That Nagging Question: Can I Make More Money At Trucking As As Owner Operator?

I think this question nags at a lot more people than just me. We see people coming into our forum all the time wanting our opinions on being an owner operator. Sometimes the threads get a little heated, we take a lot of heat for our positions on the business of owning trucks. I can assure you that if Brett and I thought you had a good chance of making more as the owner of your own truck we would not only encourage you to do it, but also give you all the help and advice we could muster. In fact, if I thought it was a profitable and viable business plan I would be all over it.

Is it possible to be a successful owner operator? Yes it is. Is it likely? All my research says no.

I've known for years that we have quite a few lease/operators in here. I think it very telling that most of them never jump into our discussions when they come up. Are they making a lot more money than the company drivers in this forum? I don't really know, (I'm fairly certain that they aren't) but I do know they continually avoid providing much input into our discussions with those who are inquiring about these issues. I was glad when we recently had a fellow named Brian who was going to keep us abreast of his experiences as a lease operator of a team truck over in the CDL training diaries section... sadly he disappeared after just a few updates. He seemed like a reasonable fellow who had some basic understanding of business and accounting already, and that was going to give him a lot more credibility in my eyes than just a guy who was a hard runner who thought he could set the world on fire as an owner/operator.

I am also looking forward to Bud's promised upcoming report of his first year as a lease operator at Prime. Bud is another guy who I am confident has enough life experiences and business knowledge to be able to see through some of the hype and give us an honest report of how it is working for him.

One of the reasons we often see people give for wanting to be a lease/operator is that they can have more flexibility in their home time. I always think this an intriguing reason because it is also works against your ability to make more money. So, I propose the question: is it worth it to take on all the added risks just so you can get home a little more often, and if you are getting home more often than a company driver, are you really coming out ahead with your net pay compared to those company drivers?

I am not opposed to risk, where there is a reasonable reward to be expected. I was a business owner for thirty years, I was constantly risking capital, adjusting my business strategies, and taking losses and gains as a result of my actions and decisions. I understand the nature of business very well, but I can't put a business plan together that makes sense to me as the owner of a truck.

In all my calculations the real rub of the owner operator game falls into place somewhere in the range of three to five years into the game. That is where it starts to get real sketchy. I'm throwing that calculation out there for those of you who are interested who might be looking into this as a business opportunity. If you think you have a workable plan, make sure that you have laid out a well though out long term strategy.

I saw a recent thread where a lease/operator was complaining about Prime continually lowering their fuel surcharges. Well, I don't know if that guy hasn't noticed, but fuel is really cheap right now. Does that mean there is a window of opportunity to make some money as an owner operator? Well, sure it does, but it also illustrates the very unsettling fact that there are some really volatile things that are completely out of your control as the owner of a trucking enterprise. Those things can have devastating effects of your bottom line as an independent operator, much more so on you than on a large company who can spread those effects out over a large number of trucks in operation. Those things are completely unpredictable, and sometimes happen over night.

I have a friend in Texas who owns a small fleet of trucks - he was doing really well working for Halliburton in the Texas oil fields. He was providing the trucks and the drivers to move Halliburton's trailers and equipment around to where ever it was needed. It all disappeared overnight when one morning his contact at Halliburton told him that someone else had won the new contract at a much cheaper price. Now he's needing to update his fleet so he can take on other forms of trucking work - he has no cash flow, his trucks are so old that the banks aren't interested in them for collateral, and he has found himself in the ultimate "catch 22" where he can't do what he was doing successfully before, and he cant move on to something else either.

I'm probably rambling on, and maybe no one is interested in my thoughts on this, but I just had a little down time today and wanted to share with you some of my recent thoughts on this subject.

Old School, recently I used the old saying that you have probably forgotten more about trucking than students need to learn for their CDL these days. As for your "ramblings" above, I take them more as Lessons from a Master. Ramble on.

I have never run a business of my own, but I have an MBA, so I know what goes into it. The major ingredients of your own business are your time and your sweat. These do not show up on a balance sheet. O.S. pointed out your "home time". Remember, "home time" is "not-getting paid" time, especially for someone in their own business. (not to speak of company drivers.)

Casinos love people who come in with a "system" to beat them at whatever game they offer. They love them because the pit bosses know the game is set for players to lose, no matter what. That's why they put big winners on billboards with a giant check. One big winner is worth hundreds/thousands of players/losers.

Truck companies are not out to rip you off this way. By offering you your own tractor and business, they are saying, go ahead, drive your a$$ off, drive your life away, become one of the $90,000 (gross) drivers on the big posters in the lounge.

