So You Want To Start Your Own Trucking Company?

Topic 26943 | Page 2

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Danny B.'s Comment
member avatar

No worries! Misunderstanding on my part. Just saw someone posting about being an O/O and there is so much that goes into it. Thank you!

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There are benefits to being an O/O and benefits to being a company driver as well. There is no one right way to do it!

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Danny, you're obviously new in here, and it seems you don't really understand our purpose here. We empathize, encourage and inspire new drivers coming into the industry. Teaching them that there are benefits to being an O/O fits nowhere in our stated purpose. In fact it's contrary to what we teach. We pretty much believe there is one way to do it, and we labor vigorously to inspire people to understand that. Teaching them to use factoring is just one more misconception that we don't need promoted here.

I know you think you're something of an expert at this, but there are plenty of other places you can share your knowledge. We are glad you're here, but we really don't need you educating us about the economics of trucking. Stick with the basics and you'll find yourself very welcome here.

Danny B.'s Comment
member avatar

I'm not here to tell you there is only one way to do things because the reality of this industry is that there are a number of ways to have success and every business has it's own needs. Here's the thing.. if someone truly has enough capital to wait out net 30 pay terms, by all means it is not worth them getting with a factoring company. Same thing for an owner operator who has been in business long enough to build relationships with shippers and starts hauling for shippers directly. Often times when this is the case you get paid on a weekly basis (guessing that might be what you have going on?) and again, factoring wouldn't be of much value. Where it really does come into play is helping new owner operators who are starting out under their own authority. By setting up with a good factoring company it gives O/O's access to instant credit checks giving peace of mind that whoever they haul for is in good financial standing and pays out every time, helps them to get paid out higher and diversify who they haul for as well by giving them the freedom to always negotiate how much they get paid instead of how fast, gets them paid faster than quick pay with same day or even 1 hour advances (depending on the factoring company), and takes the accounts receivable headache off their plate so once they submit the invoice the billing and collection is taken care of for them. In addition to this, good factoring companies usually offer a lot of other additional benefits like fuel and tire discounts, dispatch, business loans, and ELD discounts. You are right about factoring companies filing a UCC and always being made whole. That is why they have systems to make sure who O/O's haul for are always paying out. Anyways, just my thoughts! Factoring is not for everyone but it definitely has benefits for the right O/O's

Danny, factoring companies are nothing more than glorified payday loan sharks. Notice the 100 pages of legal papers you have to sign to get started?

They will also want to be listed as #1 beneficiary under any truck loans in case of the shipper not paying.

Some people use them because they find their services useful. Also, this is the year 2020. If someone says they take longer than a week to pay, than I'm not pulling for them. Plain and simple.

Shipper:

The customer who is shipping the freight. This is where the driver will pick up a load and then deliver it to the receiver or consignee.

Owner Operator:

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

BMI:

Body mass index (BMI)

BMI is a formula that uses weight and height to estimate body fat. For most people, BMI provides a reasonable estimate of body fat. The BMI's biggest weakness is that it doesn't consider individual factors such as bone or muscle mass. BMI may:

  • Underestimate body fat for older adults or other people with low muscle mass
  • Overestimate body fat for people who are very muscular and physically fit

It's quite common, especially for men, to fall into the "overweight" category if you happen to be stronger than average. If you're pretty strong but in good shape then pay no attention.

DAC:

Drive-A-Check Report

A truck drivers DAC report will contain detailed information about their job history of the last 10 years as a CDL driver (as required by the DOT).

It may also contain your criminal history, drug test results, DOT infractions and accident history. The program is strictly voluntary from a company standpoint, but most of the medium-to-large carriers will participate.

Most trucking companies use DAC reports as part of their hiring and background check process. It is extremely important that drivers verify that the information contained in it is correct, and have it fixed if it's not.

Marc Lee AKA The 100k mil's Comment
member avatar

Factoring companies charge between 1.5% to 3% depending on your volume of loads.... Landstar for example offer their own factoring for 1.5%. They set you up with a fuel card that gives you a 15% discount at the pump.... most loads go for 2.15 cpm ...if you are using a dispatching company they charge you 13% for the dispatching and handling of all your paperwork, uber freight charges 1% otherwise you can sign up with brokers directly if you are operating under your own authority

Another thing not mentioned in the article: FLOAT.

As in - most accounts-payable are "Net 30", and the time and expense that comes with having to CHASE YOUR MONEY.

