Are You Cut Out to Be an Owner-Operator?

semi in the front yard

Google “How to become an owner-operator,” and there’s plenty to discourage you from considering the question for long. 

Brett Aquilla, a former company driver, says “you have to be crazy” to take on buying your own truck and becoming a business owner. He advocates the employee route and letting your employer hassle with the financial strain, licensing, permits, breakdowns, insurance, etc.

“Kick back, earn $55K, and make a killer living viewing the sites across North America in your company’s dream machine,” he says. “And if you get tired of trucking – quit. A company driver can always just quit and return later at any time.”

Some drivers, though, have been down the employee road and haven’t found it to be the walk in the park Aquilla describes. Company drivers have their own hassles including company politics, power-tripping dispatchers, and having to haul loads and run lanes that don’t suit them.

And some are just more interested in having their independence and the sense of satisfaction that comes from succeeding on their own guts, wits and hard work.

If you’re thinking about it, here are some sources for the tough questions you’ll need to ask yourself.

Make Sure You’re Doing it for the Right Reasons

Small fleet owner and radio show host Kevin Rutherford says most people considering the move to being an owner-operator will list three reasons they want to do it: First, usually is “to make more money. Then it’s more ‘freedom’, ‘less hassle’, ‘fewer rules’. If your answers sound like these,” he says, “think again before you proceed,” because you’re likely to be disappointed.

According to Rutherford there are better reasons for taking on the additional work and away-from-home hours. Drivers who transition successfully to owner-operators are usually those who do so because they want the additional responsibility and challenges of being a business owner, and want to build a business that will support better lives for them and their families. Read the list of questions Rutherford suggests you ask yourself to further test your assumptions about being an owner-operator.

It’s a Whole Lot More than “Steering and Gearing”

Truckie D is an owner-operator with 1 million+ consecutive safe over-the-road miles who blogs at TruckieD.wordpress.com. His advice, if you haven’t driven a truck before, is first to slow the heck down and get hired somewhere first, drive for a year and then see if you’re still in love with the idea of being an owner-operator.

“But”, he says, “do NOT get sucked into getting trained and buying/leasing a truck immediately. That’s a recipe for going broke quickly. Trucking as an owner-operator is a whole lot more than just ‘steering and gearing.’ The important point to remember is, you’re not buying a truck — you’re buying a business. You need experience in the trucking business, and some general business experience if you want to be successful at it.” Being able to understand a profit and loss statement and understanding how to do a cost benefit analysis of say, adding an APU to your truck, are just a couple of the business skills you’ll need to master.

See his blog post, “So, You Want to Be an Owner Operator,” for more some more sobering reality checks about owning your own truck driving business.

If You’re Still Not Scared Off…

Samuel Barradas readers through 6 steps to becoming an owner-operator on The Trucker’s Report blog. First, is a personal assessment – how much time you need at home, health considerations, career goals, etc. Next is a list of financial considerations to mull: the risks of personal debt, establishing an emergency fund and whether your credit score is going to help or hurt you. He also addresses the questions of whether to go independent or lease to a company, what types of equipment to shop and run, and what legal and accounting structures you should have in place.

Increase Your Odds of Succeeding

According to the National Assoc. of Small Trucking Cos (NASTC), the failure rate of small, start-up trucking companies is about 85%. Only 15% make it to the second year of operation. The organization offers training to help aspiring fleet owners beat the odds. On their website you can find more info about their training.

On that page you can also find a list of 20 new authority concerns, just the tip of the iceberg as far as the kind of business planning you’ll need to do: How do you plan to find freight? Where do you plan to run? How will you find insurance? How are you going to keep the books? How are you going to do log audits, fuel taxes, and driver qualification files? How are you going to manage and interpret data and information?

Lots to think about, but looking at it all before you leap will save you a lot of stress, debt and disappointment.

How to Get the Best Deal on Commercial Truck Insurance

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When you’re shopping insurance, the first thing to know is that what appears to be the best deal may be nothing more than a low price on a crummy policy that will cost you much more in the long run.

Insufficient coverage makes you vulnerable to citations, lawsuits and can doom you to some very unpleasant downtime. You don’t want to be on the side of the road while an officer makes the determination he has to ground you since your proof-of-insurance is not on file in your home state. And buying coverage from a company that’s slow to pay claims can impair your ability to do your job and send your personal finances into a tailspin.