You have read on Trucking Truth of the benefits to the company (less capital & maintenance expenses) so it's no skin off their back if you, Owner Operator , sink or swim. True, there are other rewards: you own your own business, you actually earned every penny that's in your pocket, and you don't have to worry about driving into NYC.

I believe Trucking Truth really does not mind O-Os. But the real danger is the students fresh out of school, most are lucky to keep their checkbook on the plus side, who are offered the "deal of a lifetime", even the promise of help & training. Inexperienced drivers have enough to learn just driving the company truck around. After a few years, with lots of road experience, that's the time to tackle your new project: your very own Kenworth, built how you like it, and be your own boss.

Brilliant analysis.

Errol you just put into words what i was thinking when i read that post i just couldnt figure out how to say it

Thanks for posting this, Old School, and thanks for the replies. I don't jump into the discussions much because I only have seven months as a lease op, which isn't enough time to tell if it's going to be worth it in the long run.

Right now my gross before taxes is running 2.6 cpm higher than running as a company driver (apples to apples). That is after the 10 cpm I put into an emergency fund and the 2.5 cpm that goes to my tire fund, and after fuel, lease payment, accounting fees including a CPA who will prepare my taxes for that fee, etc. etc. etc.

I put away 30% of gross to cover taxes. The 3rd quarter estimated tax is due on September 15, so I should have a pretty good idea if I'm on track at that rate once the CPA tells me how much to pay.

I just completed training to become a PSD instructor and a TNT trainer. Lots of drivers do TNT in order to make more money. I'm not too interested in doing that since I hate running as a team, so I plan to just do 2-3 weeks out with students and then get them tested out.

I'm not doing it for the money as much as for the experience. If it becomes too unprofitable I'll stop and just go back to running solo. I know myself pretty well, I think, and running team for eight or ten weeks at a time would drive me nuts. There are advantages to having a student on board, since instructors and trainers have priority for loads when they're scarce so they can keep you running and add drivers to the fleet, but for me, that isn't worth the inconvenience of running as a team.

There are also retention bonuses for the PSD instructors, but it takes a while to build enough of a pipeline to replace the revenue lost during the two or three (or in the worst case scenario, six or seven) days that it takes to test out a student. You're not running loads during that time, so it's a big expense, and the bonus for testing out on the first try doesn't cover the opportunity cost in most cases.

Again, successful instructors receive good bonuses for retention when their students hit certain milestones, but that involves putting out new drivers at a pretty high rate. I have no idea if I will be able to do that, let alone want to deal with the difficulties that come with having a student on the truck pretty much every day that I run.

If I get time after the Q3 tax payment, I will post my YTD numbers for education and entertainment purposes.

There are other things about leasing at Prime that help reduce the risks involved, but I'll save that for another time since it's past time for me to get in the bunk.

Thanks again for posting this, OS!

Right now my gross before taxes is running 2.6 cpm higher than running as a company driver (apples to apples). That is after the 10 cpm I put into an emergency fund and the 2.5 cpm that goes to my tire fund, and after fuel, lease payment, accounting fees including a CPA who will prepare my taxes for that fee, etc. etc. etc.

Bud, thanks for responding - your numbers seem accurate, and if I understand them properly you are making about the same as a company driver. Even though you are showing to be making about three thousand dollars more per year, you put that qualifier in there of "before taxes." I also acknowledge your emergency fund, but I would not count on that as being money that you have made, at least certainly not this early in the beginning of your experiment at this leasing business.

I still look forward to your report at the end of the year which will include more detail. As a lease operator you have the advantage of Prime's accounting system which gives you very helpful assistance at making sense out of the numbers. We've stated many times that most owner/operators don't distinguish between net and gross, which gives you a false sense of making a lot of money when in reality you are quite possibly stealing from yourself and not even realizing it.

I put away 30% of gross to cover taxes. The 3rd quarter estimated tax is due on September 15, so I should have a pretty good idea if I'm on track at that rate once the CPA tells me how much to pay.

That's good Bud. One of my daughters is about to start a job where she will be paid on a 1099 basis. She has been calling me with questions about it. I advised her to put 35% of her revenues into a tax savings account so that she will have the monies available for each quarter's tax payment.

By the way, I like that new truck! Is that an advantage to Prime's leasing program? Can you just go in when you are ready and get them to put you into a different truck?

