Owner-Operator Expenses: The Costs That Determine Your Profit

When you’re an owner-operator, you deal with razor-thin profit margins all the time. When healthy, your profit margins range from 15% to 25% of your gross revenue after owner-operator expenses. However, many operators even see a range of 8% to 15% because how much it is depends on how good you are at managing your expenses. Some are even as low as 5%.

Because it can be hard in this business, you want to understand your expenses well so that you can drop your costs whenever possible. At Trucker Social, we plan to look closely at owner-operator expenses to give you a picture of what it takes to run a business like this.

Why Lower Your Costs Wherever Possible?

If you don’t actively seek to lower your expenses as a trucking company, you will walk away with a 6% profit margin. What that means is that for every $25 you earn in total profit, you will only earn $1.50 in profit. All the other revenue goes toward your expenses.

You can raise your profits in two ways, but it would be a good idea to focus on both. First, you can add more to your gross revenue.

Let's take a look at what if you made $75,000 in gross revenue. If you only had a 6% profit margin, that would mean that you only made $4,500 in take-home pay. This is why knowing how to lower your expenses matters so much.

If you raise your profit margin, even to 10%, suddenly, you have $7,500 in take-home pay.

How to Reduce Your Expenses

You can lower your expenses in a couple of ways to increase profit margins, and this would include doing things like:

• Reduce your speed to 55 mph to 60 mph

• Eliminate idling by installing an engine-off climate control

• Use fuel cards for discounts on fuel

• Keep your tire pressure at 100 to 110 PSI for steer tires for best fuel economy

• Get rid of empty miles wherever possible

• Shop around for insurance to find the best deals

The Biggest Expense for Owner Operators

One of your biggest owner-operator expenses will be related to fuel costs. You could spend anywhere from $50,000 to $85,000 per year on fuel for each truck. Typically, you can expect it to take anywhere from 25% to 35% of your total gross revenue.

To understand how much you spend on fuel, you just need to figure out how much, on average, you pay for each mile. The formula you use is:

• Price per gallon ÷ Average MPG = X, multiplied by how many total miles you plan to run.

There are also different fuel efficiency techniques you can use to save money, like putting the truck on cruise or avoiding rapid acceleration and braking.

Costs for the Truck

Behind fuel, this will be your second largest in terms of owner-operator expenses. This one ranges from the costs of the truck itself, where you might need to make monthly payments, to tires and maintenance. Normally, maintenance costs will be $0.10 to $0.15 for every mile you run. How much depends on your truck’s manufacturer and model and the year it was built.

With this cost, we would recommend you plan for next year’s breakdown. If you don’t have a plan when you get an engine overhaul or an eventual breakdown, it can put you in a tough place.

The American Transportation Research Institute (ATRI) reports tires cost owner operators anywhere from $1,000 to $4,000 per year. For owner-operators who lease a truck through a carrier, you should check to see if you can get a driver discount on things such as gas and tires since they do offer this occasionally.

Insurance

You can’t skip out on insurance. Trucking insurance runs owner operators anywhere from $3,000 to $25,000 per year. For businesses with no past history, you can expect it to run anywhere from $15,000 to $25,000.

Under USDOT, truckers are required to have at least a $1 million policy. One of the ways that you can get a break on this is by paying upfront if you can afford the large lump sum.

Taxes

The tax landscape can be highly complicated in trucking, so we would advise you to get an accountant who specializes in it. You want to keep detailed records of your income and your expenses. Doing this will allow you to get as many deductions as possible.

As a business owner, you will now need to file quarterly, but this can be an advantage since you don’t want a huge bill at the end of the year, along with a penalty for not filing quarterly. Putting aside a certain portion of your earnings from every paycheck is the best way to deal with taxes.

Food & Drink

You need to pay for all your food and drink while out driving. If you have truckers, as the company, you might offer to pay for theirs, and this is known as per diem, and it can make your trucking company look more attractive as a job, but it can also lower your profit margins. This gives you budget predictability, and it lowers the risk of fabricated receipt claims.

Finding Loads

Finding loads is one of the harder elements of being an owner operator. Many opt for load boards to help them find loads, but this does cost money either monthly or annually. Depending on the load board, it will cost you anywhere from $35 to $170 per month. It is typically lower if you decide to pay annually.

Free load boards do exist, but paid ones are better because you get data like average days to pay, broker credit scores, and lane rate analytics to keep you from getting lowballed.

You could also do dispatch services. Typically, you need to pay anywhere from 5% to 10% of the gross linehaul revenue per load, which adds to your truck owner operator expenses.

Licenses, Emissions, and Tolls

You need to make sure on your own that you have everything needed to operate. This includes an MC number, which will cost you $300 for a filing fee, and you need to be aware of emissions, which they charge for. It depends on the state, but you can expect anywhere from $2,500 to $4,500 per vehicle.

On major US turnpikes for tolls, you can expect to pay anywhere from $0.20 a mile to $0.55 a mile. As an owner operator, you can expect it to run you $2,700 to $3,600 per year.

Use a Cost-Planning Resource

To better manage your owner operator expenses, we would recommend you use a cost-planning resource like an owner operator cost per mile calculator. Doing this will help you to see your expenses and learn where you can cut to save money.

If you’d like to connect with other owner operators and find out more about their business expenses and how they cut costs by talking to them, we would recommend you sign up for a Trucker Social profile. By doing this, you can get advice from seasoned pros who can help you to succeed in the trucking business.