Don't Be Fooled By Owner Operator Math - Old School's First Podcast!!

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Steve L.'s Comment
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Really don't understand the negativity towards someone who would want to be an owner operator or small business owner for that matter. I know of two personally that are very successfull. That would be the American dream to me. If they can figure it out good on them. There are certainly both successful O/O's and small business owners. The small business association has said that "According to data from the Census Bureau's Annual Survey of Entrepreneurs, there were 5.6 million employer firms in the United States in 2016. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses."

Brian, I take much of what comes off negatively here, as trying to set the record straight. There are a lot of companies trying to convince people they should get locked into a lease program.

As for being an Owner/Operator; I was one in another business and was successful enough to sell that business after ten years. I was told by many people my idea wouldn’t work. But it did because I DID. Although I was successful, the business wasn’t worth enough to retire on (at age 50).

I personally know two people who went O/O in trucking. One was a complete disaster. The other continues doing well today, but he makes sacrifices many of us won’t. The successful one will also be the first to admit he has no desire to own multiple trucks and that it’s very demanding. My successful friend measures success a little different than I do. Ergo, he’s happy with his decisions.

But if you have no experience in trucking and are considering Owner/Operator, there are tremendous odds against you. While I don’t believe it’s impossible, I agree with Old School and Brett that owner operator isn’t worth it for most people.

I hope this helps.

Owner Operator:

An owner-operator is a driver who either owns or leases the truck they are driving. A self-employed driver.

Dm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
PJ's Comment
member avatar

OS congrats, you have done a wonderful job, as usual. I will share some info here, that I have purposely stayed away from. For those reading this not familiar with my background, I’ll make it short and sweet. I am retired and my retirement pays my bills each month. I got my CDL 5 yrs ago, because I got bored. I went through a company sponsored school and have worked for a few large carriers pulling boxs, refers, and tanks. I worked for a private fleet pulling a flatbed. I leased a truck from a major carrier and did ok. I got out of it due to the carrier abruptly changing the pay rate.

That said, I have purchased my own truck, yes its the one in my profile. I very purposely have made choices I wanted too. It’s only 2 months in. First I leased it onto the large carrier I had previously worked for that I have the utmost respect for, and know where the money is. Second I am not afraid to work. I have very detailed accounting software I use to keep track both of the profit/loss but also tracking my fuel mileage. One has to understand this business is very diverse and it has cycles. I am making money, but it is no where big money. I maximize my business deductions and take care of business first. My situation is far different from a normal truck driver, and I know it. I had money in the bank to start, and I keep growing it. I have a 3 yr and 5 yr business plan in place and after that I will be hanging the keys up. Let me get a few months of data together to show a clear picture and I post them. They will provide actual documentation of what OS, Brett, G, and others are trying to get across.

CDL:

Commercial Driver's License (CDL)

A CDL is required to drive any of the following vehicles:

  • Any combination of vehicles with a gross combined weight rating (GCWR) of 26,001 or more pounds, providing the gross vehicle weight rating (GVWR) of the vehicle being towed is in excess of 10,000 pounds.
  • Any single vehicle with a GVWR of 26,001 or more pounds, or any such vehicle towing another not in excess of 10,000 pounds.
  • Any vehicle, regardless of size, designed to transport 16 or more persons, including the driver.
  • Any vehicle required by federal regulations to be placarded while transporting hazardous materials.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

Brian's Comment
member avatar

Not angry at all. You might be because I'm questioning it but im fine. And Wasn't looking for pie in the sky numbers at all. I already knew the podcast was not going to be in favor of owner operators which is fine I don't really care I'm fine with where I'm at. I was simply curious. But there were no numbers at all. No hard facts. The only takeaway I got was you've talked to alot of owner operators that didn't know their numbers. I think what Pj is offering would be great. But this could go on day and night. I'm done with it.

Owner Operator:

An owner-operator is a driver who either owns or leases the truck they are driving. A self-employed driver.

Old School's Comment
member avatar
Not angry at all. You might be because I'm questioning it but im fine.

Sorry Brian, my reference to people getting mad at us was just a historical reference. I wasn't considering you as angry. And of course I'm not angry, I just keep trying to lay the record straight.

