Owner Operator

Hi guys, So I got my cdl a last year and worked as a company driver for a while otr , then went local hauling milk. And while I love my job I’m in now I’ve always dreamed of owning my own truck. Financially I’m to the point where I could purchase a truck but mentally I don’t know if I’m ready. I’ve heard good and bad and have done research but I’m on the fence. One nice thing about being a company driver is you just drive everything else is the carriers responsibility. So what do you all think at this point in my career should I take the leap?

Jared, I've been a business owner for many years. For some strange reason everybody thinks the natural progression of a truck driver's career is to take a few years as a company driver and then become an owner/operator. I've been a company driver for almost seven years. I have no reason to dream of owning my own truck. I have realized that learning this craft is a continuous process. I'm still learning better ways to be more productive.

Trucking is a very cyclical business. Some previously outstanding trucking operations have failed this past year - hundreds of them. It's not a business model that has large margins. Everything about it needs to be large scale to be truly profitable. You said...

Financially I’m to the point where I could purchase a truck but mentally I don’t know if I’m ready.

If that's true, then you aren't ready.

I always wonder what people think qualifies as "financially ready." Can you afford to lose a couple of hundred thousand dollars? Some people think if they have 30,000 dollars saved they could purchase a used truck, and that somehow makes them think they're ready. It shows a real misunderstanding of what they're getting into.

I never recommend owning your own truck. There's good money to be made as a company driver. You just have to learn the secrets of how to be really productive at it.

Confessions Of An Owner Operator

When Is The Right Time To Become An Owner/Operator?

NO!

You're not ready yet.

I’m curious. Would this be local hauling milk or OTR , general freight?

If it’s local milk hauling, who would be your competition and is it likely they are big enough to keep you down? There’s always somebody who can beat you on price.

Even if you wanna pursue it, you need to remember it is a small business startup with ALL of the baggage that comes with. E.g. taxes, expenses (they’ll all be your responsibility) and covering your living expenses when your truck isn’t making $.

If you still wanna pursue it, read The E-Myth Revisited...along with many other books.

Whatever you decide, good luck!

Hello, I figure I'll offer my humble opinion. After only a year or so as a company driver, I do not think your ready. I would say wait until you have 5-10 years under your belt. I would also recommend that you wait until you have AT LEAST $25-$30k in the bank, and can leave it untouched. The reason I say that is you should plan on having enough to cover replacing your engine/tranny in case it blows. Also, you have to think about all the costs related to starting your business, like insurance, registration, hiring an accountant (unless your good at keeping your own books and doing business taxes), and making contacts with and building relationships with brokers.

I would sit down and talk to a few different O/O (not lease ops) who have been doing it at least 5 to 10 years and get their opinion. And IMHO, stay away from leasing. If you do decide to go become and O/O, purchase your 1st couple of trucks in full, so you don't have to worry about a monthly truck payment and save money to buy a brand new truck eventually....

I may be wrong in my opinions, and if I am, please feel free to let me know... Chris

If it’s local milk hauling, who would be your competition and is it likely they are big enough to keep you down? There’s always somebody who can beat you on price.

That's a great question to ask! Most people wanting to be in the trucking business don't realize how volatile the rates are and how the competition often determines what the rates are. In trucking the lowest price gets the work. The customers don't research your safety record, and they don't care if you've got bright shiny Peterbilts with chicken lights all over them. They want the best rate to move their freight. That's why I said this earlier...

It's not a business model that has large margins.

It's just not a good business model for small independent operators. There's always this race to the bottom on pricing. Everyone has to compete in this race or be left behind. I remember not long ago when Knight/Swift was forced to re-negotiate their contract with Wal-Mart. Some other carriers had put offers on the table that looked really good to Wal-Mart. Knight/Swift ended up having to walk away from the negotiating process. They simply decided we can't do it that cheap. In some areas they lost their contractual agreements. In some areas they were able to hold onto the business. The point is... their hand was forced. You'd think they are big enough to command what they want. Their only leverage was to say No!

We tend to think, "If I'm the owner, I'm gonna be taking in the big bucks." I'm not even sure why that concept persists so strongly. There's no economic law that declares it to be true. I've counseled plenty of business owners who were earning less than their employees, and known many independents contractors earning less than good solid employees. My opinion, as an experienced business owner, is that you are way ahead of the trucking game as an employee.

Chris mentions a common theme among truckers who want to take the leap into ownership...