Many O/O's choose to use "factors" - that is, people who will essentially pay off your BOL's, for a 10% fee. Usually only from "approved brokers or shippers". There's also CHARGEBACKS, BOL's that end up NOT PAYING - which results in your factor taking the $$ they advanced you BACK. Most factors will require you to be EXCLUSIVE TO THEM (no "multiple factoring companies") which means you can only take loads that THEY APPROVE (which are loads they have a high confidence will ACTUALLY PAY THEM). So knock another 10% of that gross revenue fee. It's a VICIOUS WORLD out there - between competition, shady brokers. And if you think you get used/abused by shippers as a company driver for a major company - O/O's end up even lower on the totem pole.

Also find the $1.85CPM from brokered loads might be a "little high". Spot rates from brokers are running a bunch lower now (haven't been on the load/brokerage boards in awhile). A lot of the rates are dependent on location. And many "slow lanes" are significantly less. You will NOT SEE $1.85 coming out of S. Florida - and many folks won't even come INTO S.Fla without a rate over $2.00 - so they can just turn around and deadhead out.

As far as a "rookie", just buying a setup and jumping in - most insurers will only insurer a "new guy" with INTRASTATE insurance for year one - which means NO OTR. Even that was incredibly expensive (upwards of $15K).

I did EXTENSIVE RESEARCH a few years ago at the possibility of purchasing a setup and getting on the road as an independent. Even with FULL CAPITALIZATION (as in $200K liquid) and a business plan approved my my accountant and attorney - the risk to reward ratio just DIDN'T JUSTIFY THE EXPENSE.

It's called: BUYING A JOB - and not a good paying one. The "return on investment" was so low, I would be better off putting my $$ in a CD or money market account...

For every GOOD REASON someone thinks they want to go O/O, there are THREE that say you shouldn't. Not to say that there aren't O/O's that aren't making a decent living (and I know a few) - but these are SEASONED VETERANS, not newcomers.

Rick

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

Shipper:

The customer who is shipping the freight. This is where the driver will pick up a load and then deliver it to the receiver or consignee.

OTR:

Over The Road

OTR driving normally means you'll be hauling freight to various customers throughout your company's hauling region. It often entails being gone from home for two to three weeks at a time.

Intrastate:

The act of purchasers and sellers transacting business while keeping all transactions in a single state, without crossing state lines to do so.

CPM:

Cents Per Mile

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

OOS:

When a violation by either a driver or company is confirmed, an out-of-service order removes either the driver or the vehicle from the roadway until the violation is corrected.

PackRat's Comment
member avatar

Factoring companies charge between 1.5% to 3% depending on your volume of loads.... Landstar for example offer their own factoring for 1.5%. They set you up with a fuel card that gives you a 15% discount at the pump.... most loads go for 2.15 cpm ...if you are using a dispatching company they charge you 13% for the dispatching and handling of all your paperwork, uber freight charges 1% otherwise you can sign up with brokers directly if you are operating under your own authority

double-quotes-start.png

Another thing not mentioned in the article: FLOAT.

As in - most accounts-payable are "Net 30", and the time and expense that comes with having to CHASE YOUR MONEY.

Many O/O's choose to use "factors" - that is, people who will essentially pay off your BOL's, for a 10% fee. Usually only from "approved brokers or shippers". There's also CHARGEBACKS, BOL's that end up NOT PAYING - which results in your factor taking the $$ they advanced you BACK. Most factors will require you to be EXCLUSIVE TO THEM (no "multiple factoring companies") which means you can only take loads that THEY APPROVE (which are loads they have a high confidence will ACTUALLY PAY THEM). So knock another 10% of that gross revenue fee. It's a VICIOUS WORLD out there - between competition, shady brokers. And if you think you get used/abused by shippers as a company driver for a major company - O/O's end up even lower on the totem pole.

Also find the $1.85CPM from brokered loads might be a "little high". Spot rates from brokers are running a bunch lower now (haven't been on the load/brokerage boards in awhile). A lot of the rates are dependent on location. And many "slow lanes" are significantly less. You will NOT SEE $1.85 coming out of S. Florida - and many folks won't even come INTO S.Fla without a rate over $2.00 - so they can just turn around and deadhead out.

As far as a "rookie", just buying a setup and jumping in - most insurers will only insurer a "new guy" with INTRASTATE insurance for year one - which means NO OTR. Even that was incredibly expensive (upwards of $15K).

I did EXTENSIVE RESEARCH a few years ago at the possibility of purchasing a setup and getting on the road as an independent. Even with FULL CAPITALIZATION (as in $200K liquid) and a business plan approved my my accountant and attorney - the risk to reward ratio just DIDN'T JUSTIFY THE EXPENSE.

