Evaluating the benefits vs. costs
of operating under your own motor carrier authority
By Linda Yates, The Expediters Consultant
In general, from an expense consideration getting your own authority means that you will have to pay for additional insurance; you will have to pay for annual permits to operate in each state where you travel; you will have to take measures to ensure you can collect your pay from brokers and shippers; and due to audits and additional paperwork requirements a significant amount of your
time will have to be allocated to ensure you stay in compliance with the rules and regulations associated with having your own authority which obviously will take away from your driving time.
The question many expediters ask is whether or not it would be advantageous to get their own motor carrier authority and that answer depends on many factors specific to your individual business plan. For example: Is your career in trucking serving only as the means for generating personal income
or is it an entrepreneurial venture; Do you plan to expand your business with additional vehicles; Are you targeting a niche market; Is your breakeven point at a level that will realistically enable you to achieve a substantial profit margin; Are you in a financial position to assume the risks; How long can you maintain a high cash flow while developing and building your business before you would have to utilize a factoring company (a factoring company pays you up front for the amount of your
invoices to customers in exchange for a % of the gross and then they collect the money from your customers. This enables you to have cash flow without having to wait the 30 to 60 to 90 days or more to get the amount owed to you by your customers).
As an expediter bare in mind that expedited trucking is a niche which means expedite shipments represent only a portion of the overall trucking freight volume. Expediters running under their own authority may experience greater challenges
than those primarily targeting general freight. You need to consider what your target customer expects from an expedite motor carrier and whether or not you can affordably fulfill those requirements as an independent. The characteristics of
expedite freight tend to include one or multiple critical factors such as time sensitivity, specialized handling, constant surveillance, high security, high dollar freight, exclusive vehicle straight through transport, sometimes even special certification requirements such as DOD, FAST, HM, Radioactive, Explosives, etc., so to be competitive you must be able to meet those criteria. You must also be able to assure the shipper that should there be equipment failure or unforeseen delays you would have the resources, via other units, drivers or if necessary air charter, to guarantee that the critical freight arrives at its destination by the deadline.
Also be aware that you may not be able to get certain premium customers because they require much higher levels of insurance for their expedite freight, which as a single unit operator may not be affordable. Another roadblock you may come across is if a shipper has multiple loads at the same time they would likely call on one carrier that has multiple vehicles rather than deal with multiple single unit carriers like you. A big consideration for expediters that operate a cargo van or
straight truck is that your load capacity is greatly reduced compared to a tractor trailer so you may find it difficult at times to supplement your load opportunities with general freight or even multiple LTL shipments at the same time.
In order to overcome some of the challenges mentioned above there are certain strategies that may help you increase your chances for success. For example you could develop relationships with multiple expedite carriers where you basically use them as
your broker or source for expedite shipments. In that case you would set the rate you charge each carrier for you to haul their loads. By working with expedite carriers in that way you may be able to get a higher % of the charge to the shipper than if you were leased to the carrier but you need to determine if that extra percentage enables you to increase your profit margin enough to justify your additional expenses and liability associated with running under your own authority.
The advantages to having your own authority include total independence, flexibility and the potential for increased profitability.
However the advantages do not come without a lot of risk and responsibility. Operating under your own authority means that you are fully responsible and liable for everything. Even though you may only have one truck you must adhere to the same compliance standards as large carriers which means you are still required to: have a driver safety training/orientation program; maintain an accident register; have a system for overseeing driver qualification requirements; have an alcohol and controlled substance testing program; and have policies and procedures to comply with rules regarding driver hours of service as well as vehicle inspection, repair and maintenance. You will assume all the responsibility for finding loads, collecting your revenue from customers, reporting and paying fuel/mileage tax and you will be subject to DOT audits.
Even if you only operate vehicles under 10,001 lbs GVWR and will not be transporting hazardous materials (which means you are exempt from the U.S. DOT safety fitness regulations) you must certify that you are familiar with and will observe general operational safety fitness guidelines and applicable state and local laws relating to the safe operation of commercial motor vehicles.
Your approach to making a decision on getting your own authority is no different than the logic you
would use for determining whether or not it would be beneficial to become an owner operator as opposed to working as a company driver. If the average gross earnings for a company driver is $35,000 plus medical insurance, life insurance, retirement savings and other benefits, then (unless your reasoning is not based on the financial aspects) as an owner operator your business plan needs to reflect that you would at least achieve the same or better. If you get your own authority then your
business plan needs to reflect even greater earnings than as an owner operator.
The question to ask yourself is do you feel that you can compete with the rates offered by large fleets and still make a higher profit than if you worked for or leased to a carrier. The greatest consideration is are you financially prepared to try it. Putting together a solid and accurate business plan will reveal the answers you need to make that decision. # | 
