how to become an owner operator

Perhaps the time has come for you to launch your own business and become an owner-operator. Maybe you've driven for a company and are ready to venture out on your own, or perhaps a family member has had a positive experience with being a driver.

No matter what motivation fuels your desire to start your own trucking business, there are factors you need to understand that are specific to the trucking and transportation industry.

To help you better understand the ins and outs of becoming a successful owner-operator, we came up with this comprehensive guide.

In this guide, we will cover almost everything you need to know about becoming a successful owner-operator. Here are the topics that we'll cover:

Who is an owner-operator?

The Owner-Operator Independent Drivers Association (OOIDA) answers the question, "who is an owner-operator" with this definition:

"An owner-operator is a business owner who owns a tractor and, on other occasions, a trailer or fleet of trailers."

Owner-operators are independent freight transport drivers that run their transportation business with their own vehicles. They can also lease out their services but still use their trailers.

Owner-operators manage the day-to-day operations of their business on their own. An owner-operator may act as a driver and/or an employer at the same time.

Owner-operator vs. independent contractor vs. company driver

Owner-operators have businesses attached to their names and can operate under their authority. This means they can lawfully deliver cargo on their own without being hired by a company.

Their duties may include:

• Loading and unloading their vehicles
• Identifying 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.

Owner-operator vs. Independent contractor

All owner-operators are independent contractors. However, not all independent contractors are owner-operators.

Independent contractors are drivers who enter agreements with carrier companies to grant them operating authority and guaranteed loads for the entire contract period.

Contractors (who are not owner-operators) do not possess commercial vehicles but lease them from the contracting carrier company. Unlike company drivers, contractors are not employees and do not receive the same benefits typical workers do. In exchange for the authority and sure hauls, and as part of the terms of their agreement, independent contractors often give a portion of their revenues to the carriers.

Owner-operator vs. Company driver

Company drivers (also known as employee drivers) do not own the commercial vehicles they're using. Instead, they work to operate them for a carrier company as a hired driver.

The company provides the truck and pays for the vehicle acquisition, insurance, maintenance, and repairs.

Benefits of being an owner-operator

Working as owner-operators in an industry with numerous carrier companies makes many of them beam with pride. It's certainly an exciting and rewarding business venture for many.

Here are some of the major benefits of being an owner-operator.

1. Acquiring your preferred vehicles and equipment

Some company drivers share vehicles and are not assigned with rigs — but not owner-operators. Owner operators retain full control over the types of vehicles they want to acquire and use as they like.

2. Increased control over your income

Owner operators can earn up to $221,000 per year.

If you can hustle well, master and monitor the industry trends, and negotiate effectively, then owning a trucking business can be a fruitful venture. As an independent owner-operator, you have more control over your income and how you want to scale your business and increase revenues.

3. Being your own boss

Being your own boss and the freedom that comes with it is a big deal to many drivers. You don't need to contest for bonuses, insurance, and salary increases or even request permission for ride-along (such as family members and pets).

You even get more flexibility in your on-duty and off-duty hours. As your own boss, you can go on vacations or spend more quality time with your family if you reach your target profit ahead of schedule.

4. More opportunities to widen your network

When you own your trucking company, you can get numerous networking opportunities. As people get to know you as an owner-operator, they will keep you in mind for possible business partnerships.

On the other hand, there are also some challenges that owner operators face. For example, start-up expenses, finding loads, shouldering financial responsibilities, and ensuring compliance with different regulations.

How to become an owner operator

If you want to become an owner operator, you will have to go through a few hoops.

And although circumstances may vary for different people, the following five-step guide will walk you through the most important areas of becoming a successful owner-operator.

Step 1: Self-evaluate and figure out what you want to achieve

Before anything else, ask yourself what your long- and short-term goals are for starting your own business. This assessment could include thinking about the following questions:

• Are you financially ready to run your own trucking business?
• Do you have a method in place for consistently closing deals?
• What does your current network in the industry look like? Do you have enough contacts and good people to lean on if you have questions or need help?

Other points for consideration include:

• Your physical health–can you be on the road for long periods of time?
• What about your family life and home time?
• How knowledgeable are you when it comes to road regulations?

If you have experience in the industry as a driver, it will definitely help you. Company drivers with three to five years of experience likely make the best candidates for venturing on their own since they've developed a feel for the industry.

Step 2: Get your DOC and MC numbers

To become a driver-operator, you first need to acquire the USDOT and MC numbers to operate legally. If you already have a U.S. Department of Transportation number, your next move is to secure an MC number.

Being in the business also requires you to be amply covered by health and truck insurance. Visit the FMCSA insurance page to get the details of what kind of insurance you need.

The trucking industry is heavily regulated. Your transition from being a truck driver to an owner-operator can easily depend on whether or not you're complying with road regulations.

In December 2017, the ELD mandate was implemented by the FMCSA. The federal rule requires non-exempt CMVs to install FMCSA-registered electronic logging devices.

KeepTruckin's Vehicle Gateway is an all-inclusive solution that helps keep drivers and fleets compliant.

The Vehicle Gateway offers compliance and fleet management tools that are vital in helping with:

• Optimizing your trucking operations
• Minimizing operational costs
• Reducing administrative burden and paperwork

Further reading: Ultimate Guide on Starting a Successful Trucking Business

Step 3: Minimize expenditures

As an independent owner-operator, your goal is likely focused on growing and maximizing profits. You'll need a strategy to increase revenue while minimizing operational expenses.

Large expenses may include:

• Vehicle insurance
• The cost of fuel
• Compliance with various regulations
• Vehicle maintenance/repair

There are, however, several strategies that you can use to minimize operational costs.

For example, to minimize fuel expenditures, stay within the 65 MPH speed limit instead of going faster. According to studies, you can improve your fuel efficiency by as much as 27 percent by driving at 65 MPH instead of 75 MPH.

