The start of a new year is a great time to take stock of what you want to achieve and what it will take to reach your goals. We wish you great success as an owner-operator in 2020, and offer some practical do’s and don’ts as you rev up for the road ahead.
DON’T: Blame shippers or brokers for your rate, lane or anything else that isn’t working in your world. Rates and loads are driven by fuel costs, supply and demand, among other factors in the trucking industry. Too many drivers and owner-operators mistakenly believe that simply having a number of years of experience in trucking will be enough to be a highly profitable business owner. It takes good business skills, understanding of the trucking industry and logistics, keeping an eye on trends, and smart choices of brokers. If you find a broker or who is honest and certified by the TIA (important!), you have probably found a good broker.
DO: Familiarize yourself with how the industry works and what is currently happening. Use that knowledge to your advantage, and to set realistic expectations. Keep tabs on fuel pricing, supply and demand trends, and other influencers so you are well-informed in discussions with your broker and/or shippers about why you deserve the rate you do, going rates for specific lanes, etc. Be able look at your business and see what causes downturns and what helps conditions improve. You can further enhance key relationships in 2016 through your professionalism: treat everyone well and communicate effectively.
DON’T: Rely on salespeople for an accurate assessment of a truck’s fuel mileage. Their agenda is selling you the truck, and they will say or do what it takes. It’s in their best interests to convince you that a given truck delivers the best fuel mileage so they get the sale and their commission. The truck may get that MPG some of the time, but don’t count on it to be what you get all of the time. Also, don’t buy into the idea that you’ll get better mileage hauling light weights with a high-horsepower engine than with a smaller one. Fuel efficiency will vary based on the engine, load and conditions throughout the year.
DO: Become a fuel-efficient truck driver. Fuel economy plays a huge role in your success as an owner-operator. A single mile to the gallon in fuel economy can make or tank your bottom line. You may have heard other drivers say that you can’t make money if you’re driving just 60 mph, because you’re driving fewer miles each day. But driving 55-60 versus having idle time and driving 70 mph will make a dramatic difference, saving you thousands of dollars in fuel efficiency. At a fuel cost of $3.00 per gallon, let’s assume Driver 1 averages 70 mph for 10,000 miles, and gets 5.0 mpg. Driver 2 averages 60 mph for 10,000 miles, and gets 5.5 mph. At the end of the year, Driver 1 has shelled out $72,000 for fuel while Driver 2 has spent just $65,000, leaving $7,000 more in his pocket.
DON’T: Mistake your gross revenue for profits you can pocket. As an owner-operator, you have a number of expenses that come out of that revenue – fuel, permits, vehicle maintenance, truck payments, insurance, health care and insurance, other operating costs, taxes … Also, don’t assume that your truck warranty will cover all of your maintenance expenses or neglect repairs. It will cost you far less in time, money and headaches to get your rig into the shop when you have downtime than having it towed and out of commission because you got complacent or sidetracked. If you don’t sufficiently plan for the costs of operating your truck and business, you’re going to have a rough ride.
DO: Make sure you understand the costs of operating a truck and trailer and stay prepared financially. Basically, revenue per mile minus cost per mile equals gross revenue. Subtract taxes from that figure and you have your net profit. The Owner-Operator Independent Drivers Association (OOIDA) has a great article to help you calculate your fixed and variable costs per mile, which will help you determine how much money in profit you can make. Basic business accounting and book keeping skills are also very important to see success as an owner-operator. You can even take some online classes from the road to get the fundamentals. Of course, the other way to keep more money in your pocket is to control spending. If you need something, research and buy wisely. For “wants,” think long and hard about whether the immediate gratification will interfere in reaching your longer-term goals.
DON’T: Buy a slick, tricked-out, chromed-to-the-gills truck that will ultimately cost you more money in the long run. Focus on what’s best for your business instead of getting distracted by something shiny on the lot or at truck shows. It’s all about getting from point A to point B and having the most appropriate tool for making money in your business. Don’t treat it like a toy or feel compelled to buy more engine than you really need, because it’s just going to suck down more fuel.
DO: Buy a truck that is reliable. Matt Douthit, the voice of experience behind truck driver career site CDL 101, suggests purchasing a lightly used truck – target about 200,000 miles on the odometer. That way, someone else has taken the big depreciation hit, and all the little kinks are already worked out. You can also pull the Electronic Control Module (ECM) report to see how it’s performed, operating issues and actual fuel efficiency. If you go the used route, check out the warranty carefully. You can’t afford to get stuck with a lemon. Whether buying new or used, absolutely do your homework. If you’re purchasing a new one, see what the various diesel engine manufacturers say about fuel mileage, and ask owner-operators with similar trucks and engines about their experiences. Bottom line, you need a truck you can trust for reliability and longevity with good fuel efficiency and few repairs.
DON’T: Believe that work will always be there, and live and budget as if your costs and revenues will never change. Just because we will always need trucks to haul our goods across the country doesn’t mean we will always have work. You can’t view the road through rose-colored glasses and budget solely based on the best of times. The economy ebbs and flows, and so do our businesses. That’s why it’s important to look at yearlong averages and stand out from the pack.
DO: Work hard, do your job well, make smart decisions and build solid relationships with others who can help you in your career. Networking can connect you to the inside track on the best loads offered by multiple brokers and shippers. It’s also important to find and work your niche – a distinct segment of a market what makes you different from the big guys, gives you a profitable edge and keeps you busy.
For example, if you have a trailer used for hauling something unusual, or requiring special handling or specific permits, you improve your opportunity to make more money. Consider doing something that most people can’t; a business model based on lower freight volumes than will sustain a large company; and odd or niche freight, which pay much more than general freight. What can you focus on that most trucking companies do not do? This will help you better brand and market yourself because you will stand out in a small market, then you can build the business by building your reputation for honesty and reliability.
Trucker’s Guide to Freight Factoring
Our Trucker’s Guide to Freight Factoring explains what exactly invoice factoring is, how it works, and if it’s a right fit for your trucking company.