With skyrocketing fuel prices, rising insurance and equipment costs and an often grueling schedule, finding and maintaining meaningful success in an owner operator truck driving job is a challenge for even the most skilled owner operator truck drivers.
On the surface, it sounds easy to acquire a Kenworth or Peterbilt semi truck, find all the profitable truck driver jobs you can handle, and make $100,000 per year after taxes. The fact of the matter is that most owner operators are not nearly this successful. Rather, it is estimated that less than 10% of independent owner operator truck drivers make this kind of money.
Inexperienced truckers are the most susceptible and vulnerable to this financial management challenge during the initial 0-24 month period after they choose to dive into ownership.
Unfortunately, the trucking industry has a terrible reputation of chewing up and spitting out individuals taking on new, independent truck driving jobs or expeditor’s like a tobacco chewing cowboy at a rodeo.
For years, the Trucking industry has failed miserably to cultivate, train, and nurture drivers to help them manage the financial side of the business and avoid the pitfalls associated within the ranks of semi truck drivers.
The most important similarity among all successful independent truck drivers have in common is that they have set aside an emergency cash fund. Because the primary key to any successful business is managing cash flow, nothing is more important to the profitability of your trucking business than good business decisions in this area. As an independent owner operator truck driver, you and you alone are responsible for managing every aspect of your business cash flow.
Effective cash flow management is what determines your profitability at the end of the month. Most successful truck drivers we interviewed recommend that individual truck drivers have 3 to 6 months of after tax cash in a fund for emergencies such as a loss of job or unexpected major expenditure.The emergency cash fund should include all of your business expenses stashed away including truck payment, insurance, maintenance, etc.
Here are some emergency fund guidelines for owner operators. A recent trucking magazine survey found that:
- Almost 60% of those surveyed have emergency funds that average $11,500.
- Among those who have established such a fund, about 65% felt comfortable with an emergency fund closer to $14,000
- Owner operators indicated the emergency fund should equal about 33% of your operating income (revenue – expenses = operating income)
- Newbie owner operators usually accept the risk reward ratio with nothing more than God’s blessing and a thoughtful prayer support group. Emergency funds at star-up are usually non-existent.
- Saving for the unexpected requires detailed record keeping and unwavering discipline.
In summary, two key points to take on the road with you. First, discipline yourself to immediately establish and maintain a 3-6 month emergency cash fund that includes all of your operating expenses. Second, pay for all emergencies with cash that has been earning interest for you rather than with cash for which you’ll pay someone else.
We’ll see you next time with more independent truck driver secrets to success.