Today’s trucking market is unlike any we’ve seen before. Rates continue to skyrocket, and trucking companies are reporting massive profits. This was on display in earnings announcements for the second quarter of 2018, where year-over-year increases for many large carriers were significant: Werner Enterprises (65%); J.B. Hunt (55%); Marten Transport (50%); and Landstar (36%).
Not surprisingly, these surging profits are not being passed down equally to drivers. While driver pay has increased in recent years, and some trucking companies are offering higher signing bonuses as they battle each other to attract – and keep – drivers, there is still quite a bit to be desired. This is evident by the ongoing driver shortage, as well as high turnover rates among those already in the industry.
These surging rates, record profits and fierce competition for drivers truly showcase how complex and highly-competitive the existing market is today – a market that, after decades labeled as a “shipper’s market,” has conversely been great for the trucking industry as of late. But the current market has not been favorable to just large trucking companies.
In fact, now is a great time to be an independent owner-operator. It is also the perfect time for employee truck drivers to consider going out on their own, and for current independent owner-operators to scale up their business. This would allow them to capitalize on favorable market conditions and better position themselves to maximize their earning potential, expand their customer base and establish a strong, sustainable business.
Just as they have been for large trucking companies, recent market conditions have been extremely advantageous to independent owner-operators. The average owner-operator revenue per mile was $1.35 in 2017, up 7 cents per mile over the average in 2016; and this trend has continued into 2018. According to data from American Truck Business Services (ATBS), the nation’s largest owner-operator business services firm, revenue for flatbed operators in the first quarter of 2018 was $41,421 – up $5,000 from same period last year. Revenue for dry van and reefer operators were up as well.
According to ATBS CEO and President Todd Amen, “We have the most robust freight market I’ve ever seen. There’s plenty of freight no matter what segment you’re in. The good news about that is there are a lot of things lined up to help you become a successful – or continue to be a successful – owner-operator.”
Opportunities for owner-ops
One key reason for recent market growth and its subsequent long-term potential: in current conditions, shippers need access to more truck capacity while trying to keep transportation costs (somewhat) in check. Owner-operators are uniquely positioned to meet this need. While they have not been generally used by large shippers in the past, this sizeable untapped group of skilled, experienced drivers can provide shippers with additional capacity. Independent drivers are also more nimble than larger carriers and can adjust to market conditions, meet changing shipper needs and deliver faster turnaround times.
Moreover, the benefits of partnering with owner-operators are not limited to gaining access to capacity – there are financial incentives as well. Owner-operators are generally more competitively-priced than large trucking companies, which can help shippers keep their costs manageable in a market where freight costs are already exorbitant.
For example, Kellogg Co.’s logistics costs will rise nearly 10% year-over-year in 2018; Tyson Foods Inc. expects to pay $200 million more for freight this year; and McCormick & Co. largely blamed increased shipping expenses for its failure to achieve a profit target the Q1 2018.
Those shippers that are unable to connect with independent drivers will continue to struggle to find capacity and will subsequently continue to overpay the larger trucking companies. However, owner-operators can give shippers access to the additional capacity they desperately need at competitive rates.
While changing market conditions have helped set the stage for owner-operators to be successful, transportation technology can help them capitalize on it. Recent advances in transportation technology now offer independent owner-operators direct access to large
shippers without having to work through a carrier or broker – something that historically has not been possible.
Generally, it has been impractical for large shippers to work directly with owner-operators due to the need to manually communicate with and maintain compliance and safety records for each. However, transportation solutions that manage backend driver data for the shippers are removing this roadblock and opening the door for drivers to work directly with shippers.
These web- and mobile-enabled freight marketplace solutions allow drivers to view clear and accurate information regarding load availability, weight, pick-up and drop-off locations, wages and appointment times. The ability for drivers to view/accept loads as they want, combined with the availability of freight industry-wide, offers a new level of flexibility and control for owner-operators – another clear benefit of being an independent driver beyond just earning potential.
One of the obvious benefits of being an owner-operator versus an employee driver is the complete control they have over who they do business with, including the ability to work with multiple freight companies, and the ability to choose when and where to work. This level of flexibility and control is further enhanced by the capabilities available with this new technology-driven approach. The right technology can also help address some of the challenges that come with being independent, such as having to find freight or depend on brokers.
Focus on prime market conditions
Today’s transportation market has become extremely favorable for trucking companies – both large and small – and that trend doesn’t look like it will end anytime soon. The continued growth of ecommerce and mounting customer demands will continue to put pressure on shippers, and the driver shortage will continue to make truck capacity tight. In fact, some industry experts predict the current market conditions to last for at least the next 18 months (or mid-2019).
This forecast indicates that now is the perfect time for truckers to position themselves to maximize profits and grow their businesses. Truckers driving for larger carriers should consider going into business for themselves. Likewise, those who are already independent owner-operators may want to think about expanding their business from one truck to two or three.
According to ATBS’ Amen, “This is the best time – literally – in trucking in 30 years. If you’re not having success, you need to figure out how to get success and take advantage. The next year and a half is going to be a great time to be a trucker.”