Thinking about letting owner-operators work under your authority?
How to increase your revenue thanks to this operation?
How to increase your fleet size without buying more trucks?
Are there any risks associated with this?
Hi, I’m Taylor from Truck Dispatcher Training Company. This video is going to explain the pros and cons of letting owner-operators run under your authority. The biggest benefit of it is the growth in revenue. That rise is due to the fact that you’re charging the lease-on fee to the owner/operator under your authority and those fees range anywhere from 10% all the way up to 35% depending on what the carrier, what type of benefits and services that the carrier offers to the owner-operator so the more owner-operators you have under your authority the more lease-on fees you’re charging so the higher your revenue.
Another benefit of having owner-operators running under your authority is that you get to increase the size of your fleet without having to purchase trucks. Because owner-operators have their own equipment, or at least their own trucks, they’ll run under your authority and, let’s say, if you have five trucks and there is an opportunity where you could secure a very good lane and maybe the shipper is gonna require you to have eight trucks.
If you don’t have the funds to buy eight trucks you can lease your authority out to three owner-operators who have trucks but maybe need to secure more loads for themselves. It’s a win-win situation because once you let them lease onto your authority you now have the capability to walk in and say “hey I have eight trucks”. Now even though you own five and you lease three, your fleet size is still eight so you’d be able to go in and secure whatever lane it is that you’d be working on. Even though there are pros of having people lease on your authority there are also cons. One of the biggest cons is the CSA score.
Leased drivers are subject to the same rules in terms of the FMCSA in the DOT. They are your driver in their eyes so let’s say they go out and rack up a bunch of out-of-services during their inspections. That’s going to lower your CSA score because they’re running under your authority so having too many issues with the FMCSA could compromise your operating authority and it could possibly be revoked. By the way we have a video about how to get the authority file right here (link). Another con is depending on your agreement with the owner operator and it could be finding loads. There were situations where carriers are the ones who are responsible for dispatching the owner-operators. In case when you have five trucks of your own that’s your dispatching, and you take on three more owner-operators, as a result you’ve just developed your workload because now you have to find loads for other three trucks so it could mean a working progress. Another big con is having owner-operators lease onto your authority, which is the insurance risk. I’ll call this insurance liability. As a motor carrier you’re the one who’s responsible for safety according to the FMCSA and DOT.
The meaning is your general public liability insurance is going to be the insurance that’s in effect for the owner-operators that are leased onto your authority. That means that if an owner-operator goes out and gets in an accident in the truck that’s going to be reflected on your company’s insurance so even if none of your company drivers have ever had any issues in your company trucks, if at least one owner operator gets into an accident that’s going to negatively impact your insurance which price is going to go up. Another con is leasing on owner-operators is the administrative work that’s going to be required. Any of the loads that owner operators are running under your authority you’re gonna be the company that bills those loads, that invoices the customers, whether that be a broker or a direct shipper.
Let’s say that an owner operator who runs a load for a thousand dollars – you’re gonna have to bill that load to the customer, receive the money and then from there you’ll pay the owner-operator a settlement and, depending on what the agreement is, there’ll be different expenses you may deduct from that settlement which obviously your lease-on fee would be one of them, but if they’re using your company’s fuel cart then you’ll deduct their fuel expenses from this settlement.
As long as you purchase the plates for it, like their license plates, then you’re probably deducting their license plate fees from their settlement. Same thing with EOD services etc. In conclusion, having owner-operators running under your authority will create more administrative work. If you consider starting a lease-on operation just make sure that you understand the pros as well as the cons of this decision. Hopefully this video is able to help any trucking business owners out there who think about leasing on owner operators to their authority. If you find this information helpful go ahead and give the video thumbs up. If you have any questions leave a comment below and feel free to share this video with somebody who could benefit from it. Subscribe to the channel if you haven’t done this yet and check the description box for additional information that may be beneficial to your trucking business.
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