Admin
April 9th, 2005, 13:04
Three options for entering the industry as a driver
This is the second of five articles written to assist you in considering expediting as a career
The expedited trucking industry offers three distinctive ways to enter this special field of transportation. In most other areas of the trucking industry, you can either drive for a company or buy your own truck and become an owner operator. Expedited trucking adds a rarely used option in the rest of the trucking industry; you can become a driver for a truck or fleet owner.
Company drivers can either be employees or independent contractors, depending on who actually owns the trucks. Companies who lease their trucks in many instances also contract with drivers for their services as independent contractors. Other companies own the trucks outright and hire drivers as employees. There are pros and cons with each arrangement and the drivers must be able to determine which of these is best for them.
Fleet owners in our niche, are individuals, partners, and groups of individuals, or companies who own expedited trucks. The fleet owner has the responsibility of providing vehicles with drivers to various expedited companies. The expedited company contracts with the owner paying either a percentage of each load, or a flat rate per mile for this service. It then becomes the owners responsibility to contract with the drivers for their efforts. Most of these arrangements place this driver in an independent contractor status, allowing for a reasonable amount of decisions to be placed in the drivers hands.
Owner operators have the same status here as they do in all other branches of the transportation industry. The vehicle is titled in their name, LLC or corporate name.
The owner operator is responsible for the cost of the truck, insurance cost, maintenance costs, and various costs associated with the contract with their chosen carriers. The owner operator gets both the drivers and the owners percentage of the carriers tariff. While the owner operator generally will gross more on an annual basis, the expenses encountered may not provide an individual with as much net revenue as a driver for an owner operator or as a company driver.
Which choice is right for you?
Before you answer that question, lets take a closer look at each option spelling out the major differences.
Company Drivers
Many of the smaller expediter carriers utilize company drivers. These companies sometimes have contracts with local companies and deal primarily with outbound expedited shipments only. Some of these companies pay their drivers a flat rate per mile in each direction, and some pay a higher rate for loaded miles than they do for empty miles. With hundreds of smaller companies to select from the methods of operation and pay should be investigated thoroughly. Many of these companies are well managed, fair and honest with their drivers and customers, and others operate in questionable manners.
Some are even notorious for taking advantage of their drivers. However sometimes, there are many advantages for working with a smaller expedited carrier. The smaller carriers usually know all of their drivers by name. This may not sound like a big deal to you now, but I have heard many experienced drivers complain that even after several years with a major carrier they are still known only by their truck number.
Some believe that company drivers or independent contractors working for a smaller carrier are treated much better personally and professionally. Smaller carriers using company drivers or independent contractors have a vested interest in their drivers satisfaction with working conditions and with their income. Some smaller companies will react to market demands and become more competitive with rates accepted, in order to keep their trucks rolling and their drivers satisfied with their incomes.
There are some of these smaller carriers whose experienced drivers consistently earn more that most owner operators for the major carriers. But don't get too excited yet. The bad news is that most of the smaller carriers insurance companies require two years driving experience, and the majority of them also hire only teams. If you choose to drive as a company driver or as an independent contractor, expect to have little to say about where you will be driving. These companies simply want to know when you will be ready to drive, and will not for the most part be interested in where you want to go. They are in business to maximize truck mileage and many have defined traffic lanes. Prior to accepting any offer, a prospective driver should ask as many questions as possible. If the carrier runs in the northeast and you despise driving there, it will not be a good match.
This selection will allow for the least amount of decision making of the three options. It also may be the highest paying, or could easily be just another driving job.
Owner Operators
While it seems to be the goal of most drivers entering the industry to become an owner operator, it may just be the worst selection of the three. Truck ownership is an expensive proposition. It is generally believed that this choice has the greatest potential of income in the expedited industry. In my humble opinion, this belief is undocumented. Many owner operators earn impressive annual gross revenues, but fail to see all the costs involved with this choice. Some very experienced drivers have accepted these beliefs without question and are shocked when they find that many company drivers and some drivers for owners actually earn more annual net dollars than the owner operator. I am quite certain that many owner operators reading this will find this impossible to believe, but I assure you there are many drivers who do not own a vehicle earning more annually than many of you who own your vehicle.
If these statements are indeed true, then why do most experienced drivers believe differently? Many owner operators fail to see all the expenses involved. Failing to understand these costs, some believe that the owner is earning more than a fair share of the revenue and feel that they deserve a larger share, thus setting their goal to move from driver to owner. Other owner operators enter the industry having heard that they can make a much higher income by becoming an owner operator and have never considered another arrangement, taking for granted that their income is as good as it gets. In my opinion there are two major factors that continue to fuel this belief. The first is the All American dream. This is an overwhelming desire for the pride of truck ownership, independence and a belief that the only way to get ahead is to work for yourself. The second factor is the self propagating belief itself. Carriers in need of additional equipment point out the pay differences while failing to point out the actual costs of truck ownership. Most will happily put you in touch with a preferred truck sales representative and some will even guarantee your payments.
