The business and ownership model for trucking carriers have remained virtually unchanged over the last 25 years. Most commonly, this consists of carriers with their own truck fleet and hired drivers, as employees or independent contractors, and in recent years some carriers have been increasingly adding independent owner operators to their fleet.
Owner operators (O/O) are drivers who own their truck, but work for a carrier under a leased service agreement. There is also a small but growing number of owner operators who also own their own carrier, and we call them carrier owner operators (COO).
Large Business (carriers with fleet & hired drivers) –
The oldest mode of operation for over 50 years is a carrier that owns the truck fleet and uses hired drivers to move the freight. Comprising less than 25% of the market, these large sized companies are well established and equipped. Some carriers hire drivers as independent contractors to avoid federal and state tax withholding, healthcare coverage, and other employee-related overhead. They depend on this model to be profitable, and in turn, must operate at razor-thin margins.
Small to Medium Business (carriers with various combinations) –
For the two third majority, the most common mode of operation in recent years is whatever works, carriers with a varied combinations of their own fleet or leased trucks, hired drivers or independent contractor drivers, as well as owner operators.
Approximately 350,000 trucks are O/O (owner operators are drivers who own and drive their own trucks). The O/O model offers the potential for higher earnings if well managed, where the carriers and owner operators are theoretically able to achieve a slim profit. For the O/O, this looks attractive at first, but this can be deceiving in the long run.
For the carrier, not worrying about the expense of buying and maintaining a truck helps the profit margin. But for the O/O, there are several expenses that come with truck ownership. Besides the initial cost in purchasing a truck comes the numerous other expenses which add up quickly. A few examples include preventative maintenance, tires, road use taxes, tolls, fuel taxes, personal taxes, breakdown costs, personal insurance, and more.
This segment of the industry where only 15% of newly formed trucking companies make it to their second year of operation. This carrier mode of freight transportation is broken, unsustainable and in dire need of solutions for it to succeed.
One-Man Enterprise (all in one carrier, truck and driver) –
A growing number of drivers have ventured into this model of one-man enterprise. It is very attractive, as they control the entire revenue after the broker’s commission. However, in addition to driving the truck, the responsibility of purchasing and maintaining a truck, starting and operating a carrier, as well as accounting, bookkeeping and taxes are now their responsibility.
Truckers, by design, should be focused on one thing: driving. But this mode of operation requires the driver to be running a business and cognizant of things such as keeping up with paperwork and insurance, government forms and taxes, booking loads & invoicing, and the Department of Transportation (DOT) requirements, to name just a few, all while operating and maintaining their tractor and trailer!
Not surprisingly, while financially rewarding, most carrier owner operator (COO) fail to maintain this one-man enterprise, for the amount of work is overwhelming. Collectively, the burden of costs to purchase and maintain equipment coupled with the crushing paperwork demands are slowly driving Carrier-owner-operators into extinction, and back into just being a driver.