If you are thinking about taking the next big step in your career to become an owner-operator, it is important that you put yourself on the path to success. We offer you OOIDA’s Truck to Success, a 3-day in depth training curriculum that offers step-by-step guidance from the industry’s leading experts since 1973.
The OOIDA Foundation, educational and research affiliate of OOIDA, is offering this seminar online via Zoom from October 26-28, 2020 starting at 8AM central time. This comprehensive curriculum features trainers, both from OOIDA and other trusted experts, who are in contact with owner-operators on a daily basis to bring you the most up-to-date information possible.
If you are serious about your choice to become an owner-operator, then allow OOIDA’s expert staff, as well as their partners, to guide you from a company driver to a leased-on owner-operator, and/or to an owner-operator under their own authority.
The OOIDA Foundation’s mission statement is to fight for the rights of all truckers through education and research. Let us assist you on the road to success. Whether you are a company driver or an owner-operator who is struggling to make ends meet and is looking for a refresher program, come join us.
What should be in your business plan? More than likely, you will need to borrow money. To do this you must develop a plan incorporating specific information that reflects your opportunities for success. Over 90% of small businesses fail within their first year, primarily due to a lack of planning. Financial institutions want to know that you have done your “homework” and understand basic economic terms and trends within the industry.
It is critical to explore realistic short-, mid-, and long-term goals.
It is essential that you are able to show your cost of operations, including the fixed and variable costs. What are they and how can you control those costs? Learn what your operating assets are in comparison to your liabilities. Learn how to manage costs and be able to realistically project your financial success. Determine how much cash flow you will need to have in order to succeed.
Develop realistic operating procedures that reflect the freight you will be hauling, and the demographics of where the freight originates and where it is delivered. Understand that different freight lanes require different rates and why. Know where to get freight and when to use or to avoid load boards. Spot market versus contract rates. How to figure a fuel surcharge or should you figure a fuel surcharge, advantages and disadvantages? These are things that should be included in a business plan.
This first training class is an overview of what you need to succeed and what you will need to show to financial institutions and lenders in securing financing. The other training classes will help you to answer the multitude of questions that you will face in securing a realistic and comprehensive Business Plan.
One advantage of a new truck is that you can “spec” it to your operation. You will need to know the demographics of where you are planning to operate. Learn what specific tools are out there to help you “spec” for your operation. Is a 10-speed better than an 18-speed? What gear ratios and tire size should I use for my operations that gives me the best fuel mileage and power? What should you look for in truck and engine warranties? “Get it in writing” will be discussed. Our experts are not bound to any one engine manufacturer and can and will tell you the experience OOIDA has encountered with engines that should be avoided. What are the life cycle costs of new trucks and ancillary costs due to newer emission costs and maintenance? Keep in mind there are a few states that have lemon laws for trucks.
Used trucks are out there but how do you judge if the truck has been abused or taken care of, we have the experts to walk you through what to check and where you will most likely find the red flags. Should you ask for an oil analysis? Should you ask for the last ECM reading and how to read and look for potential problems with the truck and engine?
Whether buying new or used, going through a financial institution or leasing, your credit score will be reviewed. Learn what these lenders concentrate on, such as tradelines, both negative and positive. Tradelines will be discussed and what lenders look for on a credit application. The “magic score” on credit will be given and the whys of such a score.
What are the pros and cons of various financing options, such as:
- Finance lease
- Residual lease
- Lease purchase
Should you also purchase a trailer? What are the pros and cons of the various types of trailers?
Some types of insurance are required and the amounts are set by the Federal Motor Carrier Safety Administration. Other types apply depending on whether you are operating under your own authority or are leased on to a carrier. For those who choose to lease on for example, it is the carrier who is generally responsible for carrying the public liability. However, many carriers will charge the premium back to the owner-operator. Moreover, there are instances where the leased-on owner-operator will not be covered under the carrier’s insurance and will need their own instead. Finally, while some types of insurance are optional, they can provide an extra layer of needed protection.
Insurance costs will vary depending on a number of factors that are important to know and understand. Controlling cost is essential to success, but a single accident can cost you your business and all your dreams, so know what is needed and what is required. You cannot operate without insurance and it must be in place before you can begin operations. Learning how your truck and trailer costs, age, use, demographics and driving history affects your insurance rates is crucial.