Bud, thanks for being so willing to reveal your numbers. I don't talk about this stuff to rub it in any one's face, and certainly don't do it to try and prove that I am right. So many folks show an interest in these things, and then they get all flustered when we don't tickle their ears with a positive response. I like to be able to see what some folks are actually doing with their business model so we can point to it for others to study and determine if the reward is sufficient for the risks involved. People think that just because we are not owner operators then we can't truly have any understanding of it, but business is business - it doesn't matter if you are in the pest control business or the trucking business, you have to have a plan with a realistic way to execute it in a way that is profitable. If you can't make it work on paper, you sure can't just get out there and start swinging punches and expect to win the fight.

Frankly, I think it would be really cool to own my own rig and keep it all dressed up while I'm out there moving freight, but my capitalist background can't seem to make it work right for me.

Bud, thanks for responding - your numbers seem accurate, and if I understand them properly you are making about the same as a company driver. Even though you are showing to be making about three thousand dollars more per year, you put that qualifier in there of "before taxes." I also acknowledge your emergency fund, but I would not count on that as being money that you have made, at least certainly not this early in the beginning of your experiment at this leasing business.

Company pay is 40 cpm before taxes, I'm making 42.6 cpm before taxes YTD, so those figures are apples to apples. That margin varies weekly. Some weeks I'm making less than a company driver when looking at it that way, some weeks I'm making more. The overall average so far is that 2.6 cpm more. I'm going to ask when I would've gotten a bump as a company driver, and how much. For all I know, they'd be paying me 41 or 42 cpm by now, so that will need to be figured in and would lower the margin of difference, of course.

And the emergency fund is . . . for emergencies! I won't touch that unless I absolutely have to, but I figure I'll have to at some point. A lot of drivers don't get that part. It's a zero interest savings account, basically, which is kind of dumb to do from an investment perspective, but I like that it's right there on my settlement and that payroll can access it immediately if necessary.

I still look forward to your report at the end of the year which will include more detail. As a lease operator you have the advantage of Prime's accounting system which gives you very helpful assistance at making sense out of the numbers. We've stated many times that most owner/operators don't distinguish between net and gross, which gives you a false sense of making a lot of money when in reality you are quite possibly stealing from yourself and not even realizing it.

The accounting system is very good and very convenient, but not cheap. The CPA is relatively inexpensive, though.

And again, most of the lease ops I talk to inflate their numbers. They like to talk revenue instead of net or margin. While it's OK for a big corporation to say "Revenue is King, Margin is Queen," they usually have some realistic expectation of getting some tangible percentage of total market share. An individual lease op can only capture some nearly infinitesimal share of the market, in which case Margin is King and Revenue is the Joker.

By the way, I like that new truck! Is that an advantage to Prime's leasing program? Can you just go in when you are ready and get them to put you into a different truck?

When you first lease, you choose from a relatively small pool of trucks that are available. They are never brand new, from what I've seen. Most or all are trucks that other lease ops have turned in. After you've leased for three months, you can order a new truck (which involves waiting another three months for delivery) or "trade up" by switching to another in the available pool. When you do that, you have to pay out the difference for any damages, detailing, etc. to make your old truck ready for lease or sale. You also pay the difference in tire wear to bring the old truck up to new. They don't necessarily put new tires on that truck when they re-lease or sell it, but you pay for the wear. You do get credit in your tire fund for wear on the tires when you start your lease, so it's close to a wash when all is said and done, unless you abuse your tires by running them at the wrong inflation, curbing them, etc.

When you trade, you start over at zero for the lease completion incentives. It wouldn't have made sense to do it much further into my old lease. You also lose revenue while you're at the terminal for a few days taking care of everything involved in starting a new lease (inspections, shop time fixing the things on the new truck that need to be dealt with, cleaning out the old truck, etc.) I was already down for training.

Bud, thanks for being so willing to reveal your numbers. I don't talk about this stuff to rub it in any one's face, and certainly don't do it to try and prove that I am right. So many folks show an interest in these things, and then they get all flustered when we don't tickle their ears with a positive response. I like to be able to see what some folks are actually doing with their business model so we can point to it for others to study and determine if the reward is sufficient for the risks involved. People think that just because we are not owner operators then we can't truly have any understanding of it, but business is business - it doesn't matter if you are in the pest control business or the trucking business, you have to have a plan with a realistic way to execute it in a way that is profitable. If you can't make it work on paper, you sure can't just get out there and start swinging punches and expect to win the fight.

Frankly, I think it would be really cool to own my own rig and keep it all dressed up while I'm out there moving freight, but my capitalist background can't seem to make it work right for me.

I'm still not sure it's going to be profitable over the long run, but I'm in a situation where my living expenses are so low that I'm willing to roll the dice for the little perks that come with leasing. I don't think I'd do it if I had a mortgage and kids at home.

