a timely return. He should study the markets and try to make consistent contacts with shippers that can give him quality shipments that take him where he needs to go. Problems and delays will inevitably occur, but a driver should stay focused on doing everything he can to reduce the likelihood of these occurrences.
Consider Driving as a Team
Many couples share the responsibility of driving. Such arrangement works best for families without kids or whose kids are already out of the home. Operating as a team allows the couple to be with each other and get through the job together rather than being apart for weeks or months at a time. If they plan their routes efficiently, it can also be far more profitable than driving solo because of the reduced amount of downtime. Traveling the country is an excellent way for couples to bond. Moreover, driving together allows them to make money while maintaining a happy and healthy relationship.