As I left off in my last blog post, I promised to approach the two alternatives to ownership: you can inherit your equipment and authority, or you can go out and buy it.
Many of the companies you see on the road today were inherited from a trucker who started it, built it up, and then passed on to leave it for their children.
Different options drivers have for getting their truck
I have worked for such companies—both big and small. Some were good, and some were bad. Often because of size, the owner does not drive. He may never have driven a truck. Those companies allow a board of directors to run the day-to-day operations.
There are positive and negatives with these operations. As an owner-operator, one of the many decisions you must make is determining whether you want to lease your truck. This brings me back to the next choice you need to make.
1. Do you buy or lease your truck?
Do you want to buy a truck and lease it onto an established carrier or get your own authority and be a true independent operator?
If you want to buy your truck from a dealership, you first must have the credit to do so. If it is your first truck, you can expect to come up with at least 25 percent for a down payment.
Trucking is a very high-risk operation. That’s the reason for the high price. Many banks will not back a driver, especially a new owner-operator, so financing will go through the dealerships.
2. How much insurance do you need?
Just like when you purchase a regular car, you will need to have your insurance in place before you can even drive the truck off the lot.
This can be expensive depending upon your experience as a driver, and how many trucks you are buying. Your options may be limited because there isn’t a wide variety of insurance agencies in the game. It may also help you in making the decision of running on your own or leasing to a company.
When I was shopping around for insurance years ago, one company wanted me to pay an entire year’s worth of insurance upfront, which came out to $24,000. The truck was used and five years old. Another company allowed me to make monthly payments at $1,200 a month, although they did offer a discount for pre-paying the year of in six-month segments.
3. What type of operation do you want to run?
Before you take these steps, you should know what your niche will be. Your niche refers to the kind of operation you will run. This should be determined by your experience and your knowledge of freight rates in that niche.
There are many different types of operations, so it will depend upon you, and how you have determined to set yourself apart from the pack.
Don’t be afraid to start your own niche if you feel there is a need to cover such freight. Just know that it may take much more diligence and perseverance to make it work.
4. How do you pick your truck?
Your next step in the decision process is picking the right truck and trailer for your operation. Specifications are critical at this point.
- Do you want a new truck/trailer or a used one?
- Do you need a truck and trailer for the heavy haul? In that scenario, your truck needs to be geared and set up for it.
- You should also consider if you are going into the reefer or dry van operation. If that’s the case, then you should set up your truck for the best possible fuel advantage, i.e., weight, tires, engine, transmission, gearing or rears, and aerodynamic.
5. How I calculate my own truck’s MPG
I run a 2018 Kenworth T680 with an automatic transmission, a 500 Paccar engine, and 2.64 rears, in a dry van operation. That set up offers me the chance to pull down very good MPG, and if I keep my miles per gal above eight, it pays for itself.
For example, I figure my numbers at 6 MPG (fuel is a fluctuating cost), so by getting over eight, my savings make at least two months of payments on the truck.
By the time I pay it off, it will have made an entire year of payments, and if I keep the truck for another four to five years, it will have paid for itself by the time I am ready for an engine rebuild.
6. How to get your authority
Once you have made these critical decisions, you need to file for your authority.
As I have already pointed out, you need startup money for insurance, then permits, base plate, equipment (i.e., chains, binders, tarps, straps in case of a flatbed operation) and registration in a drug and alcohol testing program.
The Owner-Operators Independent Drivers Association (OOIDA) recommends everyone to set aside at least 60 days of operating capital.
However, having been a boy scout and a Marine, I am a firm believer in preparing for the worst. That’s why I recommend that you should have at least 6 months of operating capital set aside.
It can take up to 90 days to receive payments for services rendered. By doing your due diligence, you can weed out the type of companies that have a reputation for late payments.
I have known drivers who have had only 30 days of capital and run their day to day off cash advances from the broker (not recommended). This brings me to another decision you must make. Will you haul loads for a broker or a private shipper manufacturer? Again, do your due diligence, so you know what their average rate of pay and credit ratings are.
7. How to set up IFTA and permits
After that, you need to set up your IFTA and UCR permit (Unified Carrier Registration) and pay your Heavy Highway Use Tax (2290). Some states also require state-issued permits if you are going to do business in that state. States such as Kentucky, New York, New Mexico, and Oregon require a permit and a bond.
You will also need an Intrastate Authority, as many states require an additional authority if you are picking up and delivering loads within their borders.
All of this, of course, requires money and you need to be prepared for these expenses before you have even picked up and delivered your first load.
Beyond making sure you have enough money to get started, make sure you talk to other drivers who have started their own businesses and have a list of questions ready to ask.
KeepTruckin has an in-depth guide that shows you how to start your own trucking business that you can download for free.