I guess I'm not understanding your request for numbers. You must be wanting to see actual results from an owner operator , which is something I can't give you. That's why I emphasize the percentage range of profits that we can easily access by looking into the financials of publicly traded companies. That's as real as it gets. Remember these companies have the advantage of economies of scale, which provides them a buffer against the little things that have an adverse affect on a small one truck operator. Things like down time for maintenance and repairs. Also remember they have clout to negotiate much better rates for fuel and the prices for tires and parts. These large operations have some built in advantages that are difficult to come by for the individual. Oftentimes owner operators will "lease onto" these large companies to get in on some of those goodies like the fuel surcharges, but it always comes at a cost. That cost is represented by their percentage rate of the load.

Owner Operator:

An owner-operator is a driver who either owns or leases the truck they are driving. A self-employed driver.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
PJ's Comment
member avatar

There are alot of companies that are still paying mileage. That is in their favor, not the O/O. And they get drivers coming through the door all the time. If anyone is interested Kevin Ruthford from sirus xm radio channel 146 does a radio show about the business side of trucking. I have learned a tremendous amount from him. I make 65 percent of the linehaul for a load, 100 percent fuel surcharge billed, as well as a full surcharge on all empty dispatched miles. and we don’t pull cheap freight. I pull a chemical tanker. I’ll give you 2 examples just for insight. Last month I had 21k of revenue on my truck for a 24 day period. That was decent. However I did a rescue load to ca and got stuck there for a week. This months revenue is looking like about 18.5k in total revenue. Sounds like a lot. UNTIL you start deducting expenses. I pay 2400 a month for the truck payment, 458 a month insurance, and small occassional fees like tags, tolls, HUT tax, which account for around another 150.00 a month. 400 a month straight into a maint. account, and I average about 1500-2000 a week in fuel. Like I said earlier let me get a few months worth of data, possibly a full quarter and I’ll post my profit/loss statement for everyone to see.

Linehaul:

Linehaul drivers will normally run loads from terminal to terminal for LTL (Less than Truckload) companies.

LTL (Less Than Truckload) carriers will have Linehaul drivers and P&D drivers. The P&D drivers will deliver loads locally from the terminal and pick up loads returning them to the terminal. Linehaul drivers will then run truckloads from terminal to terminal.
Grumpy Old Man's Comment
member avatar

No one is saying it is impossible to do, and definitely not about small businesses in general. I have a fairly successful small business, I'm just bored with it, and want to do something else. But I'm not getting rich, by any means. I would have to expand, hire people, and then the stress level just doesn't make it worth it any more.

But as an O/O, especially a single truck, you can make a decent living IF you are also a good businessman. Spending the gross income (revenue) as if it is your salary is a quick way to go out of business. You could gross $10,000,000 a year, but it is what you net that matters.

Old School's Comment
member avatar
Like I said earlier let me get a few months worth of data, possibly a full quarter and I’ll post my profit/loss statement for everyone to see.

PJ, you're probably going to have what Brian wants to see. My concern is that monthly and quarterly reports can have some wild swings in them. I'm happy for you to post them, but for a more accurate picture we should get a good look at a full year.

Will H.'s Comment
member avatar

My brother was a O/O working for a high CPM I believe it was 1.60. He thought he was going to be raking it in. He quickly found out that he was just making a bit more than driving a company truck and saw the train wreck that would be down the road. He ended up having to take on a partner and pay him something along the lines of 30 CPM total truck miles for it to work out and have a good exit. I had also twisted his arm to put his self on a CPM pay and to bank to pay for repairs and maintenance.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

PJ's Comment
member avatar

OS your exactly right. I was only offering some real numbers in a quick manner. For the really true picture a year is best. I’m not going anywhere so we can always do that. Will your brother should thank you for twisting his arm. It takes a lot of personal displine to run any business.

Rainy D.'s Comment
member avatar

I have real numbers from my boyfriends end of year lease settlement at Prime

keep in mind he is a team trainer, and i dont know how many weeks he had a student on the truck. He leases the truck. He said he thinks he did a total of two months total solo.

His annual revenue was approx $230,000

His costs including lease payment, fuel, insurance, mileage, repairs, payroll for trainees, payroll taxes and workers comp for the trainees etc was $158,000

So 230k minus 158k = $77,000

He paid out $22,000 in taxes from that. He has no health insurance, 401k, disabilty, life etc.

He went home a total of 18 days in one year. This does not count a 34 at home or a 10 hr while he had a load.

I grossed $72,547 the same year.

