O/O or company driver – where’s the advantage?

by Mike Smith

The Owner-Operator’s Business Association of Canada was set up to assist trucking sub-contractors to maximize their profits in the hyper-competitive trucking environment. One of the many questions that we asked ourselves was whether owner/operators saw themselves as independent business people or as drivers who happen to own their own trucks. This distinction is crucial because those who truly consider themselves to be independents have a different mindset to those who fall into the latter category. Both have title to the power unit but the similarities end there.

The real independents understand that, once they decide to become sub-contractors, they are leaving behind the safety net of employee status.

There are approximately 50,000 O/Os in Canada, 68 per cent of whom operate as unincorporated sole proprietors; 50,000 hardworking individuals who have decided that ownership of the vehicle, with all that that entails, is the better way to go. Are they taking home more money than company drivers who do the same sort of work?

Many sources suggest that the eventual rate the majority of O/Os work for is around $8 per hour. And those are the efficient ones! Some accountants who handle O/Os have concluded that some of their clients, whose business skills and decisions are less than informed, are taking home – after truck expenses – as little as $2 per hour.

On the opposite end of the spectrum, one of the most highly paid O/Os I know made over $170,000 last year but it took him over 4,100 hours to do it. That’s only slightly less than half the number of hours in a year! Of that $170,000 he paid himself about $51,000. That works out to $12.44 per hour and his taxes and deductions came out of that. He’s well aware of the ludicrous nature of that figure. When I asked him if he’d consider driving a company tractor doing the exact same job he’s doing now, his reply was that, if that was his choice, he’d likely get out of driving altogether. The money, in and of itself, wasn’t the issue.

What then, is the reason that some drivers make that fateful step by buying their own trucks? Clearly the potential earnings aren’t the deciding factor. The majority of company drivers are making considerably more than O/Os; they have zero headaches as far as maintenance is concerned and generally have more time off than O/Os who, when not actually behind the wheel are busy with maintenance, making arrangements for fuel deals, insurance, tire purchases and many other matters related to running their businesses.

This doesn’t include the untold hours spent lying awake in bed staring at the ceiling and trying to figure out if their latest decision was the right one. In every way O/Os are more involved in their careers than company drivers. Whether they know this going into the business or it only begins to dawn on them after several years, O/Os have taken their trucking jobs and turned them, for better or worse, into their lives.

One possible reason that O/Os continue trucking as sub-contractors is an intangible that only other O/Os can truly understand: The satisfaction that comes from going down the road in charge of a situation which would fall apart but for their own efforts to make it all work. Only when you’ve agonized over the many choices that have to be made, when you’ve skinned your knuckles turning a wrench and gotten filthy dirty doing oil changes and grease jobs, can you truly understand the perverse pleasure that comes from personal truck ownership.

It truly takes a special sort of individual to persist in this business as an O/O. And that’s a big part of the problem with trying to make it on your own…the carriers know a steady supply of O/Os will persist, despite the dismal financial numbers involved. As one sub-contractor I know maintains, “Owner/operators can work faster, longer and harder but never cheaper.”

They can’t possibly be cheaper because the economies of scale are simply not available to them. Consequently, they must resist the tendency to undervalue their services or have them trivialized by carriers who view them as just another profit center. They must realize that, if market conditions were strong and predictable, the carriers would be seizing the marginal profits available by putting more company trucks to work.

The most effective way to ensure the profits that will justify the whole process is to know all of the costs of doing business, and to have an ironclad contract in place to leave your mind free to deal with the daily details of running the business. Knowing all of your costs is the first requirement to understanding how much revenue is required. Without that knowledge, you’ll never know when you’re engaged in a money-losing proposition and it won’t take long before you’re in trouble. There shouldn’t be any mystery on this account, since those who understand the process well have written several articles on the subject. And having a contract in place that spells out in detail the responsibilities of the business relationship is the only way to guarantee your efforts won’t be wasted or co-opted.

It’s a major life and business undertaking to be an O/O and it only makes sense to be paid handsomely for the effort demanded to do it properly. We at OBAC wholeheartedly endorse these efforts and want to assist O/Os in any way that will ensure the profitability to which they are entitled.

– A long time O/O, Mike Smith is a member of OBAC’s board-of-directors. He can be reached at msmith@obac.ca.

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