May 10, 2023
Are You Ready to Become an Owner Operator?
One of the most important factors to consider before making the jump to being an owner operator is knowing how prepared you are. While the independence of being your own boss is an attractive idea, it’s not as easy as it looks. You’ll need a good, solid foundation to stand on if you’re going to be successful.
Here are the top four signs that you’re ready to take on the responsibilities of being an owner operator.
You’re financially prepared
Starting a business while you’re in a good financial situation personally can increase the likelihood of your business’s financial success. To determine if you’re financially prepared to become an owner operator, ask yourself these three questions:
- Do you have good credit that will enable you to take out appropriate business loans?
Lenders want to see a lengthy pattern of good financial habits. After all, you can’t start a company without using credit. Chris talks more about this and other credit-related items to watch out for in the “Business Credit for Trucking Companies” episode of our Haulin’ Assets podcast.
- Do you have the capital to start a business?
You’ll typically need to make down payments for your larger pieces of equipment. Expect to pay about 10% of the truck’s cost up front as well as 10% of a trailer’s cost. And don’t forget to factor in all of the smaller day-to-day operating costs too, such as insurance, meals, fuel, etc. While it’s possible to apply for trucker grants when you’re first starting out, you can’t depend on that as a ‘for sure’ financial route, so take an honest look at what financial resources you have access to and how much capital you can really bring to the table.
- Do you have strong personal financial habits?
The financial risks of becoming an owner operator are big, but they can pay off if you start the journey wisely. This includes healthy habits like having enough money set aside for emergencies as well as the day-to-day expenses. Pro-tip, if you ever ask your employer for a pay advance, you probably aren’t financially ready to own a business. If you have a solid grasp on your personal finances, it is a really good sign that you’re ready to take on managing the finances of a business.
To get a better sense of what to expect financially during the first year, check out the start-up costs calculator on the Motor Carrier HQ website. It can help you calculate some of the larger expenses and upfront costs so nothing takes you by surprise. And be sure to take a look at Chris’ first year to get a sense of how much profit you can realistically expect to make during year one.
You know the tips and tricks of the business
Successful owner operators know their way around the trucking world. They have a good sense of business and how to do it well. Having good business acumen for the trucking industry is incredibly helpful, especially when it comes to important day-to-day activities like weighing the risks of a load, effectively negotiating for better rates on loads, and deciding which carriers to partner with.
Business savvy owner operators have learned the tips and tricks of the trade and they feel comfortable in business settings. They work hard to network with other drivers and owner operators because they can learn more about who stays with their carrier and why. This knowledge helps them decide who to partner with.
Anyone can develop a good business sense if given enough time and experience. Stop and think about how well you really know the trucking industry. Do you fully understand who the key players are and how they interact? Are there parts you aren’t as familiar with or a particular skills, like negotiating or sales, that you may need to develop more?
If you’re not 100% confident in your knowledge of how business within the trucking industry works, then you may not be quite ready to make the leap to owner operator.
Entrepreneurship won’t disrupt your personal goals
Another crucial piece to consider is how the switch to owner operator will affect your personal life. Being an owner operator does give you more flexibility, but it also comes with the trade-off of having to spend more time on the road, especially as you’re starting out and building your business. You may even find yourself working while you’re at home in order to stay on top of the many administrative tasks. This means that, at times, your relationships may feel like long-distance relationships. If you have young kids at home or are just starting a new relationship, the longer stretches of time on the road and increased work from home may not be worth the flexibility and potential financial gains of being an owner operator.
It’s also important to consider your health. Your industry experience will have quickly taught you the importance of caring for yourself physically while on the road. Owner operators are often on the road more and for longer than company drivers, which can be difficult if you’re currently dealing with health issues that require frequent medical appointments and regular follow-ups. Also consider the added stress that comes with running your own business and assess whether your mental health is in a good enough place to cope with the added burdens.
You have enough experience
Arguably the most important sign you’re ready to become an owner operator is sufficient experience on the road. Nothing can replace the knowledge and wisdom that past experiences bring. It means you understand the lifestyle, the schedule, and the setbacks because you’ve lived it firsthand.
Being able to draw from these past experiences as a driver helps you be more adaptable and flexible as an owner operator. For example, a driver who has experienced a natural disaster while on the clock knows exactly how it can turn everything into chaos — but they also know what carriers and other drivers did to manage the chaos and overcome it.
Though there isn’t any hard and fast rule about how much experience you should have before venturing out on your own, it’s typical to have at least a few years’ worth of experience as a driver before making the switch to owner operator. However, the more industry experience you have, the greater your chances are of being a successful owner operator capable of making sound business decisions.
If you’re ready to make the leap to owner operator, reach out to the coaches at Motor Carrier HQ to get sound advice on starting out and finding loads that make a profit.