Forward Via Brett Aquila
As many of you know, we officially advise against becoming an owner-operator or leasing a vehicle at TruckingTruth, particularly during your first year of driving. Already, there is much too much for you to learn. Creating a company in a sector in which you have no experience is ludicrous.
At any point in your career, we advise against purchasing or leasing a vehicle. Some who would love nothing more than to boast to their friends that they are The Big Boss Man now and possess that gorgeous rig over there disagree with our ideas practically violently.
Hey, no problem! We are as fond of rigs as anybody. But we’d rather have someone else operate the business while we concentrate on driving, earning fantastic money, keeping stress levels in check, and removing ownership risk.
You’ll read a fantastic explanation of why renting a truck is far riskier than most people realize in yet another lovely breakdown from Old School.
I have always been an entrepreneur. I decided to start driving trucks after spending thirty years as a company owner. So as you can see, I also have a background in business. Thirty years overseeing a fleet of six large rigs, seven-figure revenues, and up to ten staff. I also wanted to begin as an Owner/Operator. I put a lot of effort into creating a business strategy.
I now have a lot of expertise in making cost, sales, and profit estimates. I performed my ideas in reverse, forward, and sideways. What’s this? The best case I could think of was earning approximately $40,000 a year, assuming I could reliably move freight at 1.75 cents per mile. I may earn a little bit more than that, but I was just breaking even at 1.75 cents per mile after paying myself a $40,000 salary.
You can probably anticipate where the money would come from when I extrapolated that out to a period of about five or six years, considering whether I would need to either attempt to purchase a new vehicle or make some substantial repairs my current one. I was paid a salary of $40,000 every year, which I had been doing for the previous year.
I’m fine for you to go out there and break your neck doing it if you think it sounds okay. The fundamental issue with being an owner-operator is that it usually results in an emotional choice rather than a rational one considering all potential gains and disadvantages.
Most O/Os I’ve talked with regret their choice and recognize their mistake only when it is too late. The other half are blatantly ignorantly obstinate and will persist until the very end rises and knocks them down entirely. You may like being an owner-operator for a short period if you think it’s “cool” to have a great rig and love to be seen as “cool” by your peers, but it won’t last long. You’ll quickly realize that wasting your valuable time trying to collect money from a broker who owes you is not “cool,” especially when there are many more productive ways to use that time.
Trucking Faces Cutthroat Competition
One issue that newcomers entering this industry fail to consider is how fierce the competition is. If owner-operators want even a remote chance of success, they must identify specialized markets to enter. What’s this? These days, everyone is interested in such specialized sectors. J.B. Hunt has long been an expert in that field. To compete with major companies like Schneider, Swift, Prime, etc., even the tiny ones now have to do their best. You are wilfully blind if you don’t believe someone else will step in and undercut your goods bids to run a few more loads on their trucks.
I began looking at what loads were selling for around the nation after developing my scenarios for running loads and realizing that I would need to charge at least 1.75 cents per mile. Now, it was a startling discovery! Some of these well-known carriers sometimes offered them for as little as 1.10–1.25 a mile! Moreover, they were receiving substantial savings on gasoline, tires, and maintenance that I could not bargain. It is a commodities business, meaning the offer is accepted at the lowest price. In the competitive world of trucking, it is just a game of earning pennies.
Examine the profit statements of significant carriers
You should check up on some of these huge trucking businesses and study their operating ratios if you wish to believe that I am a lunatic and have no idea what I am talking about. As investors must know these details before parting with their money, these businesses are publicly traded, and the information is readily available. Their operating ratio is typically around 97%. In plain English, this indicates that they retain three pence for every dollar they earn. People are eager to invest in these trucking firms since they are among the finest managed globally. They have the smartest and brightest employees working tirelessly to ensure they can at least keep three out of every 100 cents of money they create.
Numerous Motives to Continue Driving for the Business
Several people in this room who have offered advice have advised you to have some experience before attempting to operate as an owner-operator. All of it is completely incorrect, and here’s why. I began my career as a corporate driver a little over four years ago, studied the industry, and focused all of my energy on being the best I could be at this. As an Owner/Operator, I make about $30,000 more annually than I had budgeted for my salary when creating my business plan. In addition, I enjoy all the perks like health insurance, a company-matched 401K plan, and paid vacations, and if my truck breaks down, they simply replace it so that the company nor I lose money.
This industry is very competitive, and it doesn’t give a damn about anybody it spits out or leaves behind. If you just want to work for yourself, there are many better methods to generate money in business. It takes a pretty hard-headed not to attempt to stand out as something extraordinary in a pitch that almost offers no space for differentiation since trucking has such narrow margins and such intense competition.
Avoid being like the owner-operator I met with, who thoroughly understood his company’s operations. Even the name of his trucking firm represented the daily challenges he faced while operating his own transportation company. Here is a picture of his vehicle. I hope you don’t do the same thing in your company as he did.