There are two types of professional truck drivers out on the road: company drivers and owner-operator truck drivers.
Most truck drivers work for a company. While one in ten is an owner-operator running their business.
You may then ask why there are fewer owner-operators on the road?
Besides making more money than company drivers do, being an owner-operator is far more challenging.
Anyway, if you are determined to start a business as an owner-operator, I've got you covered.
Below, you'll find out what is an owner-operator and what are the steps to start your business as an owner-operator.
What is an owner-operator in trucking?
As an owner-operator, whether you choose to operate as a self-employed truck driver or you lease out your truck to a trucking company, you operate the business under your own authority.
That means that while acting as an employer and driver at the same time, as an owner-operator you have to manage the operations of your small business on your own.
Their duties may include:
- Loading and unloading their vehicles
- Planning routes
- Planning and scheduling pickups and deliveries
- Transporting goods as per the contract terms
- Vehicle maintenance and repairs
- Keeping tax records
- Securing licenses and insurances, etc.
Steps to becoming an owner-operator
Assess you finances
Starting an owner-operator business requires a big personal financial investment.
It means taking on additional debt to support the business needs such as buying a truck, paying for insurance, handling breakdowns, etc.
Unfortunately, many owner-operators close out their business because they lack the supporting finances.
To prevent any financial issues put down your current personal expenses plus the business expenses. In this way, you can figure out ahead how much you need to make each month to handle your expenses.
That should give you a good idea of how much time you'll need to spend on the road to make your business profitable.
Choose a business structure
You'll need to decide on the business structure of your trucking company.
If you’re on your own, you’ll likely create a sole proprietorship or a limited liability company (LLC).
- A sole proprietor is a single-person business with no employees which allows him to independently take any business decision without the input of a partner or board of directors.
The downside of this kind of business structure is that all the business, financial, and legal aspects are tied to you personally. That means that, in case of a lawsuit or issues with debt, your personal assets could come into play.
- With an LLC, you have the same benefits of a sole proprietor business structure but without personal liability risk. In this case, only the business is liable and your assets are protected. Also, you are allowed to have a single-member LLC, a partnership, or a multiple-member LLC.
- With a corporation, this is a good option if you plan to form a larger trucking business or if you intend to grow and add employees.
Once you’ve decided on a business structure, you need to find a name for your business.
After that, you need to go to your state's secretary's website and search the database to see if your business is available.
Search the new name to ensure it is unique and doesn't compete with other businesses.
Complete the registration. Pay the registration fee, which might be anywhere from $100 to $800.
Then go to the IRS website and get an IRS federal tax identification number (EIN). This is free but required for any business bank accounts, truck financing, and business permits.
File for USDOT number and an MC number
In most states, the usual protocol of operating a commercial motorized vehicle (CMV) mandates owner-operators that operate in interstate commerce to have a USDOT number.
Your U.S. Department of Transportation (USDOT) number is assigned to you by the FMCSA.
Apply for your USDOT number on the FMSCA website.
MC number identifies your trucking business as a carrier that transports goods on a contract-by-contract basis. This is what truckers refer to when they talk about "trucking authority" or "operating operating".
Apply for your MC number by clicking the link.
Purchase truck insurance
FMCSA requires owner-operators with authority to have $750,000 in liability coverage while most shippers and brokers require $1 million in liability coverage.
As an owner-operator, you can also purchase other types of insurance such as cargo insurance, personal property insurance, roadside breakdown coverage, etc.
Decide whether to buy or lease a truck
The essential piece of equipment for any owner-operator is a big rig.
Acquiring a truck may happen in two ways:
- Buying a truck
Buying your truck is usually the best option for owner-operators. But, it can mean a hefty down payment upfront.
If you can't afford a down payment, get a loan for a new truck or a used truck. Then pay it off over time until you have full equity.
A new tractor-trailer rig costs up to $175,000 with the tractor alone being about $110,000 to $125,000. In the beginning, to keep costs low, consider buying a used rig. That might cost anywhere from $30,000 to $90,000 depending on its condition.
- Leasing a truck
In terms of the upfront cost, leasing a vehicle is cheaper.
The problem with leasing a truck is that you don’t own it, which means that you don't build up any equity. And, in the long run, you may end up paying more.
While looking for a good leasing option, look for a bank with a low-interest rate. Or, work on improving your credit score, which may help you get better interest rates from the bank.
- Use load boards
Load boards are great options for finding loads.
A load board is an online marketplace that lets shippers, owner-operators, and brokers search for available freight in real-time.
On these online platforms, you have the option to indicate the location of the truck and choose the routes you want to take.
- Build long term relationships with shippers or brokers
If you frequently book loads with certain shippers or brokers that pay well and on time, it makes sense to reach out to them and try building long-term working relationships with your existing clients.
If possible, call or email their fleet managers and set up an in-person meeting.
Next, check out how they pick their carriers and drivers and uncover a way to set yourself among their top preferred partners.
Get an electronic logging device
To comply with regulations, you’ll need to buy and install an FMCSA-compliant ELD.
Create accounts as a driver and as a fleet manager since you technically fill both roles.
You must physically or electronically connect your ELD to your truck to record hours of service information.