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Part 2 - Business basics and support for owner drivers

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The most important aspect of being an Owner Driver is to know the business and understand your own capabilities and resources.

Before becoming an Owner Driver, you should carefully consider your financial and personal situation, lifestyle and family commitments, and obtain independent advice from your industry association or your lawyer, accountant or other business adviser. You should also assess your overall investment in a business to ensure that it is sufficiently profitable to at least cover the capital repayments after tax and provide you with a fair income.

This section of the Information Booklet provides some useful information to assist Owner Drivers to set up and run a business. Information is provided on a range of topics including business and financial planning, taxation, record keeping, insurance, engaging substitute drivers and what to do if financial problems are experienced. There is also information about business advice services, from whom you can seek advice if you need further information.

2.1. Business planning and risk

A business plan is a record of how you will run your business and how you intend to identify and manage opportunities and challenges. A written business plan provides a roadmap that can help improve and even expand your business, and can also help you secure finance.

A business plan should include the following:

  • an overview and vision of your business;
  • an analysis of your market, including present and future sources of work;
  • what business structure to use;
  • how your business will be managed;
  • an estimate of establishment and running costs including financing your vehicle;
  • possible changes to things such as fuel costs and interest rates;
  • expected cash flow;
  • your projected profit and loss;
  • a balance sheet (which brings together the results from your profit and loss and cash flow statements);
  • your margin, mark-up and break-even point;
  • expected return on investment;
  • a risk management plan; and
  • an action plan to implement your identified goals.

Having a risk management plan will help you if you subsequently run into problems (for example, what will happen to your business if you have an accident and cannot work). When writing your risk management plan, you should be able to answer the following questions:

  • What risks am I facing?
  • What level of financial risk should I accept?
  • What is the likelihood of each risk?
  • What will I do if things do not go according to plan?
  • What consequences could be caused by each risk?
  • What can I do to minimise the risks to my business?

Your vehicle

Choosing the right vehicle is vital, as it can mean the difference between making a profit or loss. Make sure your vehicle is suited to the type of work you plan to carry out, as restrictions apply to some vehicles. For example, if you transport dangerous goods, special vehicles and equipment are required. There are also restrictions on the use of some vehicles such as B-doubles, which have a greater mass limit and can move more goods, but are only allowed to operate on specific routes.

More information

Go to the Business Victoria website www.business.vic.gov.au for guidance on how to prepare a business plan.

2.2. Business structures

There are a number of ways of operating a business. The structure you choose will affect your tax liability, how your business can be sold, and whether your personal assets are protected. To pay your business taxes, claim deductions for business expenses, open accounts and trade legally, you need to choose the right business structure for you.

More information

  • Go to the ASIC website www.asic.gov.au for detailed information about the establishment of company structures and business name registration.
  • Go to the Business Victoria website www.business.vic.gov.au for an overview of different business structures.

2.3. Buying into an existing business or a franchise

2.3.1. Goodwill or entry payments

’Goodwill’ means a payment that is over and above the market price of a vehicle that you are buying from another person. It is a payment for the value of the business and is usually paid in the expectation that the truck will be sold as ‘in work’, under an existing contract.

Goodwill or entry payments are discouraged by the VTA and the TWU. Goodwill payments create a higher entry price into an industry, meaning margins are tighter and it is harder to make a profit. They have also been the cause of unfairness and disputes. For example:

  • New drivers paying goodwill for a vehicle that is under an existing contract, in the expectation they will get the work, but then not being taken on by the Hirer and losing the money they paid as goodwill.
  • Drivers paying a goodwill payment to get into the work, but then not being able to recover that payment when they decide to leave the business later on.

2.3.2. Franchise fees

Paying for the rights to run a business with an established name, marketing and operating procedures offers a new business owner guidance and assistance. However, it also means you need to follow the franchisor’s system of running and marketing the business, which may not suit everyone.

Franchise fees are sometimes requested as a condition for the right to operate as a courier or driver in a geographical area for a business.

More information

Go to the Business Victoria website www.business.vic.gov.au for factors to consider before buying a franchise.

2.4. Customer service

The transport industry has become more efficient and professional, with customers expecting a higher level of service. It is therefore important that Hirers and Owner Drivers understand and agree on how customer service standards are to be met as disputes may arise where a party considers that there is a breakdown of customer service standards.

2.5. Negotiating a contract

When starting with a Hirer, you need to carefully consider the arrangements for work and income you will receive. Carefully read any contract you are offered, and ask questions if you are not sure of anything. Refer to Part 1 for more information about contracts and joint negotiations.

