Useful guidebook for becoming an owner operator
The need for professional truck drivers is constantly growing, so if you’re thinking about branching out on your own and becoming an owner-operator, now is the time to do it. However, this isn’t a decision that should be made impulsively. It requires a lot of planning and organization, and it poses a completely different set of responsibilities on the owner-operator. Besides the extra responsibilities on your plate, as an owner operator you also get to reap more significant benefits, so it’s not surprising that people tend to rush head first into this side of the business. That’s why we wanted to talk about the essential steps you need to take for you to firmly stand on your own two feet as a proud owner-operator.
Check yourself
Before you start looking for trucks to buy, take a good, hard look at your current situation. First of all, in order to be an owner-operator, you need to own a truck. Do you have the funds to finance a purchase that big? How is that going to affect your short-term and long-term goals? Did you establish what your short-term and long-term goals are?
It’s been proven time and time again that those people who worked as professional truck drivers for a few years have better chances of making it as an owner-operator - they had time to learn the ropes and get familiar with the right people - so jumping in the deep end is definitely not encouraged. This early in the process is not the time to risk it. Do you believe you have a strong enough network of reliable people to do business with? Have you thought about who your customers and clients will be? Will you focus on only one industry, and have you decided which one?
As you can see, there is a laundry list of questions that need to be answered before you start your owner-operator business, and we strongly recommend that you leave aside enough time to mull everything over because, as we’ve said before, this is no small step you are about to take.
Legal requirements
Once you are ready to embark on this journey, it’s time to look at the legal requirements. First of all, you are going to need a United States Department of Transportation number (USDOT number). Any company that has commercial vehicles transporting passengers or hauling freight in interstate commerce has to be registered with the FMCSA and must have a USDOT Number.
When you obtain your USDOT number, it’s time to get your Motor Carrier number (MC number). According to FMCSA’s website, anyone who transports passengers in interstate commerce (for a fee or other compensation, whether direct or indirect), and those who transport federally-regulated commodities owned by others or arranging for their transport, (for a fee or other compensation, in interstate commerce) are required to have a MC number. It should be noted that requesting an MC number has a one-time $300 federal filing fee. If you have already registered for a USDOT number, you can request an MC number online.
When you’re an owner-operator, you’re the one responsible for your own safety, as well as the safety of your vehicles, so it’s up to you to get insurance for both. Depending on the authority you choose and the cargo you mean to transport, there are different types of insurance coverage that you are required to have, so make sure to go over all the requirements in detail.
Getting your truck
Now, let’s look at the options for purchasing your truck. The easiest way, of course, is to pay for the truck in cash, but that’s nearly an impossible task for most, so we’re moving on to other options.
One option is to get a loan. In this case, you should make sure that your credit score and history are up to par, because that’s what can make you or break you in this situation. Having a permanent address and a stable job background are also huge advantages when getting a loan. Getting a loan from a bank can be overwhelming, and you have to deal with the interest rates (which is about 1% per month), but it is one of the safest options. Unfortunately, there are many financing companies which can help you get your truck faster even with a poor credit score, but those stories usually don’t have a happy ending, so we strongly advise against getting into business with them.
Take your time researching banks and truck deals. Always try to get the best bang for the buck, because as you know - the bigger your down payment is, the lower your monthly payments will be.
Other options that are on the table are going to a Captive Lending Institution, or a Commercial Lending Institution, but research their terms and conditions in detail because buying a truck is a long-term responsibility, so you need to think ahead.
As you can see, becoming an owner-operator is no easy task. It’s not a task at all, really - it’s a process. It requires a lot of time, planning, and above all patience. Since you are your own boss, in a way, you are the one responsible for getting new clients and maintaining good relations with current ones, as well as making sure that all legal requirements are fulfilled. You are the one who is supposed to figure out the best way to grow your profit and minimize operational expenditures. Always remember, you reap what you sow.