I went home 60 days, plus had down time in the terminals when I wanted. i trained only four months that year. So i got at least 42 more days of hometime and with 46cpm plus bonuses I make close to $250 per 500 mile day of driving. That would put me at another $10,500 if i stayed out as he did. So i would have been at $82,000 while he was $77,000

and i still would have had more down time because i was solo and he was running team. ********** if you break it down by cpm. Last years freight rates were lower than this year.

Last year he averaged $1.25 per mile (the lowest was 98cpm, the highest was $2.10). Rates have increased significantly this year, but fuel prices are fluid. He lives in FL and when he does go home, he has to take crappy paying loads to get out. So just going home for a quick 34 eats into profits.)

His avg costs per mile was .75cpm

So $1.25 - .75 = 50cpm NET REVENUE

These numbers include his trainer, on time delivery, and safety bonuses. Then the taxes come out.

My pay rate is 46cpm and i get a fuel bonus in addition to safety and on time delivery. That puts me just about even with him.

So why are costs so high besides the FL freight issue? Because with students you have to pay not only payroll, and the taxes, OWCP, but the deductibles for accidents. His truck was hit by 2 students which costs tow bills and hotel bills while truck was getting repaired. You pay extra fuel to get students home and pick them up. If a student must stay in training long enough to get health insurance, the lease op pays the health insurance employer premium.

Truck payment plus insurance, prepass, QC, phone app fees, settlement fees, OWCP, all come to about $1400 per week. WITHOUT fuel

In addition, he has to pay 10cpm for excess mileage and repair (they want any wear and tear paid for to make it ready to sell). So teaming that is $500 per week.

So $1400 for truck, $500 for mileage and we didnt talk about fuel or his pay. Fuel is a learned science. You must know which states to buy fuel in.

PA has a .77 cent per gallon tax. NJ is 44cpg CA is 56cpg. Oh is 22cpg.

As a LO/OO running under the mega carrier authority, you get their fuel discount... which can be 50cpg!!! Run under your own authority, or dont know which states have high taxes and you screw yourself. YES most states rebate the fuel tax a couple times a year, but not all. VA, KY do not. Theres others but i never looked that closely cause it doesnt matter to me. The point is, you need to pay the pump price and tax well before you would get any rebate.

Also when it comes to buying fuel, the day you do it matters. If you fuel at the end of the week, you can easily pay $800 to $1000 more than you expected that week because that fuel will come out of the current week but be used the following week. You need to know if the prices are changing the following day, because a 5cpg increase is huge. Buy it cheap when you can. Fueling at Carlisle PA Petro cause you like the showers will bankrupt you because not only are you paying 77cpg tax, but the pump price 30cpg more than the Flying J down the street.

You need to know freight lanes and rates. a $2 per mile load going into AL might sound great, but it is a freight dead zone. that means you are burning up fuel to dead head out. You need to know heavy freight vs light which determines how much fuel you will burn. Is broccoli heavier than tomatoes? You need to know the topography of the area. mountains will burn fuel more than flat KS. Running reefer you pay for that fuel, so now temps get involved. If you have ice cream at -20 in 120 degree AZ....you are gonna spend a ton of reefer fuel money. All this goes into deciding on a load, and a ton im sure i dont know or left out.

So we are still tallying..$1900 for truck and miles. At keast $1000 for student and employer taxes, and $1200 for fuel (5000 miles ÷ 8mpg × $2)

So $1900 + $1000+ $1200= $4100 and he didnt pay himself or taxes yet.

He is a lease op right and wants to make good salary...so add another $1900 which now puts you at $6000 revenue....but that is PRE TAX.

So figure you need to make $9000 per week to satisfy your $6000 costs and salary and pay the taxes. (dont forget the $1500 per year accountant fees and all those monthly bank fees).

In order to do all that, you need to run 5000 miles per week at $1.85 per mile and you get $9000. So when you get low loads, it is gonna hurt And THIS is what most newbies dont understand. They dont understand the "Get $30,000 at the end of your 3 year lease just for completing it". They dont understand that money is coming from the mandatory maintence and mileage funds the driver paid for.

Terminal:

A facility where trucking companies operate out of, or their "home base" if you will. A lot of major companies have multiple terminals around the country which usually consist of the main office building, a drop lot for trailers, and sometimes a repair shop and wash facilities.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

Reefer:

A refrigerated trailer.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

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