When negotiating contract terms with a new or existing Hirer, plan your approach in advance. Before you discuss a new job with a potential Hirer, write yourself a list of questions you want to ask before you sign such as:

Rates and payment

  • How are they calculated?
  • Does the company pay a fuel levy to cover any rises and falls fuel costs? How often is it varied and is 100 per cent of the fuel increase or decrease passed on?
  • When are your invoices paid? (Note hirers’ obligations in relation to payment of invoices - see 24A of the Act).
  • Is there a guaranteed number of hours or guaranteed earnings? Will you be guaranteed enough work to cover your outgoing expenses? (Note that the agreed minimum must be reflected in your written contract – see section 20 of the Act and 1.5.3 of this Information Booklet).
  • What do other Owner Drivers with the same Hirer typically earn each week and year?
  • Who raises the invoice? For example, does the Hirer work on a reverse billing arrangement and how will you reconcile the account?
  • What are the paperwork and documentation requirements to support the payments?
  • What information and communications equipment or technology do you need to perform the work, and who provides, maintains and pays for it?
  • Are there any deductions from the payments for goods or services (for example, insurance, administration charges)? How much?
  • From what times do the task and related payments start and finish?
  • Do you get paid for training?

Hours of work

  • What are the usual hours of work?
  • Are you required to work on weekends, nights or public holidays?
  • Can you refuse an offer of work if it doesn’t suit you?
  • Where do you park your vehicle? Is parking provided by the Hirer or customer? If not, how are overnight/stick-up loads kept secure?

Security and contract terms

  • Are there are any close-down periods?
  • Do you need to have the Hirer’s or customer’s livery on your vehicle, and who provides, maintains and pays for this?
  • Are there quiet periods during the year? What factors cause work to drop off or increase?
  • Are you permitted to work for another business?
  • What are the arrangements if you are ill or need a break?
  • Can you use a replacement driver?
  • Is the business’s work and client base secure?
  • What are the contract arrangements? (Note that section 20 of the Act requires ongoing contracts of no fixed duration or for a period of at least 30 days to be in writing).

Safety

  • Is the company accredited under the National Heavy Vehicle Accreditation Scheme (or another relevant scheme)?
  • What is the company’s safety record and approach to chain of responsibility requirements? Victorian Owner Driver Information Booklet (October 2020) 27
  • Do you have to attend or pass any customer-related inductions or training to perform the work?

2.6. Financial planning

It is important to have an independent view of your business situation. Securing the assistance of a qualified and reliable accountant or other financial adviser can be of great benefit to you and your business.

2.7. Understanding your business costs

You will need to have a good understanding of how much it costs to run your vehicle and your business. It is important to have a well-prepared budget to understand your business costs, for the following reasons:

  • It will assist you to manage your finances and cash flow, and provide an easy way of setting goals and working out budgets and forecasts.
  • You can make decisions on what rates of pay are reasonable – this will help you negotiate with your Hirer and compare the benefits of different jobs.
  • Whether you are paid by the load, the hour or the kilometre, you need to know your costs and be able to convert them from a per-hour to a per-kilometre or per-load figure and vice versa.
  • Information about your costs is essential when borrowing money to update your vehicle or expand your business. When planning to change vehicles, you need to know how your costs will change and make sure that you can make a reasonable profit.

2.8. Preparing financial statements

Financial statements should be prepared regularly and provide key information to help you improve your business. Financial statements should include the following:

  • Establishment costs − this is a detailed list of the expenses incurred to set up a business until it becomes established and starts to make a profit. Establishment costs are ‘one-off’ costs that are not repeated.
  • Profit and loss statement − this is a summary of income and expenses for your business over a period of time. It is prepared at regular intervals, usually monthly and at the end of the financial year. New businesses should calculate their profit and loss statement on a monthly basis and include the establishment costs. It is important not to overestimate your revenue and not to underestimate your establishment costs and ongoing expenses.
  • Cash flow statement − a cash flow statement is an important part of the business plan. Regardless of normal business ups and downs, it is critical that you do not run out of cash. The cash flow statement is a record of when all income is received and when all payments are made by the business for ongoing essentials, such as taxation payments.
  • Balance sheet - the balance sheet is a general snapshot of the financial health of a business on a given day. You would normally complete a balance sheet at the end of a month or financial year.

2.9. Reducing your overhead costs

A number of websites and apps provide information on where to find the cheapest fuel each day. Plan ahead on where and when you are going to fill up and you could make savings in the long run.

You may also want to consider a group buying scheme for major purchases. By coordinating with other Owner Drivers or with your Hirer, you might be able to get significant group discounts on the purchase of new vehicles or equipment, maintenance and servicing, tyres, oil and other costs.

More information

Go to the RACV website www.racv.com.au to find the cheapest fuel prices in your area.

2.10. Your terms for payment

The terms for payment of your invoices are critical, especially if you are carrying your fuel costs on an overdraft or on credit.

Under the Act, Hirers are required to pay you within 30 days after receiving an invoice unless there is a dispute about the amount payable or you have agreed to a different payment period and that period is not unfair to you or the Hirer (see 1.6.1 of this Information Booklet).

The Code also notes that, unless a hirer and an owner driver agree to a different payment period that is not unfair to one of the parties, payment terms of more than 30 days may be considered to be unjust (see 1.5.2 of this Information Booklet).

