Dollars & Sense

Startup Costs Explained

The Expediter's Startup Costs Explained

By Sean M. Lyden - Staff Writer
Posted Jan 26th 2016 11:52AM

You want to become an expedite owner-operator to launch a new career, see the country, and take charge of your financial future. But if you overlook important start-up expenses, you'll put yourself (and your health) under a lot of stress, as you struggle to pay the bills and keep your dream alive.

So, avoid unpleasant surprises by making sure you can cover all your startup costs before diving into the expedite lifestyle.

1. Carrier Costs

When you're planning your startup costs as an owner-operator, the first step is to evaluate which carrier you're considering leasing onto, says long-time expediter Linda Caffee, who, with her husband Bob, leases to Landstar.

"For example, some carriers require that your truck have a liftgate, so you have to factor that expense in your truck costs," says Caffee. "Also, some carriers will require that you have your own pads, blankets, load bars, straps, pallet jack. So, know what's required upfront and include those in your startup costs."

Norita Taylor, media spokesperson for Owner Operator Independent Drivers Association (OOIDA), an industry advocacy organization, agrees. "If you're leasing to a carrier, keep in mind the differences in costs. Some will pay your expenses during orientation, some will not. Do you need to get your own insurance? Or, can you be added to carrier's policy? Is there a deposit required? Depending on how far you intend to run, insurance can be very expensive."

2. Truck & Equipment

What size vehicle are you planning on operating? A new Freightliner Sprinter van ranges from $35,000 to $50,000, depending on how it's equipped. A new expediter straight truck with sleeper costs around $175,000 to over $200,000. Assuming you're financing the vehicle, include the down payment and first month's payment in your startup costs.

"For me, it's important to have the first payment in my startup costs because I don't want to be so stressed when I start that I feel pressured to take any load that's offered," says Caffee. "Especially starting out, I wouldn't want want to be worrying about, 'Oh my gosh, if I stop and rest right now, I won't make my truck payment. I'd rather be conservative about it."

Caffee also recommends including your first tank of fuel in your startup costs, which she says, at today's prices, runs about $200 for her straight truck.

3. Credentials

This category includes costs for commercial drivers license (CDL), certifications (Hazmat, TSA, etc.), and health card, depending on the size truck or van you run. Refer to the graphic from the OOIDA that breaks down the different credential requirements for each vehicle class and type.

4. Electronic Devices/ Software

What mobile devices do you need to run your business? Do you already have a laptop or will you need to invest in one? What about bookkeeping or accounting software?

Also, consider any upfront costs associated with wireless Internet access when you're on the road. Caffee says she uses her smartphone as a wireless hotspot, but that requires additional monthly expense for data usage.

Caffee also recommends investing in a GPS system with hazmat routing and other trucking-specific capabilities.

5. Truck Insurance

You can purchase insurance through most trucking carriers, but Caffee recommends shopping around with independent insurance providers, as well, to ensure you're getting the best deal.

"Since insurers that work through the carrier have to take on everybody, the premiums can be a bit high, regardless of how good your driving record. But if you haven't had any wrecks, the [independent providers] tend to offer lower premiums," says Caffee.

Although most insurance providers offer monthly installments, Caffee says that the discounts often make it worth paying for the entire year's premiums upfront.

So, in your startup calculations, include either the annual cost or the first month's premium, depending on which option works best for you and your budget.

6. Occupational Accident Insurance

This insurance covers medical, disability, death and dismemberment benefits for accidents that occur on the job. For teams, you must purchase policies for both drivers. Caffee estimates that premiums range from $200 to $300 per month. So, once you know much your premium will be, include the first payment in your startup costs.

7. Medical Insurance

As an owner-operator, you don't have insurance through your employer. So, where can you get it?

"That depends on the area of the country you are in and what type of policy you're looking for," says Taylor. "You will need to check companies or exchanges that provide service to you based on where you call home."

Whatever cover you choose, factor in any upfront premiums with your other startup costs.

8. Clothing and Uniforms

What clothing will you need to purchase upfront for your business?

"Clothing and uniforms will vary from carrier to carrier," says Taylor. "If you were going to put a vehicle on with FedEx, they do require uniforms. If you were going to Panther, they don't."

But even if the company does not require a uniform, you'll still need to purchase clothing for your work, says Caffee.

"Before went to work when we leased onto Landstar, I ordered shirts that had the Landstar logo on them. Then I had our names put on them. For professionalism, as far as I'm concerned, you need the company shirts," says Caffee.

Other clothing cost considerations, according to Caffee:

  • Steel toe shoes. "I can guarantee that in the last 10 years we've only had to wear them twice, but some companies require you to carry steel toe shoes."
  • Safety vests. "Some docks will require you have these to protect you from getting run over."
  • Safety glasses.
  • Hard hat.

9. Cash Reserves

You're going to have uneven cash flow, especially at the start. So, how do you smooth the gaps? This is where cash reserves come in as part of your startup cost calculations.

Taylor advises keeping questions like these in mind: "Do you have resources in case of a truck breakdown? Will the carrier set up an escrow account for that? If so, who controls when you can take money out of it? Do you have enough reserve to run for two weeks, or will you need an advance? What kind of advance fees will you be charged? Is quick pay an option? What is the fee for that?"

The Bottom Line

These 9 points give you an overview of what to consider when calculating your startup costs. But before taking the plunge as an owner-operator, consult with your financial advisor and other expediters to ensure you've covered all your bases, so you can avoid unpleasant surprises and put yourself and your family on the road to long-term success.

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