Owner-operator

Scope

Individuals who own and operate their own vehicle(s) are considered owner-operators.

Regulatory citations

• None

Key definitions

• Owner-operator (O-O): A type of trucking business owner. O-Os typically work and run their own trucking businesses using one or more vehicles that they own and operate.

Summary of requirements

An owner-operator is usually responsible for day-to-day operations in such a business as defined above. In the trucking world, this might include some (or all) of the following functions:

• Finding loads,
• Taking care of maintenance needs either directly or by using contracted services,
• Managing finances,
• Making labor-related decisions (has the business grown so much that another driver is needed to handle the possible loads?)
• Dealing with the myriad elements of regulatory compliance (both on the state and federal levels — Department of Transportation (DOT), Occupational Safety and Health Administration (OSHA), Environmental Protection Agency (EPA), International Revenue Service (IRS), and other pertinent agencies). Depending on the industries that a trucking operation services, additional responsibilities could be added to the list shown above.

Business practices for O-Os. Whether a long-time owner-operator, a company driver who has gone into business solo, or some other iteration of an independent trucking company operation, O-Os quickly become aware of many demands on their limited time and resources. Some overviews and suggestions for approaches to the business may find useful and helpful.

A typical O-O is likely to end up with somewhere between 40 and 80 pieces of paper per month, including everything from scale tickets to phone bills to settlement statements, fuel receipts and on and on. You can probably add many other types of “paper” that clutters business life. Even if you use an accounting service or a tax service, you may find yourself doing a lot of sorting and tallying of paperwork demands. The time you spend on this kind of paperwork cuts into the time available to be on the road driving and making money.

Advantages of being leased to a carrier. There are some major advantages to being leased to a motor carrier. Think about these benefits:

• Somewhere between 70 and 90% of expenses are likely to go through the carrier. Motor carriers frequently have programs offered to O-Os to handle fuel, equipment purchases, insurance, and EDI with “partner” carriers can significantly cut “paperwork” requirements for you

• The carrier may provide you with a variety of “statements” that will help you keep track of your business. Documents might include loaded and empty miles, pay per mile, revenue and expense reports, monthly profit and loss statements, a net income estimate pre-tax and advances. Carriers might also offer a sort of “benchmarking” tool that allows you to see how stack up with other O-Os.
• You get to “participate” in the carrier’s authority, registration, and perhaps insurance coverages. However, be prepared for the fact of knowing your way around a contract, current leasing regulations, etc.

Advantages of “going it alone.” There are also advantages to being a true independent. Unlike many other kinds of small business, a new O-O often sees a significant jump in income at the outset of the business venture. Be careful not to get carried away with the early blush of success. Here are a couple of the advantages:

• Freedom, freedom, freedom. If being entirely “in charge” of your own destiny is a major value for you, you will probably be happy as a truly independent O-O.
• Your time and your income is entirely your own. This “benefit” can have a downside too — it means that you have absolutely nobody to “pass the buck to” — your business rises or falls entirely based on your hard work and effort.

What did I get myself into? Here are some basic tips or guidelines to survive as an O-O:

• Take the time to do solid financial planning. Check around for assistance that may be available, take classes, and do your homework in advance. Do you know how much it really costs you to operate your truck? Keep a ledger for a while to note accurate fuel and maintenance costs, along with all of the other “incidentals” that affect the bottom line. Most likely you will be surprised at the figures you come up.
• Do your best to track/control expenses/costs. Predicting future costs of your operation is somewhat trickier. Even more challenging is the decision to set money aside to cover them (contingency planning).
• Know your strengths and weaknesses. If you are handy with maintenance skills, you may be able to buy used rather than new equipment and make it work; if you are a good business manager, you may be comfortable doing some of the accounting and tax work yourself. But if you aren’t comfortable with any of the major business areas, look around for other people who may be of assistance to you.
• Know when to ask for help. Whether it’s financial planning or stress management, be aware of the resources that are available to you and be wise enough to know when you really need help from others. It’s out there, but you need to develop a good network of sources to find it. Consider becoming a member of a trade association such as the Owner-Operator Independent Drivers Association (OOIDA) - such a membership brings access to personnel and services that would not be available to you as an “outsider”. Find out more about OOIDA on their website.