All That's Trucking

Owner-Operators: Endangered Species?

August 1, 2013

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The recession was tough on owner-operators. Add to that increasing regulations and more expensive equipment, and it’s no wonder some in the industry are saying the owner-operator is dead.

However, I spent the first eight years of my career writing for a magazine for owner-operators, and I believe owner-operators are more resilient than that. Yes, some turned in their keys due to financial hardship. Others are hanging up their hats because they don’t like the government telling them what to do.

Yet we still live in a country where the American entrepreneurial dream of being your own boss is alive and well.

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One way fleets can help drivers become owner-operators is through a lease-purchase program. The Owner-Operator Independent Drivers Association says EPA emissions regulations over the past decade have added at least $30,000 to the price of a new truck, along with causing some higher repair costs and reduced reliability.

Twenty years ago, Spencer says, OOIDA surveys showed almost half of owner-operators were buying their trucks new. Its most recent survey shows only about 20% are purchasing new equipment when it comes time to replace their trucks.

So it’s not surprising OOIDA says it’s seeing an increase in the number of lease-purchase programs offered by carriers. It views this increase as alarming, but it doesn’t have to be, if the lease-purchase programs are done right.

As Equipment Editor Jim Park, a former owner-operator, reports in this month’s issue, there are programs out there that seem designed to wring as much money out of the contractor as possible before repossessing the truck and leasing it to someone else. This kind of approach has given lease-purchase plans a bad name.

There’s also a tightrope to walk regarding the classification of drivers as independent contractors vs. employees, which Jim also covers. As he reports, a third-party company to handle the leasing and financing is recommended to keep that arm’s-length relationship the government is looking for.

Here are a few additional tips I’d like to add:

• Be open and honest about your plan’s details. If a potential contractor wants to let a lawyer review the contract, let him do so. Pressuring the driver to sign on the dotted line without taking time to do his or her homework makes it look like you’ve got something to hide.
• Just because someone has a CDL does not mean he or she is a good candidate to be an owner-operator. Some programs put drivers into their own truck when they’ve had their CDL for only a few months. I have to believe that is not an ideal situation. There’s enough to learn about driving and regulations before you pile on top of that all you need to learn about owning your own business.
• The most successful owner-operator companies help their owner-operators by sharing volume discounts and education. Landstar, for instance, named the Best Fleet to Drive For for Owner-Operators by the Truckload Carriers Association this year, has a mandatory business and safety course at orientation and every three years. However, as Jim Park explains, you need to be careful about how much of a helping hand you offer, lest the IRS or a state agency swoop in and declare your owner-operators to be employees.

The misclassification issue is arising in more and more state legislatures. At press time, the New York Motor Truck Association reported it had been successful in negotiating a compromise bill that it believes will protect independent contractor status in the state. The previous bill, the association contended, would have all but ended the use of owner-operators in New York.

If you use owner-operators or believe you may someday want to, make sure you get involved in your state association to help defeat similar efforts and protect a valued trucking industry practice. If you don’t, the owner-operator may be in more danger of extinction from such legislation than it is from the economy, equipment prices and federal safety regulations put together.

Comments

  1. 1. Clifford Downing [ August 01, 2013 @ 04:09AM ]

    The owner operator is far from becoming and endangered species. As an O/O myself, I have seen consistently higher revenues the last 5 years, and thru good business practices, net income amounts that also follow that trend line. I can do many things that carriers cannot. I have much more flexibility in implementing things that generate lower cost per mile figures. I have greater flexibility in adjusting "on the fly" various things that help in that respect. I have the flexibility to custom spec a truck that fits me and my operation more closely. The results are that I can carry 2000 lb more than the company trucks at my carrier, and I am getting roughly 20% better fuel economy than those trucks also. And at the same time, I did not skimp on driver comfort and amenities that many carriers do not spec in their trucks to keep costs lower. And I can do all of this while still using electronic logs and the new regulatory restrictions. Nope, the O/O is not a dying breed. Just a weeding out of the idiots that still want to pretend it is the 80's and 90's.

  2. 2. Heather Dunn [ August 01, 2013 @ 07:12AM ]

    Hi Clifford - Have you heard of Freightliner's Team Run Smart? (www.teamrunsmart.com) It is a site for owner-operators and has a lot of great fuel mileage and business tips. I think you would find a lot of the articles very informative and would like to see the MPG that our Pros, specifically Henry Albert, are getting.

  3. 3. F E R [ August 07, 2013 @ 07:37AM ]

    what is putting O/O out of business is the safer rating system and high cost of insurance. It is a corrupted system, e.g.: small municipalities are strapped for cash and ordering it's local police force to go after truckers to generate revenue hence driving up safety scores and allowing insurance companies to surcharge insurance rates or not offer insurance at all.

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Author Bio

Deborah Lockridge

Editor in Chief

All That's Trucking blog is just that – the editor's take on anything and everything related to trucking, with the help of guest posts from other HDT editors. Author Deborah Lockridge's career as an award-winning trucking journalist started in 1990.

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