There are some very definite pros and cons to both operating under your own authority or leasing on to a carrier. In OOIDA’s experience, leasing on for a specified time is usually the best first step into becoming an owner-operator. In doing so, you will sign a lease agreement, which is a legal binding contract between the owner-operator and the carrier. This is one of the biggest concerns and has resulted in many law suits between carriers and OOIDA. Special attention will be given to the leasing regulations and the responsibilities of the carrier and the owner-operator. The majority of owner-operators today choose to lease their equipment to a carrier, thus knowing your rights and liabilities of those leases are vital to your success or failure.
As an owner-operator under your own authority you must apply for that authority through the Department of Transportation. While the process is not complicated, it can be confusing and you want to have advice so as not to mark anything incorrectly. Thousands of authority filings are not filled out correctly and the DOT does not notify you so you may wait indefinitely without knowing. The OOIDA authority department will walk you through the process. There are potential pitfalls that you may not have considered. For instance you may want to haul hazmat, which is a whole different program, or you may want to list that you will to run in all 48 contiguous states, which will greatly affect your insurance rates and the number and type of permits you will need to purchase. As an owner-operator you are totally responsible for all aspects of your trucking business. There is a ton of extra paperwork and accountability involved and we will take you through it all providing guidance and suggestions.
All new owner-operators have to go through a new entrant safety audit, fail it and all that work you put in is gone as you will not be allowed to operate. We will take you through an audit and what the auditors are looking for, such as the 16 deadly sins. We will discuss each one in detail and teach how you can show FMCSA that you are not guilty of any of those sins. A compliance review for established owner-operators is essentially the same audit but with less tolerance for error. In today’s trucking world, FMCSA is conducting more focused audits based off of the carrier CSA scores. A brief look at CSA and its effects on your operation will also be discussed.
The most cited audit violation is the fact that the owner-operator does not belong to a drug consortium. It is mandatory that you belong to an FMCSA approved drug consortium and that your tests are conducted at a certified lab. While some individuals might be aware of the drug testing requirements for drivers, few are familiar with the requirements for an owner-operator under their own authority. For example, you will need a written drug policy that meets certain federal guidelines. We will cover questions such as what are your duties and responsibilities, what are the different types of testing, what does the DOT test for, and what happens if you fail the test? All of these affect your operating authority and your ability to keep your CDL.
There are three permits that all owner-operators must have:
- Unified Carrier Registration (UCR)
- International Registration Plan (IRP)
- International Fuel Tax Agreement (IFTA)
Learn what you must have handy when applying for your permits as well as some of the in’s and out’s. For example, for those who are leased-on, it is important that you do not let your carrier purchase your IFTA, as it could affect your taxes. Also, do not allow your carrier to pay for your Heavy Vehicle Use Tax, form 2290.
Learn which states have a mileage tax as you will need a separate account with them in order to drive in those states. Some states have a corporation tax for those carriers that incorporate, called a franchise tax. There are special permits that may be required depending on how you completed your authority filing. There are oversize permits, overweight permits as well, and in some states, trip permits.
As an independent business person you have entered into a different tax tier. You will have to pay taxes on a quarterly basis and if it is your first year, you will have to estimate your revenue and income. What deductions are allowed and what are not? You need to organize your tax information with the help of an OOIDA guide. Know what you can depreciate and when, especially if you have purchased a new truck. What you can claim as deductions as an owner-operator under your own authority and what you can deduct as a leased on owner-operator are different.
Should you incorporate? What are the pros and cons and what types of business structure works best for owner-operators: LLC, Partnerships, S-corporation or Sole proprietorship?
Almost all carriers, including owner-operators under their own authority, use brokers at some time or another. It is important that you do your due diligence when using and selecting a broker. It is important to understanding broker bonds, surety bonds and trusts. Filing on these bonds can be tricky but if you do your due diligence you are less likely to get burned by a broker.
Learn how good load boards work and how they can help you locate good brokers. Learn of the different load boards and the services they offer. Also know that relying on load boards is a sure way to lose money.
Factoring is probably not something you want to get involved with but it can provide a cash flow if in immediate cash need.