Creatures of habit
This variance can be explained by different factors, Brady says. “You might naturally be a saver. It could be a personality thing.” On the other hand, he adds, it makes good business sense to insure your business against the high cost of taking on debt in a crisis. Those who can avoid the cost of paying off the debt will have higher income over the years.
Owner-operator financial advisers recommend a cash reserve of $5,000 to $10,000. A workable rule of thumb for saving for major maintenance takes into account your truck’s age and the miles you run. It ranges from saving 2 cents per mile for a new truck up to 7 cpm for a 4-year-old truck; for older trucks, 10 cpm is recommended.
The absence of an emergency fund is one of the main causes for owner-operator failure. Many of those without a strong savings plan today won’t even be running their own truck in a few years, while those who plan for emergencies will survive.
Successful owner-operators stay on top of preventive maintenance to avoid downtime and get the most out of their equipment, whether they trade every three years or every 15 years.
Regular oil analysis stands out as a practice of high earners in the 2006 Behavior Report. “It can give you a heads-up as far as things going wrong in the engine,” says Luster.
On average, owner-operators performing oil analysis, about half of the total population, made $7,700 more per year than those who didn’t.
A new truck isn’t right for every owner-operator. Those new to the business, with little or no equity to help reduce the truck loan and its monthly payment, and without the miles or volume to guarantee enough income to cover the high monthly payments, usually do better starting out with used equipment. From there, they can build experience and equity. According to the Behavior Report, those who do buy new typically make $7,000 more than those buying used and $12,000 more than those leasing.
A new truck means less downtime, and strong warranties from new-equipment manufacturers save time and money on repairs when it breaks down. A buyer of new trucks whose trade cycle matches the warranty term never has to drive a truck that’s out of warranty.
Owner-operator Jerry Knight keeps track of cost per mile by charting his expenses in detail. “My wife does most of that,” he says. “It’s important.”
Tracking his costs and other operating information enables him to know exactly how his business works and helps him make sound decisions – for example, he says, his recent installation of a gen-set.
This is perhaps the key characteristic of high earners, Brady says. Making money comes from an awareness of every piece of the puzzle, from whether a shipper’s paid the fuel surcharge you asked for, to the fuel economy you’re getting after that in-frame overhaul, to what the level of metals in your oil means.
“I think guys who do oil analysis and things like that tend to be more focused on operating their business,” Brady says. “Also, the guys who record their business expenses and maybe analyze it a bit: ‘My insurance is too high. Maybe I’ll look around for a different carrier.’” These owner-operators have the information they need to separate best practices from stuff that just doesn’t work, thus boosting their take-home dollars in the end.