It's called: BUYING A JOB - and not a good paying one. The "return on investment" was so low, I would be better off putting my $$ in a CD or money market account...

For every GOOD REASON someone thinks they want to go O/O, there are THREE that say you shouldn't. Not to say that there aren't O/O's that aren't making a decent living (and I know a few) - but these are SEASONED VETERANS, not newcomers.

Rick

double-quotes-end.png

Source?

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

Shipper:

The customer who is shipping the freight. This is where the driver will pick up a load and then deliver it to the receiver or consignee.

OTR:

Over The Road

OTR driving normally means you'll be hauling freight to various customers throughout your company's hauling region. It often entails being gone from home for two to three weeks at a time.

Intrastate:

The act of purchasers and sellers transacting business while keeping all transactions in a single state, without crossing state lines to do so.

CPM:

Cents Per Mile

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

OOS:

When a violation by either a driver or company is confirmed, an out-of-service order removes either the driver or the vehicle from the roadway until the violation is corrected.

Marc Lee AKA The 100k mil's Comment
member avatar

I work with many trucking companies

double-quotes-start.png

Factoring companies charge between 1.5% to 3% depending on your volume of loads.... Landstar for example offer their own factoring for 1.5%. They set you up with a fuel card that gives you a 15% discount at the pump.... most loads go for 2.15 cpm ...if you are using a dispatching company they charge you 13% for the dispatching and handling of all your paperwork, uber freight charges 1% otherwise you can sign up with brokers directly if you are operating under your own authority

double-quotes-start.png

double-quotes-start.png

Another thing not mentioned in the article: FLOAT.

As in - most accounts-payable are "Net 30", and the time and expense that comes with having to CHASE YOUR MONEY.

Many O/O's choose to use "factors" - that is, people who will essentially pay off your BOL's, for a 10% fee. Usually only from "approved brokers or shippers". There's also CHARGEBACKS, BOL's that end up NOT PAYING - which results in your factor taking the $$ they advanced you BACK. Most factors will require you to be EXCLUSIVE TO THEM (no "multiple factoring companies") which means you can only take loads that THEY APPROVE (which are loads they have a high confidence will ACTUALLY PAY THEM). So knock another 10% of that gross revenue fee. It's a VICIOUS WORLD out there - between competition, shady brokers. And if you think you get used/abused by shippers as a company driver for a major company - O/O's end up even lower on the totem pole.

Also find the $1.85CPM from brokered loads might be a "little high". Spot rates from brokers are running a bunch lower now (haven't been on the load/brokerage boards in awhile). A lot of the rates are dependent on location. And many "slow lanes" are significantly less. You will NOT SEE $1.85 coming out of S. Florida - and many folks won't even come INTO S.Fla without a rate over $2.00 - so they can just turn around and deadhead out.

As far as a "rookie", just buying a setup and jumping in - most insurers will only insurer a "new guy" with INTRASTATE insurance for year one - which means NO OTR. Even that was incredibly expensive (upwards of $15K).

I did EXTENSIVE RESEARCH a few years ago at the possibility of purchasing a setup and getting on the road as an independent. Even with FULL CAPITALIZATION (as in $200K liquid) and a business plan approved my my accountant and attorney - the risk to reward ratio just DIDN'T JUSTIFY THE EXPENSE.

It's called: BUYING A JOB - and not a good paying one. The "return on investment" was so low, I would be better off putting my $$ in a CD or money market account...

For every GOOD REASON someone thinks they want to go O/O, there are THREE that say you shouldn't. Not to say that there aren't O/O's that aren't making a decent living (and I know a few) - but these are SEASONED VETERANS, not newcomers.

Rick

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double-quotes-end.png

double-quotes-end.png

Source?

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

Shipper:

The customer who is shipping the freight. This is where the driver will pick up a load and then deliver it to the receiver or consignee.

OTR:

Over The Road

OTR driving normally means you'll be hauling freight to various customers throughout your company's hauling region. It often entails being gone from home for two to three weeks at a time.

Intrastate:

The act of purchasers and sellers transacting business while keeping all transactions in a single state, without crossing state lines to do so.

CPM:

Cents Per Mile

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

OOS:

When a violation by either a driver or company is confirmed, an out-of-service order removes either the driver or the vehicle from the roadway until the violation is corrected.

PackRat's Comment
member avatar

Yeah. I saw that on your Bio page.

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