Unfortunately shopping commercial truck insurance is a time-consuming hassle. But it’s also true that if you don’t take the time, you’re setting yourself up for bigger hassles down the road. So while there may be no silver bullet to saving on insurance, there are some best practices that can help you focus your efforts and get the best possible deal for your specific situation.

First, Do the Research

Always investigate an insurance company before committing to a policy. Risks to look out for include companies that cut rates to get customers and then find themselves unable to pay out in a timely fashion when claims come in. Avoid underfunded companies by checking ratings to make sure they have the financial reserves to take care of their customers.

An article originally published in Overdrive Magazine explains that rating companies like The A.M. Best Company, Standard & Poor, Weiss Research, and others rate insurance companies on their financial strength and their customer service and provide that information for free. Ask the agent to see copies of reports published by these impartial rating services or check the ratings company website yourself. Libraries also carry ratings reports.

Compare Coverage from Three Different Companies

Get at least three different quotes from three different companies and read their offers carefully. Price is only one variable to compare. Look at extent of coverage – what situations are not covered? Consider terms and conditions of each policy and what rules and regulations the company requires you to follow in order to be entitled to a payment if you have a claim.

Policies are sometimes written vaguely about what benefits you give up to get a lower price. Make sure you’re clear about what the policy actually says. Overdrive Magazine suggests these questions when comparing quotes:

• What is the total value in time, money, and convenience – of the products and services provided?
• Are their claim procedures easy to follow?
• Are their employees knowledgeable, helpful, and accessible?
• Do they respond promptly when you need help?
• Do they provide skilled assistance in reducing accidents and passing DOT audits?
• If so, are there additional charges for such assistance?

Beware of These Scams

If you haven’t done your research and unknowingly throw your lot in with an unreliable insurance company, you may find yourself a victim of the Three Ds tactic, where insurance companies Delay, Deny and Defend to avoid paying a claim.

If an insurer deliberates for weeks and then offers much less than what is claimed, they may be hoping you’ll just accept the reduced payment rather than spending more time fighting for what you’re owed. As explained in this handy commercial truck insurance overview (scroll down), the best way to combat this tactic is to conduct all communications in writing and state in no uncertain terms that you will not back down. In the vast majority of cases, the company will come up with the fair payment, but be prepared to take them to court if it comes to that. There are many legal precedents for claimants winning these cases.

Dishonest carriers sometimes commit their own insurance scams, according to this Truckers Report Insurance Cheat Sheet. They take out a truck policy to cover one or two drivers, get their MCS-90 endorsement and employ more drivers than they’ve insured. If any of these uninsured drivers are in an accident, the MCS-90 endorsement means the insurance company will pay the claim but the insurer can then recover costs from the owner-operator if the motor carrier “disappears.” Avoid this scam by reviewing coverage terms in the carrier’s policy before accepting a load.

Other Tips for Saving on Commercial Truck Insurance

TheTruckersReport offers more ideas for making sure you get the best deal on commercial truck insurance:

  • Pay your insurance up front at the start of the year, rather than paying in installments. This could save you around 15%.
  • Be honest about the value of your truck. Overstating it only sets you up for paying higher premiums since the company will charge you to replace the vehicle based on the value you state, but they’ll only pay a claim based on the market value of the truck.
  • If your insurance agent is coming to inspect your vehicle, invest a little time in sprucing up your truck. A tidy cab is safer and agents will notice. It also improves your image as a conscientious driver.
  • When it’s time to renew your insurance, talk with your current insurance agent and mention you may shop around a bit. Usually he’ll be interested in negotiating a lower premium in order to keep your business. Word to the wise: make sure your coverage is not downgraded as a result.

And here are some final buyer beware tips from Team Run Smart [https://www.teamrunsmart.com/articles/drive-smart/june-2013/how-to-cut-insurance-costs-and-improve-your-csa-sc]:

  • Avoid paying for unnecessary coverage. Check with your carrier to see exactly what insurance you’re already paying for through them. Ask for a thorough breakdown of limits, declarations, deductibles, etc. Many times the descriptions are vague and drivers may not realize something they’re paying for independently is also being deducted from their settlements.
  • You can avoid extra interest charges by not wrapping insurance into the price of your truck. If your lease agreement doesn’t require this, there’s no reason to pay interest on insurance premiums within your truck loan.