The question then arises, why would they promote this scenario? Perhaps that question is best asked by another question. If this purchase is financially sound with such little risk and such great potential, then why is the carrier not buying trucks themselves? The answer is quite simple. There is significant risk. If the supply of trucks exceeds the demand, then each truck on the road will be earning less. If the carrier has a large number of trucks and is responsible for the payments, insurance, maintenance, licensing, permits, fuel taxes and other related costs, then the risk they have assumed could be the downfall of the company. Most expedited trucking companies own little if any equipment. All risks of ownership are passed to the owner operator. If the economy takes a nose dive, the only risks the company has is a loss of revenue. You the owner face the loss of your truck, your income and very possibly your home. It is my personal belief that if and when you can pay cash for a new truck, that this may be your best time times to become an owner operator. A downturn in the economy would then only cost you some of your income. If you are making payments the same downturn could cost you everything you have. Only the very experienced and financially sound should consider this as an option.
Fleet Owners
There are individuals and small organizations that have been in the business of supplying carriers with trucks and drivers for many years. Fleet ownership for many is an ongoing full time business. Fleet owners realize that there are reasonable sums of money to be made in this endeavor if the equipment is well maintained, reliable and professional drivers can be retained and significant sums of cash are readily available for emergency repairs. Fleet owners also understand that truck ownership does not guarantee success in this industry. Fleet ownership is simply a way for some well disciplined, intelligent business people to earn an income from their efforts and investments.
You will find some very professional owners with only a truck or two, and others who have fleets of 40 trucks and more. What determines a professional fleet owner is not the number of trucks they own, but driver retention. Truck drivers are generally independent thinkers who refuse to accept less than what they feel is fair. You will find very few professional drivers willing to accept unfair pay, poorly maintained equipment or unreasonable demands.
Fleet owners who have been in this business for several years will have references from present and or prior drivers who can verify the quality of equipment, maintenance policies, and what kind of individual or company with which you may be dealing. Great care should be taken in reaching an agreement or contract with a fleet owner. The professional fleet owner should be willing to provide you with an advanced copy of the contract or agreement that you will be expected to sign. Those who do supply the contract will normally ask you not to publish or circulate the contract. The professional fleet owner's contract is generally prepared by an attorney who did not prepare it as a favor. Do not agree to work with anyone without a written agreement or contract. Verbal agreements lead to misunderstandings and short term relationships. Contracts should cover all expenses and identify your responsibilities as well as the owners in clear and easily understood terms. If the contract is written in legalize which is difficult to understand, make arrangements to see an attorney prior to signing. You will find that it is better to spend a couple of hundred dollars prior to signing, than it is to be cheated out of thousands over a period of time.
Summary
Most responsible professionals in this industry strongly recommend to anyone considering entering this industry to begin driving for someone who owns the truck. This allows you to learn the industry without investing considerable sums of money. If you decide that you do not enjoy this niche of the trucking industry, or that the income is not what you thought it would be, then you have the ability to walk away without having thrown away your life savings or finding yourself in the position of having your credit ruined.
It has been said many times by many people, that this industry requires you to be a businessman first and a driver next. There are very few successful business people that would invest tens of thousands of dollars in a business venture without knowing exactly what risks are involved or what efforts are needed to succeed. There are newbies writing articles about the pleasures and benefits of becoming expedited drivers. There are stories about white collar professionals greatly increasing their incomes, of easy adjustments to expediter lifestyles and pie in the sky stories of becoming paid tourists. It is my opinion, that those who claim to have been successful white collar professionals, who have realized a significant increase in earnings, must not have been all that successful at their prior professions. You will not get rich or make hundreds of thousands of dollars a year as a driver or owner operator. Perhaps these story writers lived in a closet or a cardboard shelter under a viaduct and found the living arrangements of a truck sleeper to be superior. You will be driving in all kinds of weather, most of the time under strict time restraints that leave little if any sight seeing opportunities. Be realistic about your expectations and get the experience necessary to make your own calculated decision prior to investing your hard earned money in a truck.
Analyze the words of those who encourage your to invest your money in a truck for career that you know little about. What do those people have to gain and more to the point what do they have to lose? The answers to this question should be obvious.
Many people before you have ignored the warnings of caring, concerned, and experienced professionals. These people have seen others before you pay a heavy toll for jumping into this industry based on the irresponsible advice of others, some of which have yet to turn the key to their own truck.
Please use your common sense. This is not a get rich quick career. You can make a comfortable living, but you must again remember to be a businessman first.
