Don't Be Fooled By Owner Operator Math - Old School's First Podcast!!

After all of that....you still get hit with a turn in fee. So my guys last lease he turned in his truck and was supposed to get $18,000 as a lease completion bonus. They kept $7,000 to get the truck to its original state in order to sell it. That lease completion is just what he paid for with his $500 per week.mileage and mandatory maintence funds. it was already his money.

The lease purchase is a different story. You need $14,000 down, and have similar fees, but the mileage fees are different.

We argue because he still doesn't get it. Lease ops get it in their head that they are bosses. All they are is glorified company drivers with high overhead.

My guy said to me "I saved $20,000 since June. can you say that?"

What he didn't get is that $16,000 of that is his taxes from last year he didn't pay yet. So that means he only saved $4,000. So yeah....in six months I put $12,000 into my savings account, $4500 into my 401k, and $1200 for all my insurances, and i still went home and got my massages and jacuzzis.

I see plenty of shiny Peterbilts kw's going down route 30 in Indiana hauling either reefer or cattle. Are you telling me everyone of these operators are just on the edge of financial ruin waiting to be put out of their misery?

Oh, well if they're shiny then obviously those people are getting rich. Unfortunately, yes, most of those people are on the edge of financial ruin all the time, and here's why. Consider this very basic scenario: what happens if an owner operator breaks his leg and can't drive for a month or gets real sick and can't drive for two months?

Rarely will anyone have enough in savings to cover two months without revenues, and even if they do they'll lose probably $20,000 or more out of their pocket that they'll never get back. How would you make that money back? You're already running at the limit of your logbook. There is no making it back. It's gone.

The reality is that most people would go bankrupt if they lost two months of revenues.

When you're operating in a situation where one common mistake or one common bit of bad luck can send you spiraling into financial ruin then yes, you're on the edge of financial ruin all the time. What is an owner operator's backup plan if they can't drive for an extended period of time? For 95% of them there is no backup plan. They're done.

Brian said:

When I see things like this O/O's social media page I think man, that's awesome, really inspiring stuff. Working for himself like that and accomplishing what it would appear he is, it's possible. There's a path to it.

Again, he has a shiny truck so he must be wildly successful, right?

Which brings up one of the points I always try to make. Define "success in business." How do you measure success?

Do you consider owning and operating your own truck to be a success? Why would that be considered a success if all you're doing is making the same money as an employee who is driving someone else's shiny new truck?

Are you successful if you spend every waking moment of your life operating the truck you own while living on the edge of financial ruin and making the same money as a regular employee?

If you said, "yes" then you're destined to be poor your whole life. You'll never build any wealth. Anyone who truly understands what it takes to build wealth would consider that situation an abysmal failure because you have no opportunity to build wealth in that position. All you're going to be able to do is pay your bills and keep your fingers crossed that nothing bad happens.

That instagram page you mentioned.......did you notice one of the sayings that guys posted:

The thing with growth and making chess moves in life is knowing when to play for the position and not the paper(money)

That's exactly what owner operators are doing. They're playing for the "position", not the money. They're making about the same as any regular employee, but they're able to convince themselves they've accomplished something because the title of the truck is in their name. What they've really accomplished is taking on all of the extra risk and doing all of the extra hard work for free. They could have been making the same money they're making now driving someone else's beautiful new truck while that extra risk and hard work would have been done by the owner of the company they drive for.

When you're taking on extra risk and extra hard work without any financial reward then you're getting zero return on that investment. Is it more satisfying to run your own business instead of being an employee? Yes. But have you asked your bank if you can pay the mortgage on your house with your satisfaction? It doesn't get you very far.

I personally know two people who went O/O in trucking. One was a complete disaster. The other continues doing well today, but he makes sacrifices many of us won’t. The successful one will also be the first to admit he has no desire to own multiple trucks and that it’s very demanding.

The fact that the "successful one" only owns one truck and wouldn't want another tells the real story for me. If you're making so much money, and owning a truck is such a great idea, wouldn't you want to double down? Triple down? Why wouldn't you want to rake in even more money and have many good ideas?

My successful friend measures success a little different than I do. Ergo, he’s happy with his decisions.

To be honest, that's what people who are destined to stay poor always tell themselves. They get satisfaction from things that don't make them money. And hey, they have every right to do that. I do plenty of things that are satisfying and even cost me a lot of money to do. They're called hobbies, and they're tremendous fun and tremendously expensive.

