Running a successful trucking business as an owner-operator requires understanding all the costs involved. Owner-operators face many expenses, from fuel to maintenance and insurance, that impact their profitability.
Determining the cost of operating an owner-operator’s truck is important in running their business. When calculating the cost, there are two types: fixed and variable.
Fixed costs are expenses that typically do not change, and the owner-operator will incur these expenses whether the truck moves or not. Some fixed-cost examples include.
This is the most important expense for owner-operators as it is a large portion of their operating costs. Influences such as miles driven, driving habits, fuel prices, and fuel efficiency all impact the amount of money spent on fuel. By implementing fuel-efficient driving techniques, you can minimize how much you spend on fuel, such as maintaining proper tire pressure, reducing idle time, and using cruise control.
Regular maintenance is important in keeping your truck in the best condition possible and preventing expensive breakdowns. Some maintenance expenses include tire rotations, oil changes, inspections, and filter replacements. Even with regular maintenance, unexpected breakdowns, and repairs occur. Having an emergency fund available or even opting for a warranty can lessen the financial burden of an unexpected repair.
Owner-operators must carry commercial insurance to protect their business and comply with legal requirements. Insurance premiums depend on coverage options, truck value, driving records, and experience. Shopping for the best insurance provider, keeping a clean driving history, bundling policies, and even opting for a higher deductible can help reduce some insurance costs.
Licenses and Permits
Owner-operators must obtain an operating authority such as a Motor Carrier (MC) number or a United States Department of Transportation (USDOT) number. Some fees are associated with obtaining and renewing these licenses and permits. The costs of these should be included in your overall operating costs. Depending on your jurisdiction and routes, you may need an additional permit, such as a temporary fuel permit, overweight permit, or toll permit. Fully understanding the permit requirements in the different states in which you travel can help lower unexpected expenses and fines.
Taxes and Bookkeeping
As business owners, owner-operators are responsible for paying and filing their income taxes. Adequate bookkeeping and working with an accountant can help with accurate tax filings and deductions. Maintaining organized records of expenses, invoices, receipts, and business-related paperwork is important for tax reasons. Owner-operators can use tools and software to help record-keeping organized for easy financial tracking.
Variable costs are associated with pulling loads and running the truck.
If you finance your truck, you are responsible for monthly truck payments, which should be considered when calculating your overall expenses. Owner-operators should consider the payments with potential income to ensure financial stability.
Owner-operators are subject to administrative expenses, including software subscriptions, office supplies, licensing fees, and other costs associated with running a trucking business.
After figuring out the cost of running the truck, owner-operators must factor in wages for themselves. In general, owner-operators should factor between 30% – 35% of the gross revenue generated by the truck as a fair wage.
Once all expenses have been calculated, they can be broken down into yearly, monthly, weekly, and daily. The owner-operators can then divide the costs by the miles driven. This will give them a cost per mile to operate their truck. After examining the cost of running their truck, owner-operators can better understand their expenses to generate more profit for their business.
Being an owner-operator is not about running impulsively but about knowing your cost and what is needed to generate a profit to run a successful business.