Next... Choosing a Carrier
by: Tom Robertson, Editor
THIS ARTICLE IS PROPERTY OF EXPEDITERWORLD
This is the second of five articles written to assist you in considering expediting as a career
The expedited trucking industry offers three distinctive ways to enter this special field of transportation. In most other areas of the trucking industry, you can either drive for a company or buy your own truck and become an owner operator. Expedited trucking adds a rarely used option in the rest of the trucking industry; you can become a driver for a truck or fleet owner.
Company drivers can either be employees or independent contractors, depending on who actually owns the trucks. Companies who lease their trucks in many instances also contract with drivers for their services as independent contractors. Other companies own the trucks outright and hire drivers as employees. There are pros and cons with each arrangement and the drivers must be able to determine which of these is best for them.
Fleet owners in our niche, are individuals, partners, and groups of individuals, or companies who own expedited trucks. The fleet owner has the responsibility of providing vehicles with drivers to various expedited companies. The expedited company contracts with the owner paying either a percentage of each load, or a flat rate per mile for this service. It then becomes the owners responsibility to contract with the drivers for their efforts. Most of these arrangements place this driver in an independent contractor status, allowing for a reasonable amount of decisions to be placed in the drivers hands.
Owner operators have the same status here as they do in all other branches of the transportation industry. The vehicle is titled in their name, LLC or corporate name.
The owner operator is responsible for the cost of the truck, insurance cost, maintenance costs, and various costs associated with the contract with their chosen carriers. The owner operator gets both the drivers and the owners percentage of the carriers tariff. While the owner operator generally will gross more on an annual basis, the expenses encountered may not provide an individual with as much net revenue as a driver for an owner operator or as a company driver.
Which choice is right for you?
Before you answer that question, lets take a closer look at each option spelling out the major differences.
Company Drivers
Many of the smaller expediter carriers utilize company drivers. These companies sometimes have contracts with local companies and deal primarily with outbound expedited shipments only. Some of these companies pay their drivers a flat rate per mile in each direction, and some pay a higher rate for loaded miles than they do for empty miles. With hundreds of smaller companies to select from the methods of operation and pay should be investigated thoroughly. Many of these companies are well managed, fair and honest with their drivers and customers, and others operate in questionable manners.
Some are even notorious for taking advantage of their drivers. However sometimes, there are many advantages for working with a smaller expedited carrier. The smaller carriers usually know all of their drivers by name. This may not sound like a big deal to you now, but I have heard many experienced drivers complain that even after several years with a major carrier they are still known only by their truck number.
Some believe that company drivers or independent contractors working for a smaller carrier are treated much better personally and professionally. Smaller carriers using company drivers or independent contractors have a vested interest in their drivers satisfaction with working conditions and with their income. Some smaller companies will react to market demands and become more competitive with rates accepted, in order to keep their trucks rolling and their drivers satisfied with their incomes.
There are some of these smaller carriers whose experienced drivers consistently earn more that most owner operators for the major carriers. But don't get too excited yet. The bad news is that most of the smaller carriers insurance companies require two years driving experience, and the majority of them also hire only teams. If you choose to drive as a company driver or as an independent contractor, expect to have little to say about where you will be driving. These companies simply want to know when you will be ready to drive, and will not for the most part be interested in where you want to go. They are in business to maximize truck mileage and many have defined traffic lanes. Prior to accepting any offer, a prospective driver should ask as many questions as possible. If the carrier runs in the northeast and you despise driving there, it will not be a good match.
This selection will allow for the least amount of decision making of the three options. It also may be the highest paying, or could easily be just another driving job.
Owner Operators
While it seems to be the goal of most drivers entering the industry to become an owner operator, it may just be the worst selection of the three. Truck ownership is an expensive proposition. It is generally believed that this choice has the greatest potential of income in the expedited industry. In my humble opinion, this belief is undocumented. Many owner operators earn impressive annual gross revenues, but fail to see all the costs involved with this choice. Some very experienced drivers have accepted these beliefs without question and are shocked when they find that many company drivers and some drivers for owners actually earn more annual net dollars than the owner operator. I am quite certain that many owner operators reading this will find this impossible to believe, but I assure you there are many drivers who do not own a vehicle earning more annually than many of you who own your vehicle.
If these statements are indeed true, then why do most experienced drivers believe differently? Many owner operators fail to see all the expenses involved. Failing to understand these costs, some believe that the owner is earning more than a fair share of the revenue and feel that they deserve a larger share, thus setting their goal to move from driver to owner. Other owner operators enter the industry having heard that they can make a much higher income by becoming an owner operator and have never considered another arrangement, taking for granted that their income is as good as it gets. In my opinion there are two major factors that continue to fuel this belief. The first is the All American dream. This is an overwhelming desire for the pride of truck ownership, independence and a belief that the only way to get ahead is to work for yourself. The second factor is the self propagating belief itself. Carriers in need of additional equipment point out the pay differences while failing to point out the actual costs of truck ownership. Most will happily put you in touch with a preferred truck sales representative and some will even guarantee your payments.
