Are you thinking of becoming an owner operator and buying your own truck? For those that don’t know, an owner operator is a trucking company that is owned and operated by the driver of the truck. This is a solo business where the driver is responsible for all aspects of the business.
There are many advantages to becoming an independent driver, however there are several major things that need to be considered prior to jumping into such a business.
At Ninja Dispatch we pride ourselves on being America’s best dispatching company. With over 4 years in business, we have been consistently growing year after year and have added an elite night dispatch and after hours dispatch crew. We’ve worked with hundreds of different companies and have noticed several issues that commonly occur when new carriers fail.
This article is written to inform you about what you need to consider before deciding to go solo. Ignoring these issues will likely lead you to failure. We don’t want to sound negative, however it’s better that you’re honest with yourself before making the financial decision to invest in a trucking company and losing a lot of money.
So let’s get started with the first issue, cash flow.
How long can your company survive without receiving a payment?
The biggest problem new carriers face is that they are completely unprepared for the reality of payment and payment terms when it comes to working with brokers and customers.
As a carrier, you must understand that you are at the mercy of the customer/broker you are working with as to when and how fast you will receive your payment. In an ideal world, everybody would get paid the moment they completed a task. The transaction would happen immediately. This isn’t true for trucking companies where payment terms can go up to NET 30 payments. For those that don’t know NET 30 means you must wait 30 business days to get paid. 30 business days is 6 weeks. That’s an awful long time to wait for a payment on a job already completed.
At Ninja Dispatch we recommend a realist outlook on how long you could survive without payment. Our opinion is that you should have enough money saved, to survive at the very least one entire month without receiving a single payment, yet running your truck full time. As crazy as it may sound to work for one month without getting paid, it’s actually the harsh reality of what owning a trucking company really means.
The one way around this issue is to work with a factoring company. Factoring companies will literally “buy” your invoice from you for a small percentage of the total price of the invoice. The carrier will receive the money the next day after delivering a load, however with that percentage taken out by the factoring company. The factoring company will then wait out the payment terms to receive the payment.
Lots of carriers use factoring companies because they need the cash flow to keep their operation afloat. We recommend doing your research and finding a good factoring company to work with, prior to ever hauling a load.
Let’s move on to the second issue trucking companies face, dispatching.
Do you even dispatch bro?
It is absolutely mind boggling if we were to tell you some of the phone calls and email requests that we receive at Ninja Dispatch. On average we receive in the range of one hundred requests per week to have owner operators use our services.
Our experience throughout the years has taught us to not sign on any owner operator that has less than 6 months experience and has never dispatched themselves. This goes for owner operators and company owners that just started out.
This may seem counterintuitive to have a dispatching company tell you, no we won’t service you until you’ve also dispatched your truck yourself. What’s the point of a dispatching company if they won’t dispatch?
Dispatching, booking loads, speaking to brokers and signing packets / rate confirmations is something that any business owner that gets into trucking should know how to do. If you want to become an owner operator, however you don’t understand what “generate a COI” means, then you may want to hold off on investing money into trucking. You’re just setting yourself up for failure, and you’ll be lost without a dispatcher. If your dispatcher quits on you, you’ll be literally… you can fill in the blank.
Here at Ninja we vet all carriers prior to working with them to make sure they understand what dispatching is. There is nothing worse than working with a client that hasn’t even gotten their feet wet in the trucking industry.
Sure, you can be a driver with 20+ years of experience, however running a trucking business is a whole different ball game. So before getting started in trucking, make sure you know how to dispatch your truck by yourself. That way, you’ll be able to identify what a good dispatcher is when you’re ready to hire one.
Also, be weary of any dispatching company that will eagerly sign on a truck driver with no prior experience. At Ninja Dispatch we stand behind the quality of our work and welcome quality experienced drivers to work alongside us. It is because of our experience in the industry that we require dispatching experience for any carrier looking to get signed up.
If you’re interested to learn how to dispatch, feel free to contact us for a one on one consultation at firstname.lastname@example.org.