But when it comes to earning money you have to find a way to build wealth if you ever want to get anywhere financially. Building wealth is far different than just paying your bills. Being an owner operator with a single truck is never going to allow you to build real wealth. You might own a lot of shiny things because you were able to finance a bunch of stuff, but you're always going to be living paycheck to paycheck like any regular employee and you're never going to have the time it takes to scale up the business to the point that it builds wealth over time.

So if you consider yourself a success because you have a shiny truck with your name on the title but you aren't able to build any wealth then that's your right. In the minds of people who understand the business world and intend to build real wealth for themselves that would not be considered a success. That would be considered "buying yourself a job". In other words, you bought a business so you could make the same amount of money as an employee would.

There are a lot of people who believe that staying in business automatically means you're successful. To me that only means you're not bankrupt yet, which is not very impressive. To me, building real wealth is impressive and that should be your goal if you're going to be in business for yourself. If you're going to invest in a business and take on all of that extra hard work and risk then you should get a return on that investment. Owning a business but making the same as an employee means you're taking on risk and doing work for zero return. If you don't think that's a failure on your part then find yourself an old, comfortable, beat up chair in the poor house because that's where you're destined to live out your days.

After all of that....you still get hit with a turn in fee. So my guys last lease he turned in his truck and was supposed to get $18,000 as a lease completion bonus. They kept $7,000 to get the truck to its original state in order to sell it. That lease completion is just what he paid for with his $500 per week.mileage and mandatory maintence funds. it was already his money.

The lease purchase is a different story. You need $14,000 down, and have similar fees, but the mileage fees are different.

We argue because he still doesn't get it. Lease ops get it in their head that they are bosses. All they are is glorified company drivers with high overhead.

My guy said to me "I saved $20,000 since June. can you say that?"

What he didn't get is that $16,000 of that is his taxes from last year he didn't pay yet. So that means he only saved $4,000. So yeah....in six months I put $12,000 into my savings account, $4500 into my 401k, and $1200 for all my insurances, and i still went home and got my massages and jacuzzis.

And there you have it.

That is pretty much what I would expect, and that is if you are driven to succeed and willing to work like a dog, and you are lucky. A bit of misfortune, and it could all come crumbling down.

I mentioned I had a successful business. I had a rather large nest egg built up, and was working my way toward retirement. My wife broke her thigh, and couldn't walk at all for 6 months, and even after that progressed from wheelchair, to walker, etc. I notified all my customers I would only be available on a limited basis, as I needed to take care of her. They were all very good with me, were very patient while I worked at about 20% of the capacity I had been.

She had been back to work for a few months when I fell off a ladder and broke both bones in my right leg at the ankle. My foot was hanging at a 90 degree angle to my leg. Repeat the above scenario without even the 20% of work I had been doing. I did what I could by logging in remotely for free just to keep my customers, and again, they were all very good, putting projects on hold, after a few months I was able to do a couple of jobs from my wheelchair, etc.

But during those two years, my nest egg kept getting smaller and smaller. Now that I am fully recovered, I am looking at starting all over again, and working my butt off to build that nest egg back to where it was, and work toward retirement. I am also bored with computer work, so the thought of starting over again makes me almost physically ill. Also, as a business owner, your accountant does everything possible to show as little income as possible, which on one hand is a great thing, but as far as social security, is not. My retirement estimate from social security shrinks every year.

So when I stumbled onto a job ad for truck drivers and realized how badly they needed drivers, and how much it was paying, I decided to give it a shot. One thing I love about running my own business is not having a boss, and not being stuck inside an office all day. Being a driver will be much the same. I know you are all thinking, but you will have a boss, and you are correct, but even as a business owner, you still have a boss. Many of them, in the form of customers.

I believe I will be happy driving every day, alone with my thoughts, concentrating on keeping that truck moving, and banking my check as much as possible. No worrying about paying bills, estimated taxes and sales tax on time, no working as my own salesman, and on and on.

Being your own boss is great, but it is also filled with way more work, worry, and risk than simply sitting back and working for someone else. And as a company driver, you are as close to self employed as you can get without taking on all the rest that goes with owning a business.

but even as a business owner, you still have a boss. Many of them, in the form of customers.

