Are you entertaining the thought of going independent and shift from being under the authority of a company to becoming your own boss? We have provided some basic information on what it takes to get started and what you can anticipate in starting your own business as an owner-operator (O/O).
It’s estimated that there are more than 4 million commercial truck drivers in the United States today. Of those drivers, approximately 350,000, or 9% of all drivers, are classified as owner operators. As you’ll see below, there are many things consider when deciding to break away and work for yourself.
Trends in The Owner-Operator Industry
The trucking industry is so short of drivers that retailers are anticipating potential issues in the future with getting their goods to the public. In order to disburse goods as the demand increases, there will need to be 900,000 more truck drivers hired. Currently, there is 1 truck to every 12 loads needing to be shipped.
So why the decline in truck drivers? It takes a specific type of person to be a truck driver. Being away from home for long periods, driving for long hauls, and having a love for the road and travel is necessary. In fact, a recent survey found that 63% of O/O’s reported being away from home more than 150 days per year.
It is an ideal time for new incoming truck drivers (commercial and owner-operator.) Choice of loads and carriers to work for are ripe for the picking!
Below is a comparison of some of the pro’s and con’s of being an O/O and a commercial driver:
PROs Leave work behind when you go home
● Money earned is yours
● Job security
● No startup costs
● Easier to change jobs
● Health insurance
● Not responsible for:
○ Equipment maintenance
○ Finding loads
○ Finances or budgets
○ Equipment insurance, fees, or licenses
● You are your own boss and operate under your own authority
● You can choose your own equipment
● No slip seating
● Safer (because you maintain your own equipment)
● Salary is higher
● Flexible schedule
● Riders can accompany you anytime
● Free to choose type of load
● If you contract with a carrier, you:
○ Tap into their health insurance and benefits
○ Leave the filing of taxes, insurance, tolls, licenses, and permits to them to handle
○ Don’t have to find loads
○ Will have a steady paycheck
● Salary is lower
● Must work according to schedule
● Riders are not allowed
● Slip seating
● Equipment may not be safe
● Under authority of others
● Cannot choose type of load
● You will be on duty 24/7
● Must thoroughly know trucking industry laws and guidelines
● More stressful
● Costly startup investment
● Requires business savvy
● Responsible for:
○ Health Insurance
○ Finances and budget
○ Finding loads
○ Loads you are carrying
○ Equipment maintenance
○ Equipment insurances, fees, or licenses
○ Meals and lodging
What do I need to know to become an owner-operator driver?
You should learn all there is to know about the trucking industry. This will enable you to better understand the various requirements, terms, fees, licenses, and other aspects of becoming an owner-operator
Licenses/Permits Needed for Startup
As an owner-operator you will be required to have the following:
- Federal DOT Number
- Motor Carrier Number
- BOC-3 Form (filed)
- Standard Carrier Alpha Code (SCAC)
- Unified Carrier Registration (UCR) Permit
- International Registration Plan (IRP) Permit
- International Fuel Tax Agreement (IFTA) Permit
- Understanding of Form 2290 (Heavy Highway Vehicle Tax Return)
- Other permits if applicable: Hazardous Materials, Alcohol, Oversized, and/or Overweight (these are dependable on what type of loads you haul)
Independent vs. Contracted Owner-Operator
|Independent||Independent Contractor with Carrier|
|Things to Consider:|
● Where will you find loads?
● Will you charge by mile or load?
● When can you deliver?
● How will you handle deadhead miles?
● What is your policy if load cancels?
● What type of loads do you want to haul?
|Things to Consider:|
● Is carrier reputable?
● Is carrier financially strong?
● Is the pay by mile or load?
● Is there a signing bonus?
● Is there health insurance?
● Is there pay for deadhead miles?
Things that carriers look for in owner-operators that contract out:
- Must be able to pass carrier’s driver requirements
- Must meet carrier’s requirement for having a certain number of years with driving experience.
- Must meet all DOT requirements; eye test, physical, and screening.
- Must not have any DUI’s in the past 3-5 years.
- Must not have any moving violations in the past 3 years.
- No felonies, no probation.
- Must have a CDL.
- References are required.
- Truck title
- Form 2290 (proof of Federal Highway Use Tax payment for current year)
- Insurance certificates
- Social Security card
- Federal Tax ID
- Certified unladen ticket of weight
To have a successful business, owner-operators should have a business plan in place before doing anything. Your business plan acts as a guideline from which you use with regard to handling finances, invoicing, payments, equipment, insurance, etc.
