Now is the perfect time to become a trucking owner-operator. The trucking industry has a shortage of at least 60,000 drivers, a gap that is expected to grow as more drivers age and retire, according to the American Trucking Associations. Others estimate the shortfall is as high as 170,000 drivers. This means there’s definitely a market for your service, which is instrumental in starting a successful business. However, knowing that a demand exists and being able to successfully fulfill it are two different things.
To succeed as a trucking owner-operator, you’ll need to master a variety of skills, get truck financing, implement strategic plans and understand every aspect of your business. Find out what steps you need to take to get your business not only up and running but profitable, too.
What Is an Owner-Operator?
An owner-operator is someone who owns a small business and also runs the company’s day-to-day operations. The term owner-operator is used in many industries, but it often refers to trucking.
Becoming an owner-operator in the trucking industry is a way to use your knowledge of trucking, without having to necessarily be behind the wheel, though that’s still an option. It can come with autonomy and freedom, but it also requires more responsibility and business skills.
How to Become a Successful Trucking Owner-Operator
Owner-operator trucking jobs are unique in that they can essentially be created out of thin air. If you’re an independent truck driver thinking of starting a trucking business, you probably already have some of the skills you need to succeed. With some equipment financing and commercial truck financing, you’ll be on your way to becoming an independent owner-operator.
No matter which path you take on your quest to be an owner-operator, you’ll need a combination of working capital, fleet management skills and an understanding of your legal liability. It’s no help if you know what an MC number is but can’t turn gross revenue into net profit; similarly, understanding your finance interest rate and your cost per mile won’t do you much good if you don’t comprehend how a big rig operates and what kind of truck and trailer maintenance you’ll need to perform.
The bottom line is this: Your best chance to succeed as an owner-operator is to understand both the business side of the trucking industry and the day-to-day realities of driving and maintaining a trucking fleet.
Here are 15 tips on becoming a successful trucking owner-operator:
1. Perform a Self-Assessment
Whether you’ve got years of experience driving for a trucking company or you are just looking to open a new business in this growing field, take a step back to evaluate your decision. Ask yourself why you want to enter this field and if you are prepared to become a business owner.
If you’ve got driving experience, you’re already familiar with some of the shortfalls of the business. Driving a truck can be a lonely, unhealthy lifestyle for some. If you’ve got a family, you’ll be away from them for long stretches. It can be hard to make healthy food and exercise choices when you’re cooped up on the road for long stretches.
On the financial side, you’ll have to decide if you really understand the ins-and-outs of the trucking business. There are many important aspects of the business you’ll need to understand, such as truck leasing, truck insurance, industry regulations and developing a long-term maintenance plan.
These are all things that you can learn or manage if you put in some time and effort. But it’s a good idea to sit down and take an honest assessment of where you stand before you take the next step to become an owner-operator.
Need truck financing to get your business up and running? Contact Seek Business Capital today to see if you qualify.
2. Create a Trucking Business Plan
You can’t just “wing it” as a trucking owner-operator. You need to know how to write a trucking business plan that shows where you want your business to go and how you’ll get there. For starters, you’ll need a concrete document showing the financing and equipment you’ll need to reach your revenue and profit goals.
Perhaps more importantly, you’ll need something in writing for when things don’t go exactly as planned. As the boxer Mike Tyson once famously quipped, “Everyone has a plan until they get punched in the mouth.” When you’re running a business, it’s important to be prepared for the inevitable “punches in the mouth” that threaten to derail your business.
3. Break Down the Dollars and Cents
Spell out in black and white exactly how much you need to earn from your owner-operator business. Factor in all possible expenses, from operating expenses and professional fees to emergencies and down time. Be realistic with your need for time off and the number of hours you can honestly work in a given day. You could benefit from sitting down with an accountant to help you run through the numbers.
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4. Comply With All USDOT Rules
The first operational step in the life of any commercial truck business is to file for a USDOT number. This is a unique number that the U.S. Department of Transportation uses to collect safety information during audits, crash investigations and the like. All commercial vehicles involved in interstate commerce or transport, and intrastate companies transporting hazardous materials, need a USDOT number.
Interstate companies must also file for an MC number with the Federal Motor Carrier Safety Administration (FMCSA). An MC number gives a company an interstate Operating Authority for a specific type of trucking. Depending on your business, you might need to obtain more than one MC number.
5. Obtain Truck Financing
Financing is the lifeblood of any trucking company, more so than many other businesses. The reason is that trucking is by definition reliant on equipment. In addition to all of the general business expenses that any company needs, such as office supplies and payroll, a trucking company needs vehicles, which can average around $80,000 per truck. Whether you lease or finance your trucks, you’re going to need to get truck financing. Beyond that, you’ll need funding for a multitude of other items critical to the daily success of your business, such as maintenance, insurance, legal fees and benefits for employees.
When looking for financing, try to match yourself with a company that understands your needs as a startup owner-operator. Many larger banks won’t bother to finance new or startup companies, and some smaller operators might not have the expertise in dealing with the needs of new trucking companies.
6. Get Truck Insurance
Truck insurance is a necessity so that should be one of the initial steps in setting up your business. The FMCSA also requires certain types of insurance, such as liability and cargo insurance, before it will issue an operating authority.
