Keeping track of your expenses
You pay a price to be an owner-operator, not only in your commitment to finding freight and keeping your truck running but in the expenses required to get your business off the ground and on the road. You’re faced with decisions about your equipment, your business partners and your region and other operational choices, such as whether to lease out or drive independently. All these decisions will have an impact on how much it will cost you to be your own boss.
Whether leasing or not, first is the truck expense. If you can make a sizable down payment — several thousand dollars — you’re better off buying. At tax time, you’ll get three years of depreciation. You’ll face a smaller down payment if you lease, and you’ll be able to write off all the payments as they happen, plus take depreciation on the value of the truck if you buy it at the end of the lease, says David Wolff, sales manager at ATBS Leaseco.
Russell Fullingim of Truckers Financial Services suggests setting aside money to cover at least one month and preferably three months of expenses when you start. Don’t count on credit cards to get you through, because it will be hard to catch up on that high-interest debt.
Your insurance costs will vary depending on your truck’s value. For an ’05 with 500,000 miles, physical damage insurance will run $150 a month, Wolff estimates, while a new truck might cost you $300 to $400 monthly. Bobtail insurance might run another $30 to $50 – slightly more for a new rig – depending on where you’re running and what you’re hauling.
If your carrier requires worker’s compensation coverage, budget $120 to $160 a month.
For maintenance, figure 2 cents a mile for the first year of a new truck, 4 cents a mile for the second year, and bump it up annually after that, Wolff says. For a used ’05 or ’06, the per-mile figure is 7 to 8 cents. “We suggest drivers set aside $800 a month for maintenance, figuring 10,000 miles a month,” says Wolff, who strongly advocates creating a detailed budget and sticking with it. “You should never touch that money except for maintenance during the life of the truck.”
Fuel is anybody’s guess, owing to diesel’s volatility and how fast you drive and how much you idle.
Set aside money each month for maintenance, taxes, insurance, EZ-Pass through toll booths, food on the road and so on. Some of those expenses will be pulled from your weekly paycheck if you’re working for a carrier.
Now that you know your business expenses, it’s time to determine where your take-home pay needs to go. Everything from your mortgage or rent, utilities, car expenses, food and medical insurance needs to be accounted for. “If you’re on your own, you need to investigate medical insurance,” Wolff says. “That can be a deal killer for a driver who’s coming from a company to being an owner-operator.”
Fullingim says if you can’t cover all your expenses, make a profit and set something aside for yourself, “don’t do it. I see some guys whose profit is their fuel surcharge.”
In your planning, remember that hurdles await you. “Three major reasons an owner-operator goes out of business are a disastrous mechanical failure, failure to save for taxes and some kind of catastrophic health problem,” Wolff said.
Military man pays himself
After five years of planning to become an owner-operator, Robert Jacobs made the move in August 2008. During that period, he learned what it takes to make it on your own mentally and financially, he says.
From his years in the military, Jacobs learned discipline and mental toughness. And from his years as a company driver, he learned you don’t punch a time clock when you run as an owner-operator.
Jacobs had $5,000 when he began as an owner-operator. Of that, $2,000 went to a down payment on his leased 2005 Freightliner Columbia. He was able to hang on to most of the rest by working with ATBS Leasco and leasing on to a carrier.
On the financial side, Jacobs learned how to create a budget from ATBS and doggedly sticks to it. “I learned in the military you can’t spend what you don’t see,” says Jacobs, who is leased to Greatwide and is running Tyson Foods freight.
Each week, after his truck payment and other deductions are taken, 25 percent of his take-home pay is set aside for savings and investments before he gets his paycheck. “It works for me,” says the Columbia, S.C.-based Jacobs.
His budget accounts for household expenditures and for his personal expenses on the road. He stays with the budget even when his weekly mileage falls short of the 2,500 that he averages.