Those who rely on themselves to successfully run a business must:
- Be a good communicator
- Be a problem solver
- Be able to interact with others well
- Have enough cash flow
- Be proactive in finding loads
- Be self-disciplined to manage all of the paperwork
- Be assertive
- Be knowledgeable in every aspect of the trucking industry
Your livelihood (as an owner-operator) is dependent upon reliable and safe equipment. Understand that your equipment is your responsibility and any maintenance or associated costs can be very costly.
Below I will list a few of the bigger expenses that an owner operator can expect when they own their own truck. For a much more thorough list of the expenses you can expect, please take a look at my article here.
- Fuel – $70,000/year
- Tires – up to $4,000/each to replace
- Insurance – up to $8,000/year
- Maintenance – 10-15% of total expenses
Owner-operators can tap into load boards online and through apps. With the demand for drivers, the choice of the type of loads is plentiful. For a more detailed look at how you can go about finding loads, take a look at our article located here.
Remember that as an owner-operator, you are responsible for pursuing and finding loads. You cannot rely on anyone but yourself for getting the most profitable loads.
How to Become an Owner Operator
The process to become an owner-operator can be confusing; however, if you lean on reliable resources and information, you can maneuver your way through the requirements.
- Get some driving experience behind you. This is the foundation which you will build your own independence from.
- Have enough money set aside for the startup investment.
- Develop a business plan and decide if you will register as:
- Sole Proprietorship
- LLC (Limited Liability Corporation)
- Decide on how the finances will run (budget, invoicing, collecting payments, etc.)
- Make sure you have compliances completed for:
- USDOT Number (your identifier)
- Operating Authority (for-hire carriers)
- Heavy Vehicle Use Tax
- Other (refer to DAT Authority for a full listing)
- Insurance (refer to FMCSA for requirements)
- Primary liability
- Physical truck damage
- Non-trucking use
- Get Your Equipment/Truck
- Buy or lease
- Find Loads
- Tap into load boards online and through apps.
ELD Mandate and Implementation
Owner-operators are required to know if the FMCSA’s ELD rule applies to them. This rule to have an ELD is applicable to almost all motor carriers/drivers who must keep RODS (records of duty status.) Beginning Dec. 16, 2019, ALL carriers/drivers are subject to the ELD rule and must have telematic data transfer/local transfer capabilities.
The ELD rule was created as part of the MAP-21 Act and was required by Congress in order to create a safe working environment for drivers.
There are exceptions to the ELD rule:
- Drivers that use paper logs 8 or less days per 30-day period.
- Drivea way-tow away drivers (transporting vehicles for sale/lease/repair.)
- Drivers with vehicles that are older than a 2000 model.
The Open Road is Calling
If you have what it takes to be a truck driver, why not kick it up a notch and be your own boss? By crossing over to owner-operator, you have no one else to answer to but yourself. If you have the self-discipline and are business-minded, then you are halfway there!
Attaining your dream is not far out of reach. Investigate everything there is involved with owner-operator-ship and have a solid understanding of the industry.
There is nothing sweeter than to be behind the wheel of your own tractor!
Trucking Facts: Industry Owner-Operator Facts: OOIDA (n.d.), Retrieved from: https://www.ooida.com/MediaCenter/trucking-facts.asp
Resources for Drivers, Federal Motor Carrier Safety Administration (n.d.), Retrieved from: https://cms.fmcsa.dot.gov/
(2017, June 19) How to Become an Owner Operator, Trucker Path, Inc., Retrieved from: https://truckerpath.com/blog/how-to-become-an-owner-operator/
Pearson, W., (2018, February 21), Confessions of an Owner-Operator Advice for Getting Started, Retrieved from: https://www.dat.com/blog/post/confessions-of-an-owner-operator-advice-for-getting-started
Raphelson, S., (2018, January 9), Trucking Industry Struggles With Growing Driver Shortage, Retrieved from: https://www.npr.org/2018/01/09/576752327/trucking-industry-struggles-with-growing-driver-shortage
(2018, February 23) Drivers and Carriers ELD, FMCSA ELD Implementation, Retrieved from: https://www.fmcsa.dot.gov/hours-service/elds/drivers-and-carriers