You may be overwhelmed with recruiting ads and posters promising more revenue and better opportunities at another carrier. You hear it from other drivers all the time. But is the grass always greener? Increased revenue is easy to understand, but what is often overlooked is the cost involved to switch carriers. And when you look at gross revenue, instead of just pay per mile, revenue typically isn’t any better at the new carrier.
Compensation packages for owner-operators have increased considerably in recent years, and we can all agree these increases were long overdue. However, the new pay packages can be tempting to switch carriers frequently. It seems like a straightforward decision when pay per mile is 2 to 4 cents higher at another carrier. But there are other compensation and cost issues you should consider before making the switch.
Here are some things you should consider before changing carriers:
- Fuel Surcharge - is the new carrier paying you the same fuel surcharge or a higher rate?
- Paid Miles - is the new carrier paying you more per mile on all miles, not just loaded miles?
- Number of Miles available to the driver - does the new carrier have more miles available to you than your current carrier?
If you answered yes to all of the questions above, you are off to a good start in making your decision. More than likely however, you answered no to one or more of the questions. One of the most important things to remember is that carriers who operate similar equipment must operate at the same or similar rates in order to remain competitive. The revenue pie can be sliced into many different ways, but it often can’t be made bigger.
If you answered yes to the questions above and still want to switch carriers - here are some other costs associated with changing that you may have not thought of. To get up and running at your new carrier it can take three weeks before you receive your first settlement. You must return all your old equipment to your previous carrier and complete orientation at the new carrier. During those three weeks you get no revenue. Your fuel and maintenance costs go away but the truck payment and insurance bills keep coming in. Not to mention all of your personal expenses such as mortgage or rent, bills, groceries, car payments and utilities.
Consider:
| 3 weeks of tractor and insurance payments |
$2100 |
| 3 weeks of foregone revenue |
$8184 |
| 3 weeks of familiy income needed |
$2100 |
| Total Loss |
$12,284 |
| Subtract variable expenses (variable costs like fuel and maintenance x 7500 miles) |
-$4554 |
| Subtract additional .02 per mile you will make at new carrier for estimated 115,000 miles/ yr |
-$2300 |
| Hard Cost to Change Carriers |
-$5530 |
And this is probably the best case scenario (it may be sometime before you develop a relationship with your new driving manager and get the miles you need which can cost revenue while you get up to speed.)
It can make sense to switch carriers for an extra 2 cents per mile, but only if the cost isn’t too high to make the switch. Recruiters are paid to tell you their grass is greener, but you can find out first by completing your own analysis and picking your partner carefully to make the smartest business decision.