Starting and running your own business is never a simple undertaking, but those who run their own trucking businesses have their own unique set of challenges. Several variables are considered when calculating the expected business operating costs. On average, an owner-operator trucking business needs to bring in $180,000 each year just to break even, which comes down to a price tag of $1.38 for each mile they travel.
Where Does the Money Go?
The biggest expense a trucker has is fuel. Nearly 40% of money spent goes into the fuel tank. Generally speaking, commercial trucks consume a far greater amount of fuel per mile than other road-going vehicles. Most of these rigs take in between 10,000-20,000 gallons of fuel, while a car uses closer to 500 gallons annually.
With fuel costs of around 40% – commercial truck uses $50,000-70,000 of diesel fuel per year, and another 15-20% of revenue generated is spent on equipment maintenance, repairs and upgrades. A hired driver takes on average 17-20% in salary and insurance, tolls, and licensing taking another 3-6%.
Despite the expense of running a trucking business, there’s still room for profit in the above average performance model, and finding higher-yield loads paired with investing in more fuel efficient trucks can increase the profitability of the business. A successful trucking business owner will evaluate each new client/load type based on size, weight, terrain, and distance to better understand the break-even point, looking for the most profitable types of loads and from there it’s a matter of replicating a successful model; taking your small trucking business and conservative profits to a scalable, sustainable, and profitable business model.
Taking On the Challenge
While the long haul trucking industry appears to have a small number of large operators, the truth of the matter is the majority of trucks on the road are owner-operator or small-fleet trucks, subcontracted through larger firms. While this can be a quick path in for the aspiring entrepreneurial trucker, costs add up quickly, so finding the right financing partner is a key step in growing your profit margins and expanding your business. Niche lenders can be hard to find, and approaching a big bank for a substantial loan can be a challenging sell, requiring the owner-operator to educate the banker on the finer points of freight business before reaching a decision.
This is where choosing a truck & trailer lending specialist such as Engs Commercial Finance Co. makes sense. Our financing professionals are intimately familiar with the industry and we can cut straight to the chase—working on your application. In the past few years, private trucking companies have seen higher success rates, and for those who have good credit, getting a loan to cover a truck or two is a great first step.
Since 1952, Engs Commercial Finance Co has been committed to helping local owner operators succeed, and have dealt with a variety of cargo options and have earned the trust of a wide range of businesses who come back to us for their financing needs again and again.