Indeed. This touches on another point I like to make - the illusion of control. Are you really making decisions for yourself when in the end you have to do one thing because the other thing will send you into bankruptcy?

For instance, you can't just haul freight anywhere you like. You have to go where the better paying freight goes. Hauling cheap freight to fun places all the time is not a viable business option. Not only that, but watch how quickly your freight dries up if you keep forcing your company to give you the loads you want instead of taking the loads they want to give you. There's no law nor any contract that says they have to give you enough of the right freight to stay in business. You think you're calling all the shots? Think again.

Not only that, but you can't just take time off anywhere you like, anytime you like. You have to keep running if you want to stay in business. So yes, you have control over whether or not the truck rolls, but if the truck doesn't keep rolling you won't have a truck. What good is it to be in control of a situation that offers you no real options?

Oh, well if they're shiny then obviously those people are getting rich. Unfortunately, yes, most of those people are on the edge of financial ruin all the time, and here's why. Consider this very basic scenario: what happens if an owner operator breaks his leg and can't drive for a month or gets real sick and can't drive for two months?

Rarely will anyone have enough in savings to cover two months without revenues, and even if they do they'll lose probably $20,000 or more out of their pocket that they'll never get back. How would you make that money back? You're already running at the limit of your logbook. There is no making it back. It's gone.

The reality is that most people would go bankrupt if they lost two months of revenues.

When you're operating in a situation where one common mistake or one common bit of bad luck can send you spiraling into financial ruin then yes, you're on the edge of financial ruin all the time. What is an owner operator's backup plan if they can't drive for an extended period of time? For 95% of them there is no backup plan. They're done.

When you're taking on extra risk and extra hard work without any financial reward then you're getting zero return on that investment. Is it more satisfying to run your own business instead of being an employee? Yes. But have you asked your bank if you can pay the mortgage on your house with your satisfaction? It doesn't get you very far.

Wow, you must have posted that just as I started typing my reply.

I broke my ankle while cutting limbs from a tree out front. My neighbors asked where they could put the wood after they finished cutting it up for me, and I said don't bother, I'll finish it with my front end loader when I get back home. I thought they would put me in a cast and I would be able to at least hobble around in a week or two.

I couldn't even get out of bed for 2 weeks, couldn't put any weight at all on my foot for 2 months, then slowly started putting weight on, ie., 10% for a month, then 30% for a month, then 80% for a month, then 100% but still using a walker for a month, then crutches for 2 months, then finally, no crutches, but a LOT of pain for months. It was much the same for my wife's thigh.

If you break a leg, ankle, foot, hip, etc., you will be out of work for a LONG time. We were lucky, my wife's thigh was covered by worker's comp, had it not been, we would have gone bankrupt. Mine was not, and I was lucky I had the nest egg I did, or again, we would have gone bankrupt.

And Brett is correct, no matter how hard I work now, the money I spent from that nest egg is gone, I can never work enough to make it back in the 10 years I have left before retirement. Because with the growth needed to make that type of money, comes the operating costs that go along with it.

If you can make $60K and up by driving and letting someone else have all those worries, you are sitting on top of the world. Put what you can in the bank, 401K, stocks, or whatever investment you prefer, take advantage of short term disability if your company offers it, and kick back (not literally) and collect your check. Concentrate on driving as many miles every week that you can, and you will probably bank as much money as 60 to 80 percent, if not more, owner operators on the road.

I talk to other computer business owners around the country, and none of them, regardless of scale, are making much more than I am as a sole employee. I know a kid in WI who goes nationwide, has 6 stores, huge contracts, etc., and I pay myself the same amount as he does.

I knew a guy in MI who had a store and 5 employees, and he did all the on site work. Many more customers than I have, way higher gross income, complained he worked 16 hours a day and hadn't had a vacation in 10 years, and was so busy he had to turn away new customers. I was shocked to find out he was paying himself the same salary I was. I kept telling him all his money was going to overhead. His partner was diagnosed with cancer, forcing him to close his store. Within 6 months, he said he was shocked to find he was working half the hours, and making way more money. The overhead of running a business will eat you alive.

A couple of additional thoughts here...

I thoroughly enjoy truck driving and the Dedicated Account I am committed to. I am quite certain if I were to become an O/O my enjoyment factor would be diminished to the point of hanging up the keys. For all of you folks seriously considering trucking and at or approaching 50, keep that in mind. I am beyond deliberately adding stress and additional aggravation to my life. Not worth it to me.

