Becoming an Owner Operator: Revenue & Expenses
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In our last blog, we discussed how if you’re starting out fresh as a new owner operator, it’s probably best to not stretch yourself out too thin when creating the operation. Decisions around the amount of trucks to purchase, people to hire, etc. should be made conservatively at first just until you get your bearings as a new business owner.
This is because expenses take a toll on all owner operator companies. With each new investment made, your expenses are going up. And this is on top of the daily operating expenses that come with moving freight, such as fuel and maintenance. These can be hefty costs that immediately chip away at your profit margin per load. If the market hits a downturn, you don’t want to be stuck with more expenses than revenue coming into the business. Even if rates aren’t great, there’s nothing worse than trucks sitting empty, drivers on the clock and no freight being moved by your company.
The important thing to do when starting your business is to understand the difference between your gross and net revenue. Gross revenue is all of the money earned from each load. Net revenue is the revenue that the owner operator ends up with from that load after subtracting all of the taxes, business and operating expenses. This should be kept in mind for each business decision you make, because not every owner operators’ expenses will be the same and it’s essential to know what you can take on.
To get the best loads for your business, make a lucrative net profit and set yourself up for success, there are many tools for owner operators to utilize. Fuel surcharge calculators allow you to calculate how much in fuel you may end up spending on a load and compare that to the revenue you can earn from it. DrayNow also has an Intermodal Spot Rate Tracker that gives insight into the average price per mile across all markets. And of course, there are plenty of business plan templates out there that help set your goals and keep track of all of your expenses.
In the end, it doesn’t matter how much gross revenue you’re bringing in if you’re investing too much from the start and not keeping track of your expenses. New owner operators need to make sure they have a clear understanding on their expenses vs. revenue so that they can make the most logical and profitable decisions for their business.
Check out the other posts in the Becoming an Owner Operator series, covering owner operators vs. independent contractors, obtaining operating authority & insurance, setting up the business, and setting up the operation.
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