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The true cost of becoming an owner-operator

  • 07 July 2010
  • By Christopher Walton

Roadtransport.com has calculated it costs the average owner-operator a maximum of £31,151 to set themselves up as a single vehicle business.

This staggering figure is based on cost estimates for one individuial to obtain the correct licencing, skills and financial standing in order to become an owner driver in today’s economic climate.

The first thing you need is an HGV drivers’ licence. Presuming you don’t have one already, you are looking at between £1,000 and £1,500 for training and the test, according to the Freight Transport Association.

And don’t forget your Driver CPC training, which is anything from £35 to £120 per day on a public course, and you need to complete five days to meet the 35 hours required in total. So that’s another £175 to £600 you have to fork out.

So now you can drive a vehicle, there’s the small matter of getting your hands on one: the Road Haulage Association (RHA) estimates that a three-month lease for a 44-tonne artic is £4,700.

Now you have a truck you can drive, you have to get the O-licence to ensure you can do business. An application for any type of O-licence, be it restricted, standard national, or standard international, is £250. But that is before you take into account the licence issue fee of £391 (which has to be renewed every five years at £391 a time). Got all of that? Right, don’t forget insurance (the RHA estimates insurance for six months costs £2,110), money for services and repairs (approximately £530 would just about cover any outlay in the first eight weeks, the RHA says) and overheads (such as running an operating centre, which could set you back £1,800 for the first eight weeks, again courtesy of the RHA).

This is before you take into account the haulier’s big cost: fuel. The figures the RHA estimates for running a 44-tonne artic are: gross mileage of 70,900 miles per year, or 1,400 miles per week. Therefore, the first eight weeks of operation, using a rate of 57.4 pence per mile is £6,430. It is worth noting at this point that the RHA uses the eight-week estimate as this gives an indication of how much money you will have to pay out before you start to receive money from your customers, assuming 60-day payment terms.

Finally, remember to leave some money in the bank. A holder of a standard national licence or standard international licence must prove they have £8,100 in the bank for each vehicle on that licence. If you want to run an additional vehicle, you must have proof of a further £4,500 per vehicle. A restricted O-licence holder must prove access to £3,100 per vehicle.

When you add all this together (see table), CM estimates you need £26,411 to cover your initial set-up costs and keep you trading before the money starts coming through on eight-week (or 60-day) invoice terms.

And finally, don’t forget wages. If you wish to pay yourself a wage, the RHA estimates that an average HGV driver would earn – over an eight-week period – £4,740, before tax. This gives you a grand total of £31,151 so you can be on the road and working before the money flows in!

Paul Everett (left) started trading as Everett Transport Services on 4 June. He runs an eight-year-old Renault Premium that he bought outright and has a half share in a tipping trailer, specialising in bulk grain. He is ready to take on work from all corners of the industry.

It takes a certain type of individual to start up as a one-man operator, Everett says. “It was an idea I have been thinking about for a few years. I have been driving for five years and fancied having a go at it myself.

“Everywhere I have worked I have seen stuff go wrong, and I thought if they can do it that way and make a profit, why can I not make money myself?”

Everett says he began to look seriously at running his own business in December 2009, but it took him five months to get the business off the ground because of the amount of paperwork involved.

He raised the funds necessary by working as a self-employed relief driver and used the same limited company he had set up to be self-employed to do business as an owner driver.

“I was saving money, and it came to the point where I had to stop telling people I was going to do it and get it all started,” he adds.

Everett works on a dedicated business for one customer where he had spent time as a relief driver in the agriculture sector but says that the work is not guaranteed and the contract will cover him only until September. “Nothing is guaranteed for the rest of the year,” he says.

Everett says the whole process has been one of strict organisation. He had to create a spreadsheet of his incomings and outgoings based on the number of weeks he expects to work every year.

His one bugbear? The speed at which the Traffic Commissioners’ office operates. “The envelope that I had to send them was fat,” he says of his O-licence application. “The actual process is straightforward, but if they have any questions it gets slow. They had a couple of queries about my operating centres and the basic answer was simple.

“But every time you have to answer a question it is by letter with a first-class stamp and they respond by sending it second class. That and the policy to reply to each query on a first-come-first-served basis meant I had to wait another two or three weeks to get started.”

You can follow Paul’s progress on the TruckNet forums where he posts as ‘repton’.

Expense Cost (£)

HGV licence 1,500

Driver CPC 600

Three months of vehicle rental 4,700

O-licence application 250

O-licence issue fee 391

Vehicle insurance (six months) 2,110

Breakdown/repair costs 530

Miscellaneous overheads 1,800

Fuel (eight weeks estimated usage) 6,430

Minimum financial standing 8,100

Total outlay 26,411

Wages (average for eight weeks driving) 4,740

Total expenditure 31,151

Source: RHA and FTA

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Article source: http://www.commercialmotor.com:80/latest-news/The-true-cost-of-becoming-an-owner-operator