Steps to starting your own Owner-Operator business
You’re tired of your regular work grind and you’re looking for something new.
You’re tired of answering to a boss who just doesn’t get you.
Your life needs more flexibility so you can manage your work life balance more successfully.
If any of the above sounds like you, maybe a career as an owner-operator might be the right move. Becoming an independent owner-operator can be a great career. You’ll be the boss of your own show and call all the shots!
If you want to make the move or want some more information about taking your first steps to becoming an owner-operator, you’ve come to the right place. We have put together a comprehensive list of the steps you will need to get yourself set up and on the road.
Step 1: Get a CDL
In order to drive commercially you will need to get a commercial driver’s licence (CDL). If you are already driving for a company and are just looking to strike out on your own, you get to skip this step.
If you are new or have less than three years driving experience you may want to hold off on starting up as an owner-operator. Most insurance companies will want to see 3 years of verifiable insurance, which you can get when working for company. With less than 3 years under your belt you may find getting insurance to be very expensive, if not impossible to obtain
Instead, if you are brand new, why not get your CDL and try your career out with a company? You’ll gain the experience needed to grow while figuring out if this is the right career move for you, with lower start up costs. Then you can make becoming an owner-operator as part of your future career plan.
Now unlike getting your regular drivers licence a CDL is slightly more complicated. Depending on what jurisdiction you are in will dictate what you will need to complete to get your CDL. For example, in many Canadian provinces you are now required to complete Mandatory Entry Level Training (MELT) which involves a number of classroom and driving hours.
You will probably also need to complete a medical assessment with a doctor to make sure you are eligible to hold a commercial licence.
Step 2: Get a business plan
Being an owner-operator means starting up a business where you are the sole employee. To get any business up and running requires a business plan.
For anyone that a business plan is a new concept here is a run down on what a business plan should cover:
- Executive Summary: a description of your business and will touch on the below listed topics. You can write this last after you’ve sorted out the below information.
- Identify your business opportunity: this section goes over what you will do and includes who you are, what you do, what you will offer, and what market you will target. You will also cover what industry you are planning on entering, what your objectives are, whether you are a sole proprietor, corporation, or partnership. In this section you can include what makes you and your business better than anybody else out there.
- Marketing and sales strategy: This is a very important section. Identify who you customers are and how you plan to reach out to them. It’s all great to start up a business, but if no one knows about you, you will not get very far.
- Who is on your team: This may just be yourself, but if you plan on hiring someone to handle the books while you’re on the road, then you will want to include them here.
- Operations: When will you run? Where will you run your business from? Your house? Any technology requirements you might need (ELD anyone?)
- Financial forecast: This forecast should look 3-5 years into the future and include cash flow, and profit/loss forecasts. It can also include how much capital you need to get started.
- Other useful documentation: An approximation of when you plan to have everything in place to get rolling, and any other licences and permits you need to get started.
This is a quick run down on what can be included in a good business plan. Feel free to research what else might be important to be included in your business plan. A good plan may help with everything from securing any financing you may be looking for to get you running, to keeping you on track to get everything completed in a timely manner, or from missing any important steps.
There are many experts you from whom you can seek advice from such as business consultants, attorneys, and accountants.
Step 3: Expenses and Finances
Building the business plan in step 2 should make this step easier. Make sure you have a plan to cover the costs until you start turning a profit. Being your own company means you will need to cover your own living expenses until you can start paying yourself out of the profits.
Step 4: Get a Truck
Sounds simple right? Depends on your start up capital. You have two ways to get a truck: buy or lease. Figure out what is right for you based on your business plan and forecast. It might make sense to buy from the beginning, or maybe start out with a lease, and later when turning a better profit look at purchasing then.
There are three common leases:
- Operating (Full Service) Lease: You are in charge of taking care of the truck maintenance, taxes and permits, but have no obligations at the end of your lease.
- Terminal Rental Adjustment Clause (TRAC) Lease: This might appeal to many wanting to own their truck at the end. You make a down payment on the truck, then at the end of the lease you cover the remainder and own the truck. If you choose not to own at the end, the leasing company will sell the truck. If the leasing company make a profit, you will get it, but be warned: if they sell at a loss, you make up the difference.
- Lease-Purchase Plans: This type of lease is used if no down payment funds are available or if you have bad credit. You may pay more in the long run than other financing options.
Step 5: Getting Authorities
To be your own carrier, or not to be, that is the question.
All Shakespearean jokes aside, as an owner operator you have two choices: you can have your own equipment but work for a carrier and operate under their authorities; or you can become your own carrier with your own authorities. Both have plusses and minuses.
Operating under another carrier saves you the hassle of maintaining your own operating authorities, but of course this means they take a bigger cut of your profits.
Doing it yourself increases your profits, but you have to find the time, or hire someone for your business, to get, maintain and file your authorities. This is where a company such as ours becomes incredibly useful.
If you choose to maximize your profits and strike out as your own carrier you need to proceed to Step 6: Compliance which gives a run down on what operating authorities you will need to obtain.
