Getting Started with a Dream
This is how we would start the dream of becoming an owner-operator. Before we begin let’s start with a story. I was working at a truck dealership around the 2019-2022 freight boom. Our inventory was selling so fast that we barely had 2-5 trucks at one time. One of the customers who bought a truck was a middle-aged trucker named George. His hair had streaks of silver from all his years on the road. So George had some idea of what he was getting into. Once George had his truck he was off to the races. He made good money, enough to cover all his expenses and then some. George thought to himself “Why hadn’t I done this years earlier.” Little did he know something was beginning to change in the freight industry. Over the next year and a half, freight rates slowly began to drop. George didn’t notice it initially because he was still making a good living. As rates started to creep lower and fuel started to run higher, staying afloat became harder and harder. Before George knew it, it was becoming more and more unprofitable to run his operation. He began to see the writing on the wall and decided to get out before it was too late. George sold his truck back to the dealership at a loss and decided to go back as a company driver. Defeated George decided never to buy a truck again. The reason I’m writing this story is because I don’t want you to make the mistake George did. He had Fear of missing out (FOMO) and wanted to jump into a hot market without knowing all risks that come with it. Without further ado let’s get into how we would become an owner-operator.
Acquiring Knowledge
In our story, George knew how to drive trucks but there was a big thing he was missing. He didn’t understand the ups and downs of the freight market. George didn’t realize the market was at its height and was at risk of dropping. Here are some things we would do to have a better chance of succeeding.
Find Free Trucking resources
The first thing We would do to become an owner-operator would be to research everything about it. I would start off by finding free material such as podcasts and YouTube videos that give a basic understanding of what being an owner operator is all about. This is to give us a good idea of if we want to pursue buying a truck in the first place. Once I had a basic understanding of how trucking works I would consider doing the next part.
Paying for Trucking Knowledge
I would find some paid material such as business books and online courses. Some of the material might be the same as free content but the knowledge is condensed in an easy-to-learn package. Saving a lot of time and getting us closer to the end goal. As well as giving a potential small nugget of knowledge that could save thousands of dollars down the road. Another benefit of paying for books and courses is that we will pay more attention to them since we are now invested in them. While working on learning as much as we could I would also be on the lookout for a mentor.
Find a Mentor
A mentor can be anyone we work with or someone on the internet. A mentor is important because they can give us tailored knowledge to our specific situation. Mentors are further down the trucking journey than we are so they know how to navigate it better. One thing I learned at a young age is that knowledge is a cheat code to life. The more you know the better you get at playing the game.
Making our Plan
When George bought his truck he was more concerned with the outcome of making money. He didn’t really plan how he was going to keep his business running profitably in the long run. That’s why having a plan for running our trucking business is crucial. This is how we would start our trucking business.
1) Finances
Having good financial habits is an important skill any business owner needs. Without them, we wouldn’t know how profitable we are running or if our business is even sustainable. That’s why getting our finances right before we buy a truck is an important thing. The first thing we would start with is to build our emergency fund.
Build an Emergency Fund
An emergency fund is a bank account that has money ready to deploy at a moment’s notice. Usually, emergency funds have 3- 12 months’ worth of personal expenses. This gives a good buffer for any unexpected personal or business expenses. The emergency fund also gives us some relief from the stresses from figuring everything out. While we building our emergency fund I would also start to establish some credit.
Establish Good Credit
Experians’ definition of credit is “the ability to borrow money and repay the balance you owe over time“. Banks can judge someone’s creditworthiness by using something called a credit score. A good score takes 1-7 years of paying debts back every month. So the earlier we start the more history will have. Having good credit gives us more opportunities that we would not normally have. such as having lower interest rates and access to higher credit lines. This gives us options down the road to expand our operation. When we have our personal expenses figured out we can finally start to save for a big business purchase.
How we would plan to buy the truck
There are multiple ways to buy a semi-truck, when we first do it there is only one smart way. I would save enough to pay for the truck in full. Purchasing the truck in full lowers the overall financial risk of owning and operating the truck. It’s a lot of money upfront but the truck has more potential to make a profit on day one of operations. Another unseen benefit is it reduces stress. It takes the responsibility of a $2,000 truck payment off of our shoulders. After we have enough to buy a truck in full we can finally go find a truck.
What Truck Would We Buy
One of the highest expenses in owning a truck is fuel; So finding a good used aerodynamic truck that gets high miles per gallon (mpg) will help lower our expenses. We might not look like the coolest driving truck on the road, but we will be winning the business game. Our diligence process will be to look at the oil samples and at the ECM report. Looking at the oil sample can give indications that something is wearing in the engine that could be a problem as soon as we buy it. Downloading the truck’s ECM report can tell us how the truck was driven. This is important information because it can tell us if the truck was run hard or if the driver took care of the truck.
2) Team members
Once we have our finances figured out and our truck bought we need to start our team. Without a team, a business can’t get started and grow. The three people are needed to be a part of are team:
Accounts/ CPA
Having a good accountant on our team helps us with our finances. They help with organizing all our finances into a spreadsheet so we can see how profitable we are. They can also advise on how to save money on everyday expenses and lower our tax bills.
Lawyer
A Lawyer is necessary for the set up of any business. They know how to set up a trucking business entity (LLC, SCORP) that is legally allowed to haul freight. lawyers also know how to set up the entity to protect assets from potential lawsuits. Finally, in the worst-case scenario, lawyers defend us in any lawsuit that someone or another business comes forward with.
Mechanic
Having a good relationship with a mechanic is an essential resource. They are very knowledgeable about how everything on the truck works together. Helps advise us on what can wait to be fixed and what needs to be fixed immediately. Most experienced mechanics can fix our truck fast and get it back on the road. As well as give us tips to keep the truck running on the road.
Operating Our small Trucking Business
Finally, with all of our preparation in place, we can focus on running our business. The way we would start generating cash flow is to stay with the current company we work for as a company driver. Most likely they are a big company and have relationships to find loads. Plus we already have a relationship with the dispatcher which can give us loads that are not normally available to company drivers.
Driving Strategies
A driving strategy I would implement would be to slow the truck down to 57-65 mph. Driving slower uses less fuel and lessons the wear of the truck. Helping to save our company thousands of dollars worth of expenses. A good analogy for this is a truck is like the human body. The harder it works the more time is required to take off and recuperate.
Repairing our Truck
Our plan for repairing our truck is to have the mechanic fix the technical issues such as engine or electrical problems. Diagnosing and fixing take years to master and worth our time for them to fix. The mechanic does not need to do everything on our truck. Fixing small things on our truck can save thousands on repair costs. The average labor cost for mechanics is $125 an hour. So the less we have in the shop the more we save. Plus some shops upcharge parts they put on. Some of the small things an owner-operator can do is grease the truck and change the fuel filters.
Conclusion
Let’s review how we would become an owner-operator. The first thing we would do is to research everything we could about trucking and business. This gives us a good idea of what we are about to get into. Secondly, we need to prepare for starting our business by getting our finances right and finding our team members. Finally, once we had everything set up and ready to go we needed to focus on running our business. We might not have all the answers for everyone’s operation but hopefully, some of our tips can help other drivers succeed.