The question then arises, why would they promote this scenario? Perhaps that question is best asked by another question. If this purchase is financially sound with such little risk and such great potential, then why is the carrier not buying trucks themselves? The answer is quite simple. There is significant risk. If the supply of trucks exceeds the demand, then each truck on the road will be earning less. If the carrier has a large number of trucks and is responsible for the payments, insurance, maintenance, licensing, permits, fuel taxes and other related costs, then the risk they have assumed could be the downfall of the company. Most expedited trucking companies own little if any equipment. All risks of ownership are passed to the owner operator. If the economy takes a nose dive, the only risks the company has is a loss of revenue. You the owner face the loss of your truck, your income and very possibly your home. It is my personal belief that if and when you can pay cash for a new truck, that this may be your best time times to become an owner operator. A downturn in the economy would then only cost you some of your income. If you are making payments the same downturn could cost you everything you have. Only the very experienced and financially sound should consider this as an option.
Fleet Owners
There are individuals and small organizations that have been in the business of supplying carriers with trucks and drivers for many years. Fleet ownership for many is an ongoing full time business. Fleet owners realize that there are reasonable sums of money to be made in this endeavor if the equipment is well maintained, reliable and professional drivers can be retained and significant sums of cash are readily available for emergency repairs. Fleet owners also understand that truck ownership does not guarantee success in this industry. Fleet ownership is simply a way for some well disciplined, intelligent business people to earn an income from their efforts and investments.
You will find some very professional owners with only a truck or two, and others who have fleets of 40 trucks and more. What determines a professional fleet owner is not the number of trucks they own, but driver retention. Truck drivers are generally independent thinkers who refuse to accept less than what they feel is fair. You will find very few professional drivers willing to accept unfair pay, poorly maintained equipment or unreasonable demands.
Fleet owners who have been in this business for several years will have references from present and or prior drivers who can verify the quality of equipment, maintenance policies, and what kind of individual or company with which you may be dealing. Great care should be taken in reaching an agreement or contract with a fleet owner. The professional fleet owner should be willing to provide you with an advanced copy of the contract or agreement that you will be expected to sign. Those who do supply the contract will normally ask you not to publish or circulate the contract. The professional fleet owner's contract is generally prepared by an attorney who did not prepare it as a favor. Do not agree to work with anyone without a written agreement or contract. Verbal agreements lead to misunderstandings and short term relationships. Contracts should cover all expenses and identify your responsibilities as well as the owners in clear and easily understood terms. If the contract is written in legalize which is difficult to understand, make arrangements to see an attorney prior to signing. You will find that it is better to spend a couple of hundred dollars prior to signing, than it is to be cheated out of thousands over a period of time.
Summary
Most responsible professionals in this industry strongly recommend to anyone considering entering this industry to begin driving for someone who owns the truck. This allows you to learn the industry without investing considerable sums of money. If you decide that you do not enjoy this niche of the trucking industry, or that the income is not what you thought it would be, then you have the ability to walk away without having thrown away your life savings or finding yourself in the position of having your credit ruined.
It has been said many times by many people, that this industry requires you to be a businessman first and a driver next. There are very few successful business people that would invest tens of thousands of dollars in a business venture without knowing exactly what risks are involved or what efforts are needed to succeed. There are newbies writing articles about the pleasures and benefits of becoming expedited drivers. There are stories about white collar professionals greatly increasing their incomes, of easy adjustments to expediter lifestyles and pie in the sky stories of becoming paid tourists. It is my opinion, that those who claim to have been successful white collar professionals, who have realized a significant increase in earnings, must not have been all that successful at their prior professions. You will not get rich or make hundreds of thousands of dollars a year as a driver or owner operator. Perhaps these story writers lived in a closet or a cardboard shelter under a viaduct and found the living arrangements of a truck sleeper to be superior. You will be driving in all kinds of weather, most of the time under strict time restraints that leave little if any sight seeing opportunities. Be realistic about your expectations and get the experience necessary to make your own calculated decision prior to investing your hard earned money in a truck.
Analyze the words of those who encourage your to invest your money in a truck for career that you know little about. What do those people have to gain and more to the point what do they have to lose? The answers to this question should be obvious.
Many people before you have ignored the warnings of caring, concerned, and experienced professionals. These people have seen others before you pay a heavy toll for jumping into this industry based on the irresponsible advice of others, some of which have yet to turn the key to their own truck.
Please use your common sense. This is not a get rich quick career. You can make a comfortable living, but you must again remember to be a businessman first.
Next... Choosing a Carrier
by: Tom Robertson, Editor
THIS ARTICLE IS PROPERTY OF EXPEDITERWORLD