When deciding to start a trucking business, one of the most crucial choices you'll make is whether to lease under someone else's Motor Carrier (MC) number or obtain your own Operating Authority. Both options come with their own set of advantages and disadvantages, and understanding these can help you make an informed decision.
Leasing Under Someone's MC
Leasing under someone else's MC means you operate your truck under the authority of an established carrier. This option is often chosen by new entrants to the industry because it simplifies many aspects of running a trucking business.
Pros:
Lower Start-Up Costs: Leasing allows you to avoid the significant costs associated with obtaining your own MC number. You won’t need to worry about the fees for filing, insurance, and compliance that come with getting your own authority.
Administrative Support: The carrier you lease under will handle many administrative tasks, such as billing, load assignments, compliance with federal regulations, and paperwork. This can save you time and reduce stress.
Established Network: You benefit from the carrier's established customer base and relationships, potentially resulting in more consistent loads and revenue.
Maintenance and Fuel Discounts: Larger carriers often have negotiated discounts on maintenance, fuel, and other services that you can take advantage of.
Cons:
Reduced Autonomy: When leasing, you must follow the rules and guidelines set by the carrier. This can limit your flexibility in choosing loads and determining your work schedule.
Lower Earnings Potential: Carriers typically take a percentage of your earnings as part of the lease agreement. While you benefit from their network and administrative support, this can significantly reduce your net income.
Dependency: Your business is closely tied to the carrier's performance and reputation. Any issues the carrier faces can directly impact your operations and revenue.
Your Own Operating Authority
Having your own Operating Authority means you operate independently under your own MC number. This option provides complete control over your business but comes with increased responsibilities and costs.
Pros:
Full Control: With your own authority, you have complete freedom to choose your loads, negotiate rates, and set your own schedule. This autonomy can lead to higher job satisfaction and better work-life balance.
Higher Earnings Potential: Without having to share a percentage of your earnings with a carrier, you can potentially make more money. Your profits are solely dependent on your efficiency and ability to negotiate good rates.
Business Growth Opportunities: Operating under your own authority allows you to build and expand your own brand and customer base. This can lead to greater opportunities for growth and diversification in the future.
Cons:
Higher Start-Up Costs: Obtaining your own MC number involves significant initial expenses, including application fees, insurance, and compliance costs. You also need to invest in your own administrative infrastructure.
Complex Regulations: Managing your own authority requires a thorough understanding of and compliance with various federal and state regulations. This includes maintaining proper insurance, keeping accurate records, and staying updated with industry standards.
Administrative Burden: You'll be responsible for all aspects of running your business, from billing and paperwork to finding loads and ensuring regulatory compliance. This can be time-consuming and requires strong organizational skills.
How to Find a Carrier Who Will Allow You to Use Their MC
If you decide to lease under a carrier’s MC, finding the right partner is crucial. Here are steps to help you find a reliable carrier:
Research Online: Use industry websites, forums, and social media groups to research carriers. Look for reviews and feedback from other drivers to gauge the reputation and reliability of potential carriers.
Network: Attend industry events, join trucking associations, and connect with other drivers. Networking can lead to recommendations and introductions to reputable carriers.
Check Requirements: Different carriers have different requirements for leasing. Ensure you meet their criteria, which may include specific experience levels, equipment standards, and safety records.
Evaluate Contracts: Carefully review lease agreements and contracts. Pay attention to details such as payment terms, percentage splits, additional fees, and termination clauses.
Visit in Person: If possible, visit the carrier’s office to get a feel for their operations and culture. This can provide valuable insights and help you assess if the carrier is a good fit for you.
Financial Differences Between Leasing and Operating Your Own Authority
The financial aspect of choosing between leasing and getting your own authority is a critical factor. Here’s a breakdown of the potential earnings and costs associated with each option:
Leasing Under Someone's MC
Gross Income: Typically lower because the carrier takes a percentage (often 20-30%) of the revenue for administrative support, network access, and other services.
Net Income: Lower administrative costs and no need for hefty insurance premiums can result in a higher net income relative to gross earnings.
Expenses: Reduced operational expenses due to carrier-provided discounts on fuel, maintenance, and insurance. Lower administrative and compliance costs as these are often handled by the carrier.
Operating Your Own Authority
Gross Income: Potentially higher as you keep 100% of the revenue. The ability to negotiate better rates and choose higher-paying loads can significantly boost gross income.
Net Income: Despite higher gross income, higher operational and administrative costs can reduce net income. You’ll need to pay for insurance, compliance fees, permits, and administrative overhead.
Expenses: Higher start-up costs including insurance, authority application fees, and compliance costs. Ongoing expenses for maintaining authority, handling billing, and administrative tasks.
Conclusion
Deciding between leasing under a company's MC and obtaining your own Operating Authority is a significant choice that will shape your trucking career. Leasing can provide a smoother entry into the industry with less financial risk and administrative burden, while having your own authority offers greater autonomy and earning potential. Evaluate your personal circumstances, financial situation, and long-term goals to determine the best path for your trucking business.
HURRY UP AND WAIT
Author
