Last Updated on September 22, 2023
The thought of becoming an owner-operator can be both exciting and daunting. On one hand, owning your own trucking company can provide financial returns that might not be obtainable by being a company driver, while on the other hand, there are added responsibilities that make for a more complex and time-consuming day-to-day job.
Fortunately, you can feel less overwhelmed by noting the following ways to become a successful owner-operator — some of which should also reduce time spent in handling those seemingly tedious daily tasks.
Continue reading to find out the responsibilities and requirements for owning your own trucking company, how to become a successful owner-operator, and frequently asked questions about transitioning from a company driver to an owner-operator. But first, what is an owner-operator?
What Is an Owner-Operator?
By definition, an owner-operator is someone who runs their own business while simultaneously remaining involved in said business’s day-to-day operations. In the trucking industry, an owner-operator is someone who has started their own trucking business and purchased their own truck(s). Owner-operators tend to follow one of two paths:
Operate under their own authority – Owner-operators that have their own trucking authority are responsible for finding loads to haul, maintaining their equipment, complying with rules and regulations, and handling general business operations.
Lease-on to a carrier – Owner-operators that choose to lease-on with a carrier have less overall responsibilities as the company they lease-on to are usually responsible for finding loads and managing paperwork. However, there is a fee that you must pay to the company you lease your equipment and services to in order to work with them.
What Do I Need to Be an Owner-Operator?
If you’re in the process of becoming an owner-operator or you’re aspiring to become one, remember that you won’t just be owning a truck; you’ll be owning a business. You may even be trying to become an owner-operator with no experience, or perhaps even no money. Therefore, do not dive head-first into this venture until you feel comfortable with the responsibilities, requirements, and expenses that come with this career.
Owner-operators have more administrative and business responsibilities than those that choose to be a company driver. Make sure that you’re willing and able to handle the following before pursuing an owner-operator career:
- Finding loads to haul
- Building relationships (with fellow owner-operators, freight brokers, carriers, shippers, etc.)
- Buying and/or leasing a semi-truck and equipment
- Semi-truck and equipment upkeep
- Paying for insurance costs and overhead costs
- Overseeing accounting responsibilities
- Organizing financial records and all paperwork, including DOT records
- Project-management tasks, particularly scheduling out your future truck loads and planning routes
- Driving your truck, including potentially loading and unloading your freight
- Any other administrative tasks, as needed
Keep in mind that if you choose to become an owner-operator without your own authority, you will likely have fewer responsibilities than what are listed above, but you will still have more than a company driver because you will be running your own business.
To be an owner-operator and to successfully fulfill your responsibilities, you’ll first need to obtain a Commercial Driver’s License (CDL), which includes passing written exams and driving tests. If you’re an existing company driver, you’re good to go, as you already have your CDL.
Aside from your CDL, you should know that there’s a significant amount of general driver qualifications, including being at least 21 years of age, having a high school diploma, and submitting your 10-year driving history from every state you’ve lived in.
Once you’ve ensured you are eligible to become an owner-operator, you can then shift your focus to the more logistical aspect of running your trucking business. Requirements for starting your owner-operator venture often include:
- Securing financing for your trucking business
- Finding equipment
- Registering your business
- Obtaining insurance
- Setting up and organizing an accounting system
- Complying with regulations
- Obtaining Safety and Training Certifications
One major component of those regulations is complying with FMCSA regulations as both a driver and an employer. This includes:
- Registering for a US Department of Transportation (USDOT) number
- Opening an account on the FMCSA portal (an online database aimed to enhance roadway safety)
- Confirming your USDOT number with the FMCSA Clearinghouse
- Choose a consortium/third-party administrator (C/TPA), which will help keep you safe via managing regulatory compliance.
- Confirming your TPA with the FMCSA Clearinghouse and granting them access via your portal
- Purchasing a query plan, which allows employers and C/TPAs to perform queries of drivers’ Clearinghouse records.
Some of the other FMCSA regulations that you must be aware of and comply with include:
- Hours of service regulations
- Electronic logging device mandate
- Safety fitness demonstration
- Truck inspection and maintenance
- Drug and alcohol testing
- CDL requirements
- Insurance requirements
Complying with regulations, obtaining necessary certifications, and registering your business aren’t the most thrilling aspects of becoming an owner-operator, but everyone has to complete this process. Now that you’re aware of owner-operator responsibilities and requirements, let’s move on to tips for becoming a successful owner-operator.