If you do decide to go become and O/O, purchase your 1st couple of trucks in full, so you don't have to worry about a monthly truck payment

This is another concept I don't get. Most business people are not afraid to borrow money. They understand that debt has to be serviced, and they know how to forecast revenues so they can be confident in their ability to absorb those expenses. Debt can a powerful engine for economic growth. Money is really cheap these days, and people who have good business models can easily afford debt to expand their operations. This idea that makes debt into an economic boogeyman is foreign among successful business people and/or most people of wealth.

I work for a very large trucking company. In the five years I've been here I've never seen them make the mistake of purchasing used trucks. Why wouldn't they save all that money by purchasing less expensive used trucks? They know this business. I'm not going to give the answer to that question, but I hope people following this discussion will think about it.

Economies of scale are critical in the world of commodities. It's an uphill struggle to enter the fray as a small independent. I can never recommend it.

If you do decide to go become and O/O, purchase your 1st couple of trucks in full, so you don't have to worry about a monthly truck payment

With all due respect to Chris, I'd like to point out a few things:

1) Running out of cash is the #1 reason businesses fail.

2) Borrowing money has never been cheaper than it is today.

3) Debt used properly is the #1 driver of economic growth.

I cringe when personal finance pundits like Dave Ramsey make debt sound like The Great Evil. They claim getting out of debt is the ticket to economic freedom and prosperity. I'm afraid that is utter nonsense. Because this mantra gets repeated so often I can understand why many people think running a business debt-free is the way to go. It's not. Running a business with a huge pile of your own cash in the bank gives you the best chance of survival, and savvy business owners do that by using debt wisely.

Thanks for all the replies, I really appreciate the input and yes I’m still learning haha. I have owned a business before and did fairly well with it until I completed nursing school and started doing that but thing is I always wanted to drive a truck since I was a kid so I left that for a truck haha and haven’t looked back.

I also need to clarify a little bit I’m not looking at jumping in now at this exact moment but in the next year or so. As I have a lot of learning left to do before I take the leap. I also have enough cash saved that I could get a nice used truck without financing a ton of money

I ask the original question because I’ve talked to some guys at the yard and about 50% of the o/o I have talked to said I should do it that the money is there and the others said i should stay company that I’m making more money in what I’m doing now. And I’ve done some research and it’s about the same. I know that making this decision now would be premature and would be a financial disaster since I have so much to learn.

But as far as my ambition goes I would love the opportunity to have my own truck to look out and say that’s mine that I did it. But I’m undecided if it would financially benefit my family as I’ve heard good and bad accounts from others.

So I guess the way I should have worded my question is, with how trucking is going these days would becoming a o/o be worth it. I know opinions are like buttholes everyone has one but I need a little advice from guys who are more experienced than I on the matter to decide financially if I need to start working on a plan to get a business running or if I should invest my time and effort into other things such as furthering my career with the company I’m at and working on retirement.

Jared,

It has been a down year for trucking and it's projected next year also. The rates are real low right now. Keep saving and check back next fall.

as far as my ambition goes I would love the opportunity to have my own truck to look out and say that’s mine that I did it.

Jared, what's the point?

I always encourage entrepreneurs to take a big picture look at their accomplishments. Owning a truck that's gonna rust and end up in the junk heap in a few decades is not much of an accomplishment. Now, I love your ambition! I'm all for ambition. It needs to have higher purposes though. You hint at a good purpose when you say this...

I’m undecided if it would financially benefit my family

That's a good thing to focus on. Think long term with your business ideas. Things like, "How can I generate wealth for my family and future generations and descendants?" That's big picture stuff. Those are the kind of goals you want to pursue in a business. Just being thrilled that you own a truck is pretty shallow. I'm not picking at you Jared. I do admire your ambition.

Trucking is complicated. A lot of people would disagree with me on that, but it's got a lot of challenges that most folks don't recognize. They just seem to think, "Hey, I know how to drive a truck - I can own a trucking company now!" It's really amazing how many folks take that approach. I just read a statistic indicating more than 600 trucking companies failed this past year. Most of those were one person/one truck operations.

If you like the idea of always reducing your rates to keep business coming in then jump in and join the fun. I ran a business for years. I was constantly finding ways to reduce expenses and increase the prices I could charge for what we did. Racing to the bottom of the level of pricing where you can still manage to survive is a really difficult burden to bear. It's the harsh reality in trucking.

Think about this...

Pay for company drivers has increased substantially over the last two years. I saw someone post recently that they started straight out of school at 60 CPM. That's incredible! Rates that trucking companies charge for moving freight have been dropping considerably. How does that combination sound to you? As a business owner it sounds like a bad plan to me. It's a complicated business where other people control the rates. I'm convinced you can always count on a solid career as a competitive company driver.