Additionally, vehicle idling and poor driving behavior may also lead to fuel wastage and expenses.

The KeepTruckin Vehicle Gateway automatically detects poor driving habits and critical safety events, such as hard braking and hard cornering to help you improve road safety, minimize potential liabilities, and increase fuel efficiency.

If you operate in Canada, don't forget to check out the complete guide to the Canadian ELD mandate.

Step 4: Get the right truck for the best price

The state of your finances will play an essential part in the acquisition of your trucking equipment.

As an independent owner-operator, you can either lease or buy your truck and trailer outright, which would require a lump sum of cash or acquire your assets through bank financing.

Take your time looking for the best truck deal. Also, look for a bank with a low interest rate.

It is also worth mentioning that having a solid credit score helps with better interest rates and banks willing to work with you.

The following are factors that may affect your interest rates:

1. Your credit history

An excellent credit rating will help you obtain the lowest interest rates. Financial institutions look at your records to assess your credit risk.

2. Permanent address

A decisive factor that will work for you is if you are a longtime resident of a specific address. Banks believe people who have permanent homes also pay better.

3. Stable job background

Borrowers who show a stable job history are generally seen as a lower liability. Job-hopping, on the other hand, can send the wrong signal to your possible financiers.

The three points above (and other intangibles) are considered during your credit risk review.

There are other ways to fund the purchase of your truck outside of a bank. Here are a few:

Alternative funding sources:

1. Captive lending institutions

Truck equipment manufacturers own these companies. They are often more receptive to lending to new owner-operators because they are into the business of selling trucks.

2. Commercial lending institutions

Used truck dealers may refer you to commercial lending institutions. These finance companies are not necessarily affiliated with truck manufacturers, but certain ones cater to the trucking industry.

Step 5: Understanding the golden equation

Think of your day-to-day operations with this equation:

Revenue per mile – Cost per mile = Gross revenue – Taxes = Net profit

Lower your variable costs as much as possible so your business can turn in a profit. There are several ways you can go about doing this:

1. Find the quickest and shortest route

A faster or shorter route can help minimize fuel consumption.

2. Check your vehicle's health frequently to avoid severe maintenance issues

Address your vehicle's maintenance problems as soon as you get wind of them. In theory, this would help reduce costs before the issue gets worse.

3. Reduce vehicle idling

When a truck idles for an hour it consumes about a gallon of fuel. Be mindful of when the engine is turned on and for how long. There are also ways to track this with KeepTruckin's Vehicle Gateway.

4. Drive safely and install a dashcam

Make sure that you are doing your best to avoid possible road accidents. Installing a dashcam can help you prove whether or not you were at fault. It may help to get you exonerated and even lower your insurance premiums.

How to find owner-operator jobs

Landing lucrative projects, loads, and clients are one of the most crucial tasks as your own company's driver.

Learn how to find owner-operator jobs using the strategies we'll cover below.

1. Establish yourself as a dependable driver

If you want to score high-paying freights, always be trustworthy and provide excellent customer service. Clients favor consistently reliable drivers. Ensure you ship your loads on schedule and maintain favorable partnerships with your clients, fleet managers, and other people you'll work with.

Forging these solid relationships even increases your chances of being the go-to driver of your clients.

Remember: positioning yourself as a dependable driver takes time and effort, but this eventually results in steady workloads and increasing revenue.

2. Use load boards

A load board is an online marketplace that lets shippers, owner-operators, and brokers post and discover freights for hauling in real-time. Load boards are great places to start as they get your wheels rolling as soon as possible.

When transacting with brokers on that virtual marketplace, you have the advantage to tell them your location and dictate the routes you want to take.

Getting shippers from load boards usually makes for short-lived, transactional relationships. To bag longer-term clientele, you should reach out to companies with frequent loads or build long-term working relationships with your existing clients.

3. Find high-ticket trucking clients with regular shipments

Seek credible shippers that request regular delivery, pay well and on time, and have freight lanes matching your ideal routes. It's also better to find shippers with quick-pay offers.

You can find these ideal clients from other industry niches and their local federation chapters in your area. Examples include pharmaceuticals, auto dealerships, food retail stores, the US Government (one of the largest shippers in the country), and more.

Take time to assess these local industries. Concentrate your efforts on the underserved companies and see how you can fulfill their cargo transport needs. Most of these associations' membership lists with contact details are also publicly available, so use them to list your prospects.

Once you have them, call or email their fleet managers and set up a meeting — preferably in person. Next, check out how they pick their carriers and drivers and uncover ways to set yourself among their top preferred partners.

Becoming an owner-operator: Next steps

Owning your own business requires a level of talent and perseverance. Talk to your network of friends and colleagues and ask about their experience and what they find challenging.

Learn more about the business of being an owner-operator:

• The process of becoming an owner-operator: What you need to know
• New owner-operators: 7 ways to reduce your expenses

You will also need the right tools to succeed as an owner operator. Check out the following products by KeepTruckin that can help you become a successful owner operator:

• KeepTruckin ELD — to ensure compliance with the ELD mandate
• AI-Powered Smart Dashcam for Fleets — to help increase fleet safety and ensure you have video evidence that may be used for driver exoneration.
• Smart Load Board — to find loads quickly and easily.

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Disclaimer: All content and information on this website is for informational and educational purposes only, does not constitute financial, business, or legal advice. Although KeepTruckin strives to provide accurate general information, the information presented here is not a substitute for any kind of professional advice, and you should not rely solely on this information. Always consult a professional in the area for your particular needs and circumstances prior to making any professional, legal, business and financial or tax-related decisions.

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how to become an owner operator

Source: https://keeptruckin.com/blog/becoming-owner-operator

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