Is it time to own your own truck rather than operating for a company or leasing? There are quite a few factors to consider when deciding to become an owner operator. But we've boiled it down to the essentials. Here are eight of our best tips for starting your own trucking business.
1. Research Your Equipment
First, make sure you are doing some research on the equipment you plan on purchasing. You will want to know the average fuel mileage you can expect, maintenance cost and intervals and known problems with a particular engine/chassis. Resale value should also be considered. Take a look at how the truck/engine you want to buy is doing on the used market. You don't want to get into something that has no resale value. And while it is easy to cut corners, driver comfort needs to be on the top of the list; after all, you spend more time in your truck then in your home.
2. Weigh the Options of Owning Versus Leasing
There are several factors to consider when you make this decision. Most banks will ask for 15% down if you decide to finance. If that's an option, take a good look at financing. Keep in mind, there is nothing wrong with leasing and, in fact, it is a good way to get into a truck with very little money down. Make sure you understand the lease as most leases will have a buyout after 36 to 48 months. The big difference with a having lease versus financing is that the leases can only write off the lease payment. There is no depreciation available. If you finance then you have the opportunity to take the depreciation. What to look for in a lease is a topic for another article, so comment if you have specific questions we can answer.
3. Understand the True Cost of Operating
Know what maintenance intervals your engine requires including the cost and replacement intervals for the DPF system and check with other own operators to see if there are any known problems with the engine you are buying. Get your hands on a state fuel tax list so when you purchase fuel on the road you know the true cost per gallon (pump price less the state tax) and start planning fuel stops to decrease your fuel expense. Everyone has to carry insurance. If you lease on to a company, check to see what their cost is for physical damage and bobtail insurance. If you go it alone without leasing onto a company you will need to know the cost of public liability insurance as well. As with most expenses you incur, you can control them simply by driving the truck as efficiently as possible. Remember trucking is the business of pennies so efficiency can add up to big savings.
4. Explore Auxiliary Power Units
With the low cost of fuel today it's hard to justify the purchase of an auxiliary power unit (APU) but if you idle your truck much the payback can be pretty huge. An APU can save you thousands of dollars on the maintenance of your exhaust system. If you are a driver who can handle temperature variance and keep your idle below 15% then spending money on an APU isn't needed. There are other options as well - smart idle, or a small generator - explore what option might work best for you.
5. Get a Good Bookkeeper/Accountant
It's a rare owner who can keep up on bookkeeping and still put on enough miles, so investing in a good and trustworthy bookkeeper is key. Knowing your current numbers is important, it allows you to make changes quickly if something isn't working. If you lease your truck to a company, regardless if you have a bookkeeper or not, review your weekly settlements. You are the only one who truly knows what you should be paid for and what expenses you should be reimbursed for; no matter how good your bookkeeper is, they will not be able to pick out an error as quickly as you. It's your money, stay involved, people make mistakes.
6. Be Smart with Tax Planning
Get a good tax person before you start trucking on your own. Ideally this person should be able to help you both plan and pay taxes. Most owners get in trouble in this area, so don't be one of them. Knowing your tax exposure is key to your success. Everybody likes surprises, except for when it comes to owing taxes.
7. Plan for Retirement and Social Security
No matter how young you get in the business, you need to start planning for your retirement. If you work for yourself you don't have an employer holding back social security or putting into a 401K for you. As an owner operator you are responsible to provide your own. And it's pretty easy to start spending those settlement checks with the thought that you will start your retirement fund later. But sometimes, that day never comes. You want to make sure you plan for the future so you can enjoy your retirement years and set up your family for success.
8. Don't Neglect to do the Miles
You can usually work yourself out of any mistake or bad decision made. Regardless of whether or not you lease your truck onto a company or you operate alone, miles and discipline in spending are the key to being a successful owner operator.
Being an owner operator isn't for everyone, but it can be a great financial decision that provides freedom and the pride of owning your own business. For some, driving for a company is a better option. Either way, a trucker is only successful if they can get consistent work. If you're looking for opportunity you've come to the right place. Click the link below and find out more about partnering with K&J Trucking either as a driver or as an owner!