Step 6: Compliance- Permits and Licensing
Alright, at this point you are getting closer to having everything you need to get your business as an owner-operator operational. Up next is the alphabet soup of permits and licensing you will need to be legal. Now this will take a little research as it depends on the types of loads you are planning on running, and where your home jurisdiction is, and where you plan to travel to. Are you hauling hazardous materials? Crossing international borders? The answers to these questions will determine what operating authorities you will need.
When determining your timeline for getting up and running, just note that it can take a few weeks for your operating authorities processed.
Here is a rundown on the operating authorities:
National Safety Code (NSC) or Commercial Vehicle Operator’s Registration (CVOR)
The National Safety Code registration is the common name used within Canada for an operating authority. For Canadian carriers, you file for this in your home province, and it follows you from the Atlantic Ocean to the Pacific coast. The province of Ontario calls this number a CVOR and Quebec calls this an NIR. To apply for your NSC number in Alberta all new carriers need to complete the Pre-Entry Program for New National Safety Code Carriers.
For US based carriers who want to operate in the Provinces of Quebec or Ontario, you will have to file for a CVOR number and NIR number as applicable.
DOT numbers and MC numbers for the United States
Interstate carriers in the United States and carriers based in Canada wishing to enter the United States will be required to obtain a DOT number. For-Hire Carriers will additionally be required to obtain a Motor Carrier Number which is your US Operating Authority. Those carriers requiring an MC number will have to provide proof of insurance and file a BOC-3.
IFTA: International Fuel Tax Registration Agreement
Interstate carriers will also be required to get International Fuel Tax Registration. IFTA fuel taxes are payable every quarter and reported to your base state. Additionally, the states of New York, New Mexico, Kentucky, and Oregon require additional mileage tax registration and reporting. Oregon requires a bond for all new carriers and require monthly reporting.
International Registration Plan or IRP
If you plan on leaving your home province, you will be required to obtain International Registration Plan. This is your plates. IRP plates are purchased annually, and fees are calculated based on prorated mileage and weight. Some provinces and states might additionally charge taxes along with the plate fee.
BOC-3
BOC-3 is an Agent of Process. BOC stands for a Blanket Of Coverage. An Agent of Process is a legal firm authorized to receive and forward legal documents in case of a legal proceeding in a given state. This is a US requirement.
Unified Carrier Registration or UCR
All entities with an active DOT number including brokers must file an annual Unified Carrier Registration (UCR). Fees are based on the size of the fleet. UCR replaced the former Single State Authority. This must be renewed annually.
Heavy Vehicle Use Tax (form 2290)
All commercial motor vehicles over 55,000 lbs that operate on US public highways must have proof of payment of the HVUT. Fees are based on the weight of the vehicle and are prorated based on the first date of use. Fees are transferable as long as proof of payment is retained with the vehicle. Canadian vehicles operating in the United States must also comply.
Hazmat, tobacco, alcohol and other regulated products
Carriers wishing to haul Hazardous Materials, tobacco, alcohol and other regulated products may have to apply for specific permits and licenses.
Carriers wishing to haul Hazmat in the United States must register with the Pipeline & Hazardous Materials Safety Administration annually. Additionally, some states require additional registrations.
Tobacco and alcohol registrations differ from state to state, some require permits, reports, and or registrations based on commodity or pick up and or delivery.
Drug and Alcohol Programs
All carriers operating in the United States must provide Drug and Alcohol testing to all their drivers. Drivers can not be dispatched on new hire until a pass Drug and Alcohol test is returned to the carrier. All drivers must be maintained within a random drug pool.
Canadian carriers DO NOT ever dispatch a new driver into the US until you obtain a passed Drug and Alcohol test back from your service provider!
The FMCSA New Entrant Safety Assurance Program
The FMCSA New Entrant Safety Assurance Program applies to all new carriers starting operations as an Interstate Carrier in the United States. Carriers WILL BE audited within the first 18 months of operations. Carriers MUST pass this audit to obtain their permanent operating authority. Auditors will examine all files, logbooks, and other documents and records to ensure the carrier is complying with all safety regulations.
Clear as mud, right?!? Just remember there are operating authority specialists, such as ourselves here at PSTC, who can assist with getting you these authorities with the least amount of hassle.
Using services of a consultant can help you not only get set up, but also maintaining these authorities (you’ll need to renew and file for each of these on a quarterly, annually or biannual basis depending on the authority). There are often severe penalties should you miss or forget to file your operating renewals.
Not only are there fines, but often you are taken out of operation which of course costs you more money. It can also affect your safety rating.
Definitely something to take into consideration!
Step 7: Make money!
Okay that sounds great, but you have a few things to consider. You have everything in place to be operational, but now what kind of loads are you going to haul? As set out in Step 2, this will be part of your business plan. But here is a spot in this blog post for you to take a few minutes to consider what you will do.
When you start out you may not be able to be as picky about what loads you take on as you want to make money. But keep in mind: when you niche down and specialize in particular loads you will be able to make a name for yourself among businesses that require your services, and you may be able to command higher payouts for those loads.
Ready to get started?
We can help make your dream a reality. We offer support for the behind the scenes running of your business that keeps you operational and compliant. You can chat with one of our experts at any time to find out what we can do to get you up and running.
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