Working as an owner-operator is a demanding career path within the trucking industry, and it presents high earning potential for drivers. However, it’s not as simple as it may seem on the surface. When you’re an owner-operator, you're also a business manager who needs to maintain a steady focus on the bottom line, prudently managing expenses to ensure the business is profitable.
Before we jump into the management of owner operator expenses, let’s take a look at some industry statistics for owner-operators (courtesy of Zippia) to give you an overall view of the trucking and owner-operator landscape by the numbers:
- Over 600,000 truck drivers work as owner-operators in the US.
- 32.2% of owner-operators are women, and 66.8% are men.
- Owner-operators earn an annual average of $167,288.
Trucking is a large and highly competitive industry with a unique set of dynamics. And for those who understand and adhere to the necessity of managing their expenses, it can also support a highly rewarding and fulfilling career as an owner operator.
The Importance of Keeping Track of Your Expenses
The average owner-operator’s profit margin sits around 5%. That means about $1 of profit out of every $20 of gross income. When you’re working with such a narrow margin, every penny counts and it's essential to track every expenditure, no matter how insignificant it may seem
Tracking expenses is also only half the battle. Assuming that you diligently track your expenditures, the other half the battle is seeking ways to reduce those expenditures. You do not want to just maintain your profit margin, but also to expand it as much as possible.
7 Must-Know Owner Operator Expenses
Aside from the occasional one off types of expenses, such as staying in a motel while your truck is being worked on or purchasing a new mattress for your sleeper berth, there are a few rather predictable, consistent expenses that should form the core of your expense tracking strategy.
Because oil prices are highly sensitive to geopolitical events and economic swings, your fuel expenses are going to be your most volatile expense. And while you can’t control the fuel prices, you can minimize their impact by maintaining your equipment in good working order, using equipment with a strong track record for high MPG averages, and paying close attention to your driving habits.
Maintenance and Repair
These expenses are usually third in line behind equipment purchase and fuel costs. Every cent spent on maintenance needs to be tracked. It also helps to shop around for the best prices on mechanical work and parts replacements. Some key ways to reduce your maintenance costs include:
Conducting daily pre-trip inspections to look for small problems that can be fixed right away, before they become much more expensive and extensive issues.
Using warranties wherever possible - especially to cover the really big and expensive problems
Strictly adhering to your equipment manufacturer's maintenance schedules and suggestions.
Never cut corners when it comes to maintenance and repairs. It may seem like you’re saving money in the short term, but that approach can blow up in your face with a much more expensive repair down the road, or worse still, a regulatory fine and being placed out of service by DOT officers.
Permits and Licensing
Some of these can be expensive, but they are required to operate legally. Always track costs for your necessary permits and licenses, including the costs required for renewal payments.
Fortunately, permits are practically a fixed cost that you can easily anticipate. The only way that permit and license costs can lead to signifiant and unexpected expenses for your business is if you fail to obtain them and have to pay costly fines. The best thing to do is to keep all of your requirements up to date. You’ll save yourself a little bit of money and avoid a lot of headaches.
You have to have it. Always look for the best deals on insurance, scarce as those may be these days. The best way to keep this particular expense down is to operate your vehicle in a safe manner at all times, and keep up on your insurance payments.
As Ben Franklin said, nothing in this world is certain except death and taxes. You may be able to write off your operating expenses. Make sure you find a good tax advisor, report your earnings accurately and pay your taxes on time.
Cost of Finding Loads
You’ll do yourself and your fellow owner-operators a favor by supporting brokers who take smaller cuts.
Stay connected with your fellow drivers to find brokers with lower fees. You can also use technology like CloudTrucks to access load boards with low broker fees. If you’re serious about reducing your brokerage expenses, check out what CloudTrucks can do for you.
Food and Drink
Food and drink choices are personal decisions and we sometimes dissociate our personal decisions with our work. Therefore, it can be easy for us to overspend our hard earned dollars when buying food and drink.
Set a strict budget, keep all your receipts and/or use an app or spreadsheet to track your personal fuel expenditures. Look to reduce your on-the-road costs by taking food with you to prepare on the road instead of eating at restaurants. Make your own coffee and avoid replenishing your food and drink at pricey truck stops.
Your profitability will be determined largely by these seven expenses and how well you manage them. But, don’t lose sight of occasional expenses like new mattress, too. Those things can add up and put a real dent in your profitability if you’re not careful.
As is the case with any business, expenses come with the territory of being an owner-operator. They are inescapable, but they can be tracked and managed. The key to maximizing your profitability is a matter of diligence.
Regularly review your expenses and look for areas where you can reduce them.
Dedicating time and effort to your expense management can ultimately support your bottom line and lead to greater profitability. You also don’t have to do it all alone. Look for apps, spreadsheet templates, and other resources to help you track your expenses and automate the accounting related to them.
CloudTrucks is purpose-built to empower owner operators and their businesses. Join us today for our industry leading rates, aggregated load board access, 24/7 support system, schedule optimization, tracking software, business intelligence and more.