How to Start a Trucking Business Owner OperatorA Step by Step Guide!
Did you know that truckers move over 70% of the freight in the United States each year?
The trucking industry is not going anywhere, in fact with an increase in online shopping, it has been growing year after year.
Starting an owner operator trucking business is worth it because owners operators take in over three times the average salary of an OTR company driver.
If you’ve been looking for a new business venture or perhaps just trying to find a way to get out of the daily rut of your current job, you could start an owner operator trucking business – and it isn’t as hard as you may think!
Form your Business
Before hitting the road, you will need to legally form your trucking business.
Start by choosing a name for your business.
Once you have that, you will need to decide on a business structure.
There are several business structures to choose from including sole proprietorship, limited liability company (LLC), Corporation, etc.
You will want to consult an attorney if you are not sure which business structure to choose.
You can also use a formation service to help you setup your business.
Some of them are free + State Fee!
Many small business owners choose an LLC (limited liability company) because it provides limited liability protection to you as the owner you get the benefits of pass-through taxation.
It provides a flexible business structure and is fairly simple to set up.
Why business owners choose an LLC:
- Business owners are not liable for the company’s debts and can choose their own management structure.
- They qualify for pass-through taxation – meaning that profits are only taxed once.
For example, if your LLC declares bankruptcy or is sued, your personal assets such as your vehicle, personal bank accounts, and house are safe.
Each business structure has its own advantages and features but for the majority of small businesses, an LLC is going to be the best choice.
LLC’s are simple, flexible and protect your personal assets.
Here is a quick checklist of things you need to complete to form your business:
- Select a business entity type: we recommend an LLC.
- Obtain an EIN (Employer Identification Number) from the IRS – once your application is completed online, you will receive an EIN instantly.
- Register your business locally in the State in which you will be conducting business. This is done with the Secretary of State in the state where you will be doing business.
Once this is all completed, you will officially be legally recognized as a legitimate trucking company!
Get your CDL (commercial driver’s license)
If you have already been driving for a trucking company, you most likely already have your commercial driver’s license and can skip this section.
If you are not already driving, you will need to obtain your CDL (commercial driver’s license) and gain some driving experience.
There are classes available to prepare you for your CDL and then you will need to get some driving hours under your belt.
Many owner-operators start as company drivers before branching out on their own.
Like we said before, if you’ve already been driving for a company – you can skip this step.
If not, unfortunately, this is a requirement you cannot skip.
Obtain Required Business Licenses and Permits
Once you have your CDL, you will need to obtain a few requires business licenses and permits before hitting the road.
Before applying for these licenses and permits, you will want to determine which ones you need depending on the types of loads you plan on moving.
For the most part, the following business licenses and permits are required:
- USDOT Number – this is used to identify your company during inspections and audits.
- Motor Carrier Operating Authority Number (MC): this number identifies the type of operation a company may run and the cargo it may carry.
- International Registration Plan (IRP) credentials and International Fuel Tax Agreement (IFTA) decal: this is required if you plan on offering services across multiple states.
Again, you will want to double check that you actually need all three of these and that there are not others that may be required.
Buy or Lease a Truck
You can’t really be a truck driver without a truck, so if you don’t already have one you will need to buy or lease a truck for your business.
If you don’t have enough capital to purchase a vehicle in the beginning, you can always turn to the leasing option.
Some places offer lease-to-own programs as well and they are worth looking into.
We usually like to say that purchasing your own truck is a better option and saves you money in the long run, but we know that not everyone has the capital to do so when they are starting out.
Whichever route you take, be sure to do your research and choose a truck that has a reliable track record.
If you are purchasing a used truck, make sure you are buying from a reputable dealer that offers some sort of warranty or guarantee.
Accidents happen, and having the proper insurance can literally save your business from going out of business.
Before you can even be licensed by the U.S. Department of Transportation (DOT), you will need to obtain general liability and cargo insurance.
The DOT requires you are insured for $750,000 – $5,000,000 in general liability and cargo insurance.
Before settling on an option, you should consider your companies needs to avoid overpaying for insurance premiums.
In order for a trucking company to be profitable, you need to charge your customers more per mile than your cost-per-mile.
The only way to do this is to accurately track all of your expenses and review your profit and loss statement.
Knowing your cost-per-mile is actually a key for success in an owner operator trucking business.
Your cost-per-mile calculation should include both fixed and variable costs.
Some examples of each include:
- Truck and trailer payments
- Mobile phone plan(s)
- ELD and health insurance premiums
- Truck maintenance and repairs
- Toll road fees
To accurately calculate your cost-per-mile you need to know the total miles you drove.
The average trucker drives between 10,000 and 14,000 miles per month.
You will want to make sure you are accurately tracking all of the mileage as well as fixed and variable costs to determine if you are profitable or not.
Once you know your cost-per-mile, you can determine how much to adjust your rates and the minimum load you can take to remain profitable.
In the owner operator trucking business, managing cash flow and controlling expenses is of the utmost importance.
It can literally make or break your business.
Owner-operator trucking businesses can be very lucrative and rewarding.
You get to be your own boss and there is no limit to your growth potential by adding additional trucks and drivers to your roster.
If your goal is to eventually stop driving, adding additional trucks and drivers can help you make the career shift from driver to managing the business from your home office.
The possibilities are endless!