Beyond the demands of the FMCSA and your finance company, however, you should want to get insurance. Trucks are high-mileage vehicles that often have demanding schedules. This results in inevitable maintenance issues from time to time. If you’re a startup owner-operator, having a disabled truck could end your company before it ever really gets going.
Looking for truck financing to start and grow your own trucking business? Contact Seek Business Capital today to see how we can get you the financing you’re looking for.
7. Choose the Right Trucks
Your rig is the key to your whole business as an owner-operator. Of course you’ll need financing and insurance and all of the other necessities to operate your business, but without one or more trucks, you have no source of revenue.
You’ll have to search the truck market for a fleet that’s an exact match for the routes and cargo you intend to carry. The more efficiently you can match your trucks to your business, the greater your chances for success.
Choosing the right truck is also important when it comes to commercial truck financing. Some lenders won’t offer a loan on a truck that is too old, for example. You might also get a better financing deal on a truck that’s only intended for shorter hops. Long-haul freight trucking racks up mileage faster, and trucks tend to break down more often as a consequence so it’s critical you choose the right truck from the get-go.
8. Hire the Right People
The expression “no person is an island” is as valid in business as it is in your social life. Even if you’re a sole proprietor, you can’t run a successful trucking company entirely by yourself — though many try. Sooner or later, you’ll need someone to answer the phones, or keep the books or even drive your additional trucks. While you may or may not choose to have employees, you will need legal, tax and/or financial help along the way.
The people you choose to work with can be as critical to the success of your business as you are. For example, if you’re hiring an law firm, you’ll want to make sure that company understands how your business operates. Similar to when you obtain startup financing, look for a company with a solid Better Business Bureau rating that has experience funding and supporting startup companies.
9. Join the American Trucking Associations
The whole purpose of the American Trucking Associations is to increase the productivity, profitability and safety of the trucking industry. As an owner-operator, it’s critical to have a trade association like this at your back. Each state has its own affiliated trucking association, and they all offer conferences and councils to talk about and help develop the industry. Depending on the nature of your business, you might want to join other specialized associations, such as the National Tank Truck Carriers Association or the Truckload Carriers Association.
10. Keep Current With All Trucking Regulations
You could have the sharpest business acumen in the world, but if the government shuts you down for operating outside of the law, your company will still end up bankrupt. Familiarize yourself with FMCSA regulations, which appear in the U.S. Code of Federal Regulations. If you’re a member of the ATA — and you should be — you can also be regularly updated on regulations.
11. Maintain an Emergency Fund
You don’t just need initial operating capital to run a trucking business, you need excess capital. In fact, if you’re just starting a business, it can be hard to get initial funding without demonstrating that you have a source of excess capital. Businesses ebb and flow, and during down times, you’ll need money to make it through to the next up cycle. You’ll also need funding for emergencies that aren’t covered by insurance. If your truck breaks down, for example, you might have insurance to get it repaired, but you can’t replace the revenue you lose while the truck is in the shop. To avoid a problem like this affecting payroll, for example, have a business emergency fund at all times.
12. Stick to an Exercise Program
As an owner-operator, you have the option to be behind the wheel for some if not all of your business day. If you’re a veteran truck driver, you know the routine: If you don’t force yourself to exercise, your health can suffer. As a startup, you might be so focused on the business aspect of your company that you neglect the personal wellness side. As an owner-operator, if your health suffers, so too does your entire business. In fact, if you’re the only driver in your company and you are sidelined with health-related issues, your company could lose revenue or worse. If you want to be a successful owner-operator, maintaining the health of your body is equally as important as maintaining the health of your vehicles.
13. Keep an Eye on Your Credit
As financing is the lifeblood of a new trucking business, credit is the lifeblood of financing. If you had a bad credit history when you were applying for your initial funding, you already understand how difficult and/or costly it can be to access capital. Once you’ve got your financing, be sure to never miss a payment. If your credit takes a hit, it could impact your ability to get any new financing going forward, and you might have to pay a higher interest rate on your existing loan. This can hurt your business more than you can imagine.
If you are looking for truck financing to take your company to the next level, contact Seek Business Capital.
14. Expand Carefully
So you’ve successfully registered your business, financed your equipment, remained healthy, maintained a spotless credit history and planned the path forward for your business. What’s the next step? Careful expansion. If the demand for your business exceeds your capacity, you can potentially make your business even more profitable by adding more trucks or personnel.
Just remember that when you expand, you’ll have to go through the same process of personal and business review that you did before you opened your company originally. Understand the complexities of fleet management, have realistic expectations and assemble a good team around you to smooth the process.
15. Never Stop Learning
No one person has all the answers in any business, particularly in the trucking industry. There are plenty of ways to make money as an owner-operator, so keep learning from your colleagues and industry organizations. Especially if you’re a startup, you can always learn something about operating more efficiently or exploring new markets, so remain humble and always be on the lookout for information about how to better succeed.
The Bottom Line
Succeeding in any new business is a challenge, but trends in the trucking industry seem to indicate the potential for success for new owner-operators. Translating that potential into profitability requires a long string of successful steps, starting with getting the correct licensing and obtaining funding for your new venture. Don’t be discouraged if your credit score or your short operating history block funding options for you with larger banks. Instead, look into online or specialty finance companies, like Seek Business Capital, that are ready and willing to work with startups.
If you keep your eye on your business costs while continuing to learn and understand your market, you have every chance to succeed with the right business partners by your side.
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