Bud A. I'm curious are you getting Mileage or Percentage? Have you ever heard of ATBS? I currently use them for all my accounting, they charge $20 a week. They also help track revenue per mile, cost of operating a truck per mile and fixed cost per week or month depending on how you view things. They also calculate your taxes Quarterly for you. One thing they offer is a expense report that has really helped me bring down cost on the road, I'm more aware of what I'm wasting my money on and it helps bring more money home. Obviously my revenue per mile wouldn't change but my Savings account grows. :)

Bud, thank you for running this "experiment". Life is a one-way road. I realize you are taking a chance whether to come out ahead or not - and letting us in on the results.

Trucking Truth holds up a big WAIT A MINUTE sign about leasing/owning, as we have posted above. And I think you are helping to answer the real main question, as Old School asks: Can I make more money at this as as owner operator?

I have no interest myself in leasing out. But just to know how it goes is great.

Wow this is great! An honest discussion about whether leasing or owning a truck is worth doing. This is a first for me I'll tell ya. Bud, thanks a ton for stepping up to the plate and giving everyone honest, helpful numbers and insights so they can understand the situation and make the right decision for themselves.

And again, most of the lease ops I talk to inflate their numbers. They like to talk revenue instead of net or margin. While it's OK for a big corporation to say "Revenue is King, Margin is Queen," they usually have some realistic expectation of getting some tangible percentage of total market share. An individual lease op can only capture some nearly infinitesimal share of the market, in which case Margin is King and Revenue is the Joker.

Very well said. And I think this hits upon the key problem with owning or leasing a truck. Trucking is a commodity. All that matters to customers is getting the lowest price, just like with gasoline or airline tickets. Yes there are services you can provide hoping to increase your profit margins, but rarely are people interested in them. The overwhelming majority of the time it's simply a matter of choosing the lowest price and going with it.

Now the problem with making good money in a commodity business is that you need scale. By definition you'll only make a tiny amount of profit off of any individual unit of sale, be it a gallon of gasoline, one airline ticket, or hauling one load with one truck. So in the end when you compare being a company driver to owning or leasing a single truck you wind up with numbers like this:

Right now my gross before taxes is running 2.6 cpm higher than running as a company driver

And we all believe that number is accurate because it fits right in with everything we know about commodity businesses in general and the specific metrics in the trucking industry like the average profit margin of 3%. And it demonstrates what we've always said about leasing or owning a truck: it's not that we think you're going to go broke. The problem is that even if you do everything right there simply isn't much in the way of extra profits to be had. You can pinch and squeeze and strangle yourself in every way possible to make every cent there is to be made but in the end there's nothing but a few extra cents to be made.

Now if you multiply those few extra cents times 1000 trucks then you have more cents (and more sense, get it?) :-) But to be in a commodity business and have only a few irons in the fire doesn't amount to much in the end.

Bud, I love that you're sharing your numbers with us because you're not putting your pride on the line here. You didn't start leasing a truck to demonstrate to the world that you're smarter and better than everyone else. You simply felt you were in a position to take a shot at it and see where it leads. Therefore we know you can share your numbers honestly. Your pride doesn't take a hit if you don't turn big numbers. You're not criticizing anyone for being a company driver, you're not touting your expertise as a business owner - you're simply taking a path and letting us know where it leads. And we really appreciate that. You also don't take it as a personal insult when someone asks a question or raises a concern of any sort about the business. You simply answer the question honestly. Thank you for that also.

Errol and Old School also made a long list of interesting and important points, as always, and I thoroughly enjoy any and all business conversations. Always have. The business world is fascinating because it's endlessly complex.

We've had people accuse us of hating owner operators or stifling any opinions that don't agree with ours and nothing could be further from the truth. The problem is that there are very few people out there willing to have an honest, genuine discussion about this topic. We keep getting blowhards who have staked their personal reputation on their ability to turn bigger profits than anyone else. Therefore they've backed themselves into a corner where all they can do is put out propaganda touting their prowess. We don't want propaganda and we don't want prideful boasting. We want hardcore data and a friendly discussion where all points can be made without personal attacks. And this is exactly that conversation.

We always invite any lease drivers or owner operators to share their experiences. I'm just as curious as anyone about possible angles for making money in this business. "There has to be a way!" is the rally cry that drives millions of business owners to put their money on the line and make their best efforts every day out there. If there's a way to make great money as a lease driver or owner operator then I'm hoping we can uncover it and share it for others to benefit from.