If you believe that you should have been paid within 30 days after receiving an invoice but have not been, or that your payment terms are unfair, you can notify a dispute to the VSBC (see 1.9 of this Information Booklet).

Owner Drivers working in the building and construction industry may also have rights to progress payments and to make claims against principals for unpaid work under the Building and Construction Industry Security of Payment Act 2002 (Vic).

If you are not paid or are short-paid, first speak with your Hirer and seek a commitment to the payment. Tell your Hirer up front that you require payment in accordance with your contract terms. Keep a diary note about who you spoke to, what they undertook to do and by when.

If your Hirer continues not to pay you, you may wish to reconsider whether you continue to provide services as the Hirer may be heading towards insolvency and you may never get paid or not for a very long time. If you find yourself in this situation seek urgent advice from your industry association, lawyer, accountant or other business adviser.

2.11. Insurance

An insurance policy that is appropriate to your business needs can protect you against a range of risks or events, such as theft of equipment. Adequate insurance is essential for all businesses, as it reduces the risk of an accident or illness resulting in you losing your business.

WorkSafe insurance is a compulsory insurance for Victorian employers that is funded by their contributions. It provides employers with insurance cover for the cost of benefits, if their workers are injured or become ill because of their work. It does not cover conditions that are not work-related (such as sporting injuries or general ill health). Obligations in relation to WorkSafe insurance will vary depending on the individual circumstances of your business.

More information

2.12. Taxation

A range of taxes may apply to your business operations, depending on the business’ size and location. Understanding taxes and the deductions and exemptions you may be able to claim can save you money. You do not want to pay too much tax and you do not want to be penalised for paying it late.

More information

2.13. Financial problems

Help is available if you get into financial difficulty. Banks, the ATO and other creditors may be able to offer assistance. Don't just ignore creditors and your situation.

If you cannot pay your debts, ask your accountant or financial adviser for advice straight away. Your adviser can help you prepare a written business survival plan to give to your bank and to negotiate alternative payment arrangements with creditors. There are accountants who specialise in turning around struggling businesses. If the business cannot be saved, they may be able to advise on the various forms of insolvency administration.

2.14. Record keeping

It is essential to keep proper business records to satisfy a range of legal requirements, such as for taxation purposes. Retaining appropriate records can also show the Hirer that you have met your contractual requirements.

More information

2.15. Engaging substitute drivers

There may be circumstances when you may need to hire a substitute driver to, for example, run a second shift or if you are ill. It is recommended that you discuss the use of a substitute driver with your Hirer. If you need help finding a substitute driver, your Hirer or another Owner Driver may be able to recommend someone. Alternatively, a labour hire agency may be able to supply you with a driver (you must check that they can operate under the Victorian labour hire licensing scheme). A substitute driver could be engaged as an employee, as a contractor or as a labour hire worker through an agency.

It is important to note that if you engage a contractor who provides their own vehicle, you may now be a Hirer of an Owner Driver under the Act and Code, and be required to meet all of the obligations as a Hirer.

More information

2.16. Business advice

2.16.1. Industry associations and unions

The TWU represents employees and Owner Drivers in the transport industry. The TWU provides services including representation in disputes and negotiations, assistance in health and safety matters, training, and referrals to other services.

The VTA represents employer organisations (owners of freight and logistic businesses) involved in the transport industry. The VTA provides information about a wide range of issues affecting the industry and seminars and training programs.

Other industry associations listed below have expertise in sectors of the transport industry including concrete, quarrying, asphalt, manufacturing or livestock transport.

More information

2.16.2. Business Victoria

Business Victoria provides a range of programs and services to help business owners make strategic decisions, improve their management skills and develop greater confidence in their business future.

The website www.business.vic.gov.au is the key online link between business and government. The website provides information on a range of business matters, including setting up a business, employing and managing people and financial management.

The website also has details on grants, workshops and events to help make the most of running your own business. You can get in touch with a small business expert or book time with a mentor to help get your business in good shape.

More information

2.16.3. Australian Business Licence and Information Service (ABLIS)

ABLIS helps you find the local, state and federal government licences, permits, approvals, regulations and codes of practice you need to know about to meet your legal responsibilities.

If you are starting, operating, growing, or closing a business, just answer a few questions about your business and ABLIS will generate personalised information:

  • about required registrations, licences and permits;
  • downloadable application forms and links to online registrations; and
  • contact details for the authorities you will need to deal with.

More information

2.16.4 Accountants and bookkeepers

It is important to have an independent view of your business situation. Securing the assistance of a qualified and reliable accountant or other financial adviser can be of great benefit to you and your business.

A bookkeeper could also assist you with keeping accounts and preparing your Business Activity Statement.

More information

There may be times when you need the services of a lawyer, for example, to negotiate a contract or to act for you in a dispute.

Your union or association may be able to refer you to a lawyer. The Law Institute of Victoria is the professional organisation for lawyers in Victoria. Their website provides information on a broad range of legal issues and guidance on choosing a lawyer.

More information

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