As an operator, you know enough to strike out on your own. But becoming an owner-operator means more than just being the boss. Your two roles—as an operator and as an owner—require different skill sets. And, you will need to master both roles.
Too many first-time owner-operators don’t appreciate what it means to step out of the rig and put on the owner’s hat. Here are ten common mistakes made by operators who take the plunge.
1. Going it Alone. As an operator, you’re an expert. As an owner, not so much. Successful owners aren’t afraid to surround themselves with people who have special knowledge and experience that they lack. In fact, that’s one sign of a good owner. Talk to established owner operators about how to set your own business up for success and keep building those business relationships.
2. Letting Family and Friends Steer You Wrong. They mean well, but your loved ones and friends might be doing you a disservice by encouraging your every idea. Related, most of us know a downer or two. They may be close friends, yet their nature makes them quick to dismiss your dreams. No harm in listening politely, but when it comes time to make important business decisions, make sure that you’ve consulted well beyond your family and friends. Pay special attention to the advice of folks who have been where you’re planning to go.
3. Skipping the Business Plan. From your experience in the driver’s seat, you might know the industry inside-and-out. But you should still draft a detailed business plan that spells out clearly where you intend to take your business and how you’ll get there. You wouldn’t head off on an OTR route without knowing where you were going and what lay ahead. A business plan is a map for your new company.
4. Failing to Plan Adequate Cash Flow. A big part of your job as owner will be smoothing out the financial bumps and ensuring that you have enough cash on hand to deal with whatever expenses come your way. Be sure that you understand the fixed and variable expenses for which you’ll be responsible. Build a reserve fund for Maintenance & Repair. It’s up to you as an owner-operator to keep things moving forward even when times are volatile, business is light, repairs are many – or when you take a week off to go fishing.
5. Taking Bookkeeping Too Lightly. To get a handle on your business’s performance, predict future needs and opportunities and prove your creditworthiness to lenders, you’ll need a solid bookkeeping system. Too many owner-operators cut corners on their bookkeeping. A solid set of books can reveal your overhead per mile and other basic measures like monthly profit and loss. You have plenty of options here, so choose one and commit to it.
6. Not Shopping Around for Customers. As an owner-operator, your customer is whoever signs your paychecks. If that’s a fleet, be selective before making any commitments: Expectations and pay can vary widely. If it’s a broker, check around to be sure that you’ll have a chance to compete for enough business, at fair rates, to keep your company operating successfully. Once you’ve chosen a customer, do everything you can to deliver value. It works best when your customers are happy. This stabilizes customer retention and improves the chances of valuable referrals.
7. Buying a Truck Right Off the Bat. Once your owner-operator business has a long track record of success and a great relationship with its customers, you can think about buying a truck. Until then, leasing is your best bet. After you learn which freight lanes and types of freight work well for you, you’ll have a much better idea of how to spec the truck purchase for your needs.
8. Signing a Lease Before Examining It. Lease agreements can look similar. But be aware they can differ greatly. Be sure to study a lease’s terms and be sure that you have the cash flow to cover your payments – even in lean times. Also, consider the options you’ll have at the end of the lease. Will you be on the hook for any penalties or charges when you return the truck? How much would it cost to buy the truck outright? And, to be certain, note the options available if you need to vacate the lease midway through the contract. If its practical to do so, once you’ve studied a lease agreement, it’s a good idea to compare it against a couple of others. Take your time here, it’s a significant decision.
9. Hesitating to Build a Team. Between the excitement of starting a new business and the need to keep costs down, you’ll at first probably be wearing a lot of hats. Remember, no one’s great at everything, and before long you’ll want to find others who can bring expertise to things like maintenance or accounting. This will free you up to do the things you’re best at. Whether you hire employees or strike long-term relationships with contractors, you’ll need a supportive team to give your owner-operator business its best chance of success.
10. Forgetting that You’re an Employee, Too. Most of us have worked jobs that offered lousy benefits (or none at all). We know it is difficult to do our best when we’re worried about the future or dragging ourselves to work despite illness or injury. Treat yourself better than that. Find an affordable insurance plan—through a marketplace or HMO, for example—and don’t be too proud to use it. You might even enter a worker’s comp program designed for sole proprietors, in case repairs or medical problems keep you off the road.
Owner Ops are the backbone of the industry …to thrive and build a successful future avoid these 10 mistakes….