Onus of Operators

by Dennis Shipman
(Newburgh, NY)

Although it is true that unless an owner operator finds a lucrative niche market, he will not even earn what a union driver nets at say ABF, UPS, USPS, Roadway, Yellow, or New Penn per year @ close to $30/hour or $70,000/year, whose drivers are all represented by the International Brotherhood of Teamsters, or even a good non-union local driver (I used to take home $800/week, drove less than 1,000 miles/week, and was home every night), but still have all of the responsibilities of an independent business person.


Because of the country's current economic climate, some of those union drivers have recently experienced give-backs ranging from $1.90 or more per hour. The Master Freight Agreement, which governs salaries, benefits, and union member working conditions, is generous to a fault. But it can also be used as a broad barometer of what a good owner operator ought to be grossing on a monthly basis.

After all what are you in business for if not to make money? To simply drive a "large car?" The most important component of a successful operation is to manage expenses by factoring all fixed costs against what a load is paying. One way of doing it is to know what your truck averages per mile in terms of fuel consumption, which is typically 6-9 miles/gallon, divide that by your average cost of fuel per gallon, and add .15/mile for maintenance (because it is not a matter of if the truck breaks down, it is a matter of when it breaks down). That number is your fixed cost. If you take your fixed cost and subtract it from what a given load is paying, you can easily employ this formula routinely to determine if you are running profitably, or at a loss and make adjustments.

Partnering with reputable trucking companies leasing owner operators, or finding a good broker, which is near impossible, will save you a tremendous headache because many chores associated with running your business efficiently - i.e., finding loads, backhauls, scheduling maintenance, inspection et cetera and getting you back around the way on a regular basis - will now be done in collaboration with a trucking company who needs to also make money, knows how to do it well, and has an incentive to keep you loaded, moving and happy.

Brokers are really unnecessary middlemen. Because every load they broker takes a percentage of the revenue from that load off the top, which cuts directly into your profits, diminishing your bottom line. I would avoid them like the plague, use them sparingly, or only in an emergency after you did your due diligence to determine if they run a legitimate operation. There are several websites that rates brokers for a small fee. The investment may just save you major problems down the road.

If you seriously want to be an owner operator, why not go for your own operating authority enabling you to bid directly with vendors, those wicked brokers, and even large, established trucking companies for freight? Unless you are hauling Class 1 Explosives, you only need 750k insurance policy, which you can obtain at very competitive rates through trade associations.

Although you would be paid net 30 days like any other business, you should have increased your gross monthly revenue by anywhere from 30% to 50% as a result of having your own "authority." Successful owner operators have to act like businessman if they want to "take home" 100k per year, and not just gross it - along with the inevitable headaches of footing the bill for exorbitant fuel prices, expensive repairs, and high road taxes.

If you want to be a successful owner operator, join organizations like OOIDA, which offers substantial discount on insurance, maintenance, legal and accounting services. Another source of steady, reliable, freight is around either the airports, or ports. Because of the security associated with these facilities, you now have to undergo a thorough background check called a risk assessment analysis by Homeland Security. If you are successful as 90% of the drivers undergoing this process are, you can obtain a port card and/or TWIC enabling you to get in and out of these facilities.

The side streets surrounding these places usually abound with freight forwarders, small privately owned trucking companies, or direct agents for air and ship lines, which offer pretty good deals where owner operators can average $1,000 to $2,000/week after expenses doing picks ups and deliveries within a 100 to 500 mile radius of the agent's location and, if you have a family, are typically home daily.

Heavy haul is also very lucrative as is chemicals and Less-than-Truckload (LTL) freight. All require considerable experience, however, because of liability issues, and are also labor intensive irrespective of unfavorable weather conditions.

Defense contractors also offer another potential source of high revenue loads. Contracting with one is not simply a matter of faxing over your operating authority and insurance policy information, however. Defense contractors are required by federal law to have prospective drivers obtain additional security clearances, which are involved, time consuming and intrusive for most owner operators to successfully navigate.

Another problem that causes too many owner operators to fail is buying too much truck: a large car with all the bells and whistles and large monthly payments to boot. Unless you have a 5 to 10 year, $250k to $1 million annual contract, you do not need, nor can you afford a $60k to $120k tractor. So, resist the urge.
Instead buy a good, clean, high powered, used owner operator or, preferably, fleet maintained tractor no more than 5-10 years old.

Have the truck thoroughly inspected by a reputable technician to ensure that no major repair is imminent. Make sure the dealer services and inspects it before you pull off the lot, and provides you with the records; wash, have it detailed, put in a nice entertainment system, a good CB radio, invest in a wireless card for your laptop, an invertor, AVP, and call it a day. When it is time to have the motor overhauled, consider replacing it altogether with a more powerful, energy efficient one from any of the major engine - i.e., Cat, Cummins, or Detroit - manufacturers. All have really impressive product line-ups with horsepower ratings from 300-625 and significantly improved fuel mileage standards.

In short, not every driver is going to become a $130k/year union man. There just are not that many of those jobs to go around. Plus some drivers prefer the freedom of the open road. But what binds us all together is the need to make money for our families, have a little fun doing it, if not total enjoyment by our career choice, while moving our economy as well as the country forward. 10-4?

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Aug 27, 2010
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Great job
by: American Trucker

Makes me proud to be owner-op. Heck i even to point i have driver for both my trucks.
94-fld 98 kw. Both running with the best.
good job Dennis.

Rolling
American Trucker

Aug 26, 2010
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Insight for becoming an owner operator
by: Hervy

Dennis, what an excellent post man.

I am going to have a link to this from the owner operator page.

I agree with mostly all you said.

Especially the part of getting a truck for getting the job done not showcasing unless you have plenty of money set aside and your just trucking now for the fun of it. (or unless you otherwise have your ducks in a row. Firm long term high paying contracts, large reserve, etc.)

Anyway great advice and insight.
look forward to seeing more,

Thanks,
Hervy

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