Do you have an issue with being away from home?
A big red flag for us at Ninja is when a brand new owner operator tells us what his expectations are and it sounds like this:
“I’m looking for local runs, I want to be home every night, one pick one drop, and I’d like to make $6,000 – $8,000 per week.”
This is literally a phone call or email that we receive several times per week. It is the equivalent of saying that you want to go skiing in Kansas or search for pristine water in Death Valley, I’m sorry but it’s just not realistic.
Being home every night, especially when your MC number is brand new, will be extremely difficult to do. It’s possible to do this, however you may not be able to make enough money to stay afloat.
As a brand new trucking company you should be prepared to go OTR, or over the road. That is where you can make the money. An owner operator needs to mold to the market and not expect that the market will mold around what your wants and needs are. If you’re not ready to be gone from home for a minimum of at least one week, then do not get into trucking, or at least don’t start your own trucking business. As the old saying goes, you either play the game or the game plays you!
Don’t despair though, if you’re looking to be home every evening then maybe working with a larger trucking company would be your best bet. From our experience, companies that do local runs do so because they can offer their clients a larger fleet of trucks. Large manufacturers don’t partner with one man operations because they’re not as dependable as a large scale trucking company.
Do you think you can make money with cheap equipment?
One of the biggest points of failure in a new trucking company is the equipment breaking down and constantly needing repairs. We’ve seen many businesses go under because of this specific reason. Not only does it cost them their business, it also costs them their reputation. Having your truck break down, delaying a delivery, has costly repercussions for your company’s reputation.
Working as truck dispatchers we’ve seen many businesses fail due to sub par equipment in both the tractor and trailer. Before signing up a new client we take a look at their experience and also at the quality of their equipment. The year is more important than the make or model of the tractor or trailer. Also, whether or not their equipment has a warranty is equally important.
There is nothing worse as a dispatcher than booking high paying loads, putting your name on the line with a broker or customer, only to have a driver call you to let you know that his truck is broken down. Oftentimes, owner operators that go cheap on their equipment, don’t even have enough money to fix the equipment when it breaks. This is a complete gamble. It’s like going to the casino and putting all the money you have on red. It’s also very risky as a dispatcher to work with any company that has sub par equipment. If that equipment breaks, you’ll be the last person to get paid.
If you’re thinking about starting a trucking business or becoming an owner operator, remember this – it’s very expensive to go cheap. When you buy a cheap truck and trailer, you will without a doubt be coughing up money in the days, weeks and months to come at the service garage. You will also destroy your reputation and most likely will be blacklisted with customers and brokers.
Can you handle the stress that comes with trucking?
Last but not least, you’ll want to ask yourself if you can handle the stress that comes with running your own trucking business.
Dispatchers are often the central point of criticism by any trucking company, even though the majority of times these situations are out of our control. However, an owner operator needs to blame someone, so what better person to blame than the dispatcher that’s booking loads.
Drivers oftentime don’t understand payment terms. They expect to be paid right away, and are not prepared for waiting for tens of thousands of dollars. They don’t know how to dispatch their own trucks and therefore don’t understand what a dispatcher’s job actually entails. They’ll go through dispatchers thinking that the dispatcher is the problem. Some drivers think that once they’ve bought their truck, that they are the CEO of Trucking Incorporated and they deserve to be home every single night and to make a maximum profit. This couldn’t be further from the truth. Some owner operators want to take a gamble on cheap equipment, thinking they’ll buy better equipment once they make money, only to find themselves paying a towing bill more expensive than their entire rig.
All the questions that we’ve written above are the real deal. If you can honestly answer each of the questions and want to go into trucking then please give us a call and we can schedule a consultation.
Trucking businesses can be very profitable and have made many people rich. These people knew what it was they were getting into and were ready to make the sacrifices.
If you’re looking to get into trucking and would like a personalized consultation, or you are looking for a quality dispatcher or night dispatch, please reach out to us at email@example.com!