How to Become a Successful Owner-Operator
Becoming a successful owner-operator with no experience isn’t easy, but you can remove complexities from the process by closely following the steps listed below. Fortunately, if you’ve gotten this far, you should already have a good grasp of the obstacles that come with the job.
1. Speak with Other Owner-Operators
Dipping your toes in the water before jumping in is a good idea if you’re thinking of becoming an owner-operator. Aside from having a good understanding of the responsibilities that come with owning a trucking business, there are other methods that will prepare you as well.
One way to do so is by utilizing any existing connections within the trucking industry. Hop on a phone call with an established owner-operator to discuss their day-to-day or meet them for a cup of coffee. Doing so could not only confirm your interest in driving your career in this direction, but it may also give you a leg up over your future competitors.
If you’re unable to find someone to speak with face-face, you can also pose questions in popular online forums, such as Ask an Owner-Operator from Truckers Report.
2. Understand the Costs Associated with Running a Trucking Business
The costs of operating a trucking company can get quite expensive, but having a good understanding of what to expect can make becoming an owner-operator more approachable. For example, in 2021, owner-operators spent an average of $45,605 on fuel, coming out to about 48 cents per mile. Additionally, owner-operators who know their cost of operations earn $1.15 more per mile than those who do not.
Many of these costs will fall under the categories of insurance, fuel, accounting, equipment, business registration, and buying or leasing a truck. Plus, remember to account for overhead costs.
If you find your pre-planned budget won’t be enough to cover all these costs, you may need to secure financing via a bank loan or an alternative lending method.
3. Decide If You’re Going to Operate Under Your Own Authority or Lease On
This is a significant decision, as it will shape the outlook of your future trucking company.
By operating your business under your own trucking authority, you will have full responsibility for essentially all decision-making processes pertaining to your business. If you choose this route, you’ll have to put more emphasis on networking and marketing your business, along with finding freight to haul, than if you were to lease on to a carrier.
Leasing to a motor carrier takes a lot of the burden off your shoulders, as an agent handles most of the aforementioned networking, marketing, and load scheduling. However, it does limit your take home pay since your agent will take a cut of the profit your business earns.
4. Create a Business Plan
This is perhaps the most important step in becoming an owner-operator. Once you understand the ins and outs of the trucking business, it’s time to put together your trucking business plan.
When drafting up your play, do your research regarding important business metrics and financial measures that you’ll need to stay on top of. For example, the three essential financial statements are: a profit and loss statement, a business balance sheet, and a statement of cash flows.
More specifically, your trucking business plan should include an executive summary, a detailed company description that outlines the services you plan on providing, a market analysis, and a sales and marketing strategy. You should also prepare yourself to detail how you plan on financing your business, such as through savings or freight factoring.
Furthermore, you’ll need to:
- Choose the right location for your company’s headquarters
- Determine what kind of truck and equipment you’ll need
- Outline criteria for a potential new driver hiring process
- Calculate your startup capital
- Map-out how you’ll generate revenue
The final bullet leads us to step No. 5.
5. Have a Plan to Generate Revenue
Effectively planning and strategizing is of utmost importance for any entrepreneur or small business owner; this is no different for trucking owner-operators.
Examples of decisions and considerations that can make the difference in reaching your revenue goals include:
- Finding the right loads for your truck
- Having an effective marketing strategy
- Finding optimal routes
- Managing, organizing, and staying on top of expenses
- Negotiating beneficial rates and fees
- Which load boards to use
- Providing top-notch customer service
Important topics to research include exploring the different payment options for hauling freight, such as prepaid and add vs. collect freight. Doing so can ensure you’re making the best financial decisions for your business and by effect, boost profits.
6. Choose and Form Your Business Structure
Next is a fairly simple, but rewarding step. It’s time to establish and register your business by law by choosing a business structure.
For this step, it’s important to consult with an accountant or utilize your trusted network to help determine which structure makes most sense for your business: an LLC, proprietorship, corporation, or partnership. Doing so will provide your owner-operator business with all of the necessary legal protections and benefits.
Once you’ve made your decision, you can go about the process of registering your business, with the help of SBA.gov.
7. Ensure You’ve Completed Owner-Operator Requirements and Documentation
Once you’ve registered your trucking business, you officially become a business owner! But before you can get started with the fun stuff, like hauling freight, you still need to review all of the requirements, regulations, and documentation listed previously in this article to ensure you fully comply. This can be a tedious process, so be patient. Know that once you’ve reached this step, you’re close to having all of the housekeeping in the rearview mirror.
