Perhaps the time has come for you to launch your own business and become an owner-operator. Maybe you’ve driven for a company and are ready to venture out on your own, or maybe a family member has had a positive experience with being a driver.
No matter what motivation fuels your desire to start your own business, there are factors you need to understand that are specific to the trucking industry.
Here are five steps to take in order to become an owner-operator.
Step 1: Self-evaluate and figure out what you want to achieve
Before anything else, ask yourself what your long- and short-term goals are for starting your own business. This assessment could include thinking about the following questions:
- Are you financially ready to run your own trucking business?
- Do you have a method in place for consistently closing deals?
- What does your current network in the industry look like? Do you have enough contacts and good people to lean on if you have questions or need help?
Other points for consideration include:
- Your physical health–can you be on the road for long periods of time?
- What about your family life and home time?
- How knowledgeable are you when it comes to road regulations?
If you have experience in the industry as a driver, it will definitely help you. Company drivers with three to five years of experience likely make the best candidates for venturing on their own since they’ve developed a feel for the industry.
Step 2: Get your DOC and MC numbers
To become a driver-operator, you first need to acquire the USDOT and MC numbers to operate legally. If you already have a U.S. Department of Transportation number, your next move is to secure an MC number.
Being in the business also requires you to be amply covered by health and truck insurance. Visit the FMCSA insurance page to get the details of what kind of insurance you need.
The trucking industry is heavily regulated. Your transition from being a truck driver to an owner-operator can easily depend on whether or not you’re complying with road regulations.
In December 2017, the ELD mandate was implemented by the FMCSA. The federal rule requires non-exempt CMVs to install FMCSA-compliant electronic logging devices.
KeepTruckin’s Vehicle Gateway is an all-inclusive solution that helps keep drivers and fleets compliant.
The Vehicle Gateway offers compliance and fleet management tools that are vital in helping with:
- Optimizing your trucking operations
- Minimizing operational costs
- Reducing administrative burden and paperwork
Further reading: Ultimate Guide on Starting a Successful Trucking Business
Step 3: Minimize expenditures
As an independent owner-operator, your goal is likely focused on growing and maximizing profits. You’ll need a strategy to increase revenue while minimizing operational expenses.
Large expenses may include:
- Vehicle insurance
- The cost of fuel
- Compliance with various regulations
- Vehicle maintenance/repair
There are, however, several strategies that you can use to minimize operational costs.
For example, to minimize fuel expenditures, stay within the 65 MPH speed limit instead of going faster. According to studies, you can improve your fuel efficiency by as much as 27 percent by driving at 65 MPH instead of 75 MPH.
Additionally, vehicle idling and poor driving behavior may also lead to fuel wastage and expenses.
The KeepTruckin Vehicle Gateway automatically detects poor driving habits and critical safety events, such as hard braking and hard cornering to help you improve road safety, minimize potential liabilities, and increase fuel efficiency.
Step 4: Get the right truck for the best price
The state of your finances will play an essential part in the acquisition of your trucking equipment.
As an independent owner-operator, you can either lease or buy your truck and trailer outright, which would require a lump sum of cash or acquire your assets through bank financing.
Take your time looking for the best truck deal. Also, look for a bank with a low interest rate.
It is also worth mentioning that having a solid credit score helps with better interest rates and banks willing to work with you.
The following are factors that may affect your interest rates:
1. Your credit history
An excellent credit rating will help you obtain the lowest interest rates. Financial institutions look at your records to assess your credit risk.
2. Permanent address
A decisive factor that will work for you is if you are a longtime resident of a specific address. Banks believe people who have permanent homes also pay better.
3. Stable job background
Borrowers who show a stable job history are generally seen as a lower liability. Job-hopping, on the other hand, can send the wrong signal to your possible financiers.
The three points above (and other intangibles) are considered during your credit risk review.
There are other ways to fund the purchase of your truck outside of a bank. Here are a few:
Alternative funding sources:
1. Captive lending institutions
Truck equipment manufacturers own these companies. They are often more receptive to lending to new owner-operators because they are into the business of selling trucks.
2. Commercial lending institutions
Used truck dealers may refer you to commercial lending institutions. These finance companies are not necessarily affiliated with truck manufacturers, but certain ones cater to the trucking industry.
Step 5: Understanding the golden equation
Think of your day-to-day operations with this equation:
Revenue per mile – Cost per mile = Gross revenue – Taxes = Net profit
Lower your variable costs as much as possible so your business can turn in a profit. There are several ways you can go about doing this:
1. Find the quickest and shortest route
A faster or shorter route can help minimize fuel consumption.
2. Check your vehicle’s health frequently to avoid severe maintenance issues
Address your vehicle’s maintenance problems as soon as you get wind of them. In theory, this would help reduce costs before the issue gets worse.
3. Reduce vehicle idling
When a truck idles for an hour it consumes about a gallon of fuel. Be mindful of when the engine is turned on and for how long. There are also ways to track this with KeepTruckin’s Vehicle Gateway.
4. Drive safely and install a dash cam
Make sure that you are doing your best to avoid possible road accidents. Installing a dash cam can help you prove whether or not you were at fault. It may help to get you exonerated and even lower your insurance premiums.
Owning your own business requires a level of talent and perseverance. Talk to your network of friends and colleagues and ask about their experience and what they find challenging.
Learn more about the business of being an owner-operator:
- The process of becoming an owner-operator: What you need to know
- New owner-operators: 7 ways to reduce your expenses
Disclaimer: All content and information on this website is for informational and educational purposes only, does not constitute financial, business, or legal advice. Although KeepTruckin strives to provide accurate general information, the information presented here is not a substitute for any kind of professional advice, and you should not rely solely on this information. Always consult a professional in the area for your particular needs and circumstances prior to making any professional, legal, business and financial or tax-related decisions.
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