Second, no sound business decision should ever be made on emotion and hope. The “bigs” who sell the leasing concept are preying on a driver’s emotions. Wake up people! Brian you are so damn naive it pains me to read your replies. Leasing favors the company who is leasing you the truck; Prime, Swift, Schneider etc., the contracts are heavily skewed in their favor.

And most drivers who are hooked on the concept do not take their time to understand the contract, let alone approach it with even a rudimentary business plan. Study what Rainy wrote...it’s so obvious.

Leasing favors the company who is leasing you the truck; Prime, Swift, Schneider etc., the contracts are heavily skewed in their favor.

This is yet another point we always try to make. Who is writing the lease contracts? The companies are, not the drivers who are leasing the trucks.

Now think about this for a minute. These companies already own their own trucks and hire drivers to drive them, yet they've come up with these leasing "opportunities" for drivers who want to feel like a boss. If these companies were making more money with their company trucks than they were with the lease trucks then these leasing opportunities wouldn't exist!

These companies are going to do whatever makes them the most money. If they could be 100% lease, they would. Prime, in fact, used to be 100% lease back in the day. The problem is that you just can't find enough drivers to lease trucks from you, so you have to have company trucks also. But these companies make virtually risk-free profits from their lease drivers.

The company acts as a freight broker where they book the freight, take their cut off the top, then pass whatever is left over to the driver. On top of that, they resell services to the lease drivers for a profit - lease financing agreements, insurance, tags, parts & repairs, tires, fuel discounts, etc.

So the company is basically providing paid services to the lease drivers. They're making more money providing these services than they are owning and operating their own company trucks. If a lease driver quits or goes bankrupt the company takes their truck back and leases it to the next person in line.

We argue because he still doesn't get it. Lease ops get it in their head that they are bosses. All they are is glorified company drivers with high overhead.

This is exactly right.

Unfortunately these lease agreements and ownership opportunities appeal most to people with a troubling combination of traits. They tend to be people who are:

• Terrible at business math, so they don't really understand their business numbers.
• Great at wishful thinking. They're able to convince themselves of anything they'd like to believe.
• Insecure to some degree, so they feel good when they think they're in control and can brag about their accomplishments.

I just want to reiterate that for me, being in business should be all about building wealth. If you want to have cool, expensive hobbies then go for it! I know I certainly do. But if you're going to be in business you should be focused on putting yourself in a position to build wealth. Being a lease driver or an owner operator is never going to allow you to build wealth beyond what you could do as an employee. It's simply going to put you in a very risky position and devour all of your time and energy in the process.

I have always been intrigued by O/O's or any small business owner for that matter. And when I've asked people in the industry whether it have been a cdl instructor, Schneider trainer whoever the response of "anyone who is considering being a o/o is a dumb M-efer" Doesn't really do it for me. And yes I will say again I know business owners that are very happy with their lifestyle. I'll be happy to dig more. What a crazy concept to be able to make something of yourself like that, employee others, and be your own boss. What happens if you break your leg as a company driver? Still has bills. Sure not that of a owner operator. And maybe getting some money from somewhere. The bottom line for me was I was looking for exactly what Rainy posted some real eye opening cold hard facts. I really don't understand why you care that much to begin with. There are still truck drivers are they not? You are making it sound like they are scum of the Earth. That guy Truckerjourney would appear pretty happy. For him is obviously more the lifestyle, a sense of pride to be able to do what he's doing. He was a Marine as was I. Certainly didn't do that for money. For him it resonated to him. And I'm sure he got quite a bit of help from the VA from business loans etc.

Everyone is simply pointing out facts as a comparsion. O/O vs company drivers. No one has said people that go O/O are bad people. MOST get into it without a clue. Everyone here has one and only one purpose. To help anyone coming into the industry to be successful. Rainy’s information is very spot on and typical. My situation is very different in that I did NOT lease this truck. I bought it and leased on to the carrier. Much different scenario. I also pay for short/long term disability plans along with my health, dental and vision plans. I have put everything in place to be successful. Also this is all on a 3 yr plan. I make just slightly more than a solid company driver much of the time. I have all the extra headaches. I’m single with only me too worry about, and knowing all I do and the risks involved I feel this is right for me and my goals in life. It certainly is not for just anyone.