8. Be Cognizant of Potential Additional Federal Owner-Operator Requirements
Depending on the truck you purchase (or lease) and what state your business is licensed in, you may need to add a couple more items to your list of owner-operator requirements.
Heavy Use Vehicle Tax (HVUT). This is an annual fee, with the exact cost depending on the size of your truck, required for all owners of commercial motor vehicles over 55,000 pounds. For example, any motor vehicle between 55,000 and 75,000 pounds must pay $100 per year, plus an additional $22 for every 1,000 pounds above 55,000 pounds. So someone owning a truck weighing 60,000 pounds would have to pay $210 per year (210 = 100 + (22 x 5)).
You can find out more information about HVUT via the US Department of Transportation.
International Fuel Tax Agreement. Federal law requires commercial trucks to abide by IFTA laws and regulations. This means that, as an owner-operator, you must report your fuel usage and pay taxes based on the given amount. Certain states will require you to file an IFTA registration on a yearly basis, while others require registration quarterly. You should have your USDOT number, business name, and federal business number handy when filing.
9. Obtain All Relevant Insurance
As a commercial trucker, you must have general liability coverage to protect you and your employees in case of damage to the truck in an accident or bodily injury. If you’re leasing-on , check with your motor carrier to see if they will provide this primary liability insurance coverage.
Other owner-operator insurance coverages you should heavily consider include:
Non-Trucking Liability – For when you’re driving your truck for personal use (or when returning from hauling a load).
Physical Damage – Provides additional coverage for replacing or repairing damaged or lost trucks or equipment.
Trailer Interchange – Covers any damages to non-owned trailers being pulled.
10. Have an Organized Accounting System
Once you’ve completed all of the necessary documentation and verified that you’re abiding by all laws and regulations, you can move on to performing and setting up day-to-day, operational tasks. This includes implementing an organized accounting process.
If you’re an owner-operator with your own authority, you should research automated accounting software. Working for yourself, you have a lot on your plate, so limiting manual labor wherever possible is crucial. You might be surprised at just how much accounting work goes into running a successful trucking business. In fact, the average business handles up to 500 invoices per month. While you likely won’t be near that number when you’re just getting started, it can be beneficial to automate the process early so that when your business grows, you already have an efficient system in place.
11. Start Finding Your Truck Loads!
Finally, becoming a successful owner-operator is impossible without knowing how to find loads that will make you money and align with your planned routes. There are many ways to find loads for your truck, such as utilizing load boards or hiring a dispatch service. If you can map out your schedule effectively, you can build your revenue in no time.
How long does it take to become an owner-operator?
Becoming an owner-operator can take anywhere from several weeks to more than a year, depending on your experience as a truck driver.
If you’re an experienced company driver, it shouldn’t take too long since you already have your CDL and have undergone training. In this case, it may only take a few weeks to go through the process of setting up your business and acquiring the necessary documentation.
However, if you’ve yet to obtain your CDL and you’re planning on leasing-on, it could take years. This is because most trucking companies require drivers to have significant experience driving a semi-truck before shifting from a company driver to an owner-operator, and if leasing-on, you’ll have to abide by their requirements.
What is the best way to become an owner-operator?
There is no “best way” to become an owner-operator, but the first step should be thoroughly researching the responsibilities and requirements to become an owner-operator. While owning a trucking business can grant you flexibility and financial gains, it takes significant time and effort. Therefore, understanding what goes into the process gives you the best chance of becoming a successful owner-operator.
How do I become an owner-operator with no money?
If you have no money, it is still possible to become an owner-operator. However, you will likely have to take out a loan or look for alternative financing options to fund your startup trucking business. Some of the most popular financing options that assist trucking business owners with day-to-day operations include traditional bank loans (if you can qualify for them), invoice factoring, equipment financing, crowdfunding, and lines of credit.
What do I need to be an owner-operator?
First and foremost, you need to know the duties that come with owning a trucking business, along with any required documentation and federal regulations. Once you’ve ensured you can complete these processes, you’ll then need to create a business plan. Factors that go into planning your future as an owner-operator include whether you’ll purchase your own truck or lease a truck, what accounting system you’ll utilize, how you’re going to fund your startup trucking company, and how you’re going to generate revenue.
Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.