Hey owner/ops, ever dream about breaking free of your company agreement?If this sounds ideal, you'd better consider all the practicalities of running under your own authority.Striking out on your own ...
Hey owner/ops, ever dream about breaking free of your company agreement?
If this sounds ideal, you’d better consider all the practicalities of running under your own authority.
Striking out on your own as an independent is challenging to say the least.
Higher costs and little security are part of the life, but it may make sense for an o/o able to accept the risk – especially for someone who craves adventure, a potentially higher net income, plus the opportunity to grow a business.
“You’re cutting out the middleman … and you decide who to haul for and what goods,” says owner/operator Karl Maier, who continues to work under contract for a fleet.
“If you want, you can completely cut hazardous (materials) or any other product you don’t want to haul. You can pick and choose.”
Does running under your own authority capture your interest? You may want to ask yourself which of the following best describes you.
A: I dream of running under my own authority as an independent, but really I just like driving my own truck … or B: I imagine I would enjoy running my own business, and playing the role of negotiator, sales agent, administrator and collections agent, in addition to driving my truck.
Herbie Walker got his start in the truck biz in the late 1960s driving for somebody else. But their “way of working” was different from his vision, so Walker chose option B and joined the ranks of that rare breed of trucker who operates independently.
“The rates today with a broker charging 25 per cent, there’s not enough money left for a trucker,” he says.
But the money-making potential as an independent owner/op is still good, he adds.
“We’re getting more money going one way than most guys going two ways. I get $2.40 per mile to go down (to the U.S.),” says Walker.
He adds the rate drops slightly coming back but, “You can still get a decent rate: $1.60 to 1.70.”
Walker has two primary customers: a softwood lumber wholesaler heading south, and a hardwood flooring manufacturer coming north.
“The people going down give me loads in the area I pick up from,” he explains.
“You could probably make 25 to 30 per cent more (than an o/o hauling for a broker), which may not sound like a lot, but it is a lot. If I’m making $10,000 more per year, that’s $350,000 over 35 years.”
But he says the real bonus is that you become your own boss.
When you run with a fleet, you’re totally controlled by them he contends.
“Really, are you in business?” he questions. “Maybe (some people) like that security.”
He adds that jumping from one carrier to another really only changes the name on the door.
“If you’re not happy, you should go into business for yourself. If you’ve been working for a freight company for years, why not deal directly?”
If you’re thinking about going independent, you may already have a network of contacts that could turn into future clients.
“If your customer is unhappy and your broker is going to lose them, you could go in and talk to them,” Walker suggests.
“All people can do is say no. Why not try? To be a good salesman, you have to accept rejection … you’re free to look for freight anywhere.”
Even if nine out of 10 contacts say no, that tenth contact that says yes can become part of your successful business.
And that’s something your fleet doesn’t want you to hear.
As a new independent, you can build a niche market with small manufacturers or other clients who want specialized service that a bigger company can’t affordably provide.
A shipper may want you to function like a part of their organization. Walker says flexibility and willingness to provide extra service can be your winning strategy.
“(My clients) know that I’ll do things nobody else will do – like if they need something on a weekend. Little things that I don’t ask to be paid for, and (in return) they don’t chisel me on the rates,” he explains.
“You’ve got to work for good people … they’re out there.”
Managing costs becomes even more critical right from day one if you hope to survive.
Walker says, “A lot of guys want a certain kind of truck without knowing what it’s going to cost them. But when it’s all said and done, they’re (all) scrap-iron (eventually).”
The wood-hauling o/o says he runs an older truck, which has been a key to success.
“I bought a new Kenworth in 1968 for $28,600 and sold it privately in 1985 for $15,000. Then I bought a 1985 Western Star. I still have it today,” he says.
Planning ahead for repairs and building a good relationship with a garage will also help cut costs. And you can get more miles out of tires when you buy better quality and then drive carefully, he explains.
Underestimating the costs and overestimating the revenue is a common pitfall that can run a new independent off the road, says trucking consultant Leo Van Tuyl from TBC Group.
“They don’t generally have the operating capital to get the cash flow going. They’ll need at least three months’ worth and preferably more … that’s a minimum. You’d better have a big bank account when you start,” he says.
And what are the costs?
“The 25 per cent increase in gross receipts must be more than enough to pay for all the (additional costs),” according to the booklet Getting Your Own Authority from the U.S.-based Owner/Operator Independent Drivers Association (800-444-5791).
“If you just break even, there’s no reason to bother with all the extra time and energy required to operate under your own authority.”
An o/o hauling for a broker is paying for the capital cost of the truck plus repairs and fuel.
But an independent o/o will be responsible for these costs, plus insurance, capital cost of the trailer, trailer maintenance, the actual authority, fuel tax, “plus 100 other little things that pop out at you,” says Van Tuyl.
“If you were making $1.08 to $1.12 per mile as a company o/o, then $1.60 (as an independent) sounds good. But pretty soon you eat up that 50 cents you thought you had.”
The real question is why would anybody want to do this?
For the smart operator, there is money to be made.
“In the end, the principles are the same whether you’ve got one or 100 trucks: Know thy costs!” says Van Tuyl.
Clear accounting for costs will help you quote accurately to ensure a stable cash flow.
“Not on the back of a cigarette pack,” he cautions.
It’s also helpful to have a good business management plan and an accounting plan, he adds.
“You have to stay on top of it, or pay someone to do that for you. (But) that doesn’t have to be a full-time staff or a specialist service,” says Van Tuyl.
It’s important for an independent to negotiate payment terms supporting their cash flow needs even though customers may ask for 45 to 60 days to pay.
Walker says if you go to work for somebody small, you might want to trade flexibility for the luxury of being paid once every one to two weeks.
He himself is on a weekly plan with one of his customers.
Working with a net
Getting insurance may be a challenge for a new independent. Van Tuyl says few firms will underwrite a one-truck operation, and suggests talking to an insurance broker who specializes in trucks before you make the leap.
If you’re new, you may also be asked to pay 25 per cent up front.
Walker, however, is more optimistic about getting insured and says if you have a decent record, it shouldn’t problem.
He says insurance companies have even competed for his business on occasion.
He suggests checking various competitors’ rates and switching companies if the deal is right.
No quick fix
Van Tuyl warns wannabe independents need to watch out for ‘grass is greener’ syndrome.
“The transition,” from company o/o to independent o/o “is enormous,” he says.
Walker echoes these concerns adding there is one other trait you’ll need before trying it for yourself.
“It doesn’t come overnight. Be patient,” concludes the successful owner/operator.