Owner-Operator Details

An owner-operator is a business term that is common in new or small businesses and found in many business models, including family businesses and franchising companies like restaurant chains, logistics, and repair and maintenance. Large businesses and multinational corporations usually have management teams, multiple high and low-level employees, and part-time contractors working on various projects. These parties keep the business running, and they work hard for its success. The owner of the business is either the overseeing president or a silent majority partner.

In smaller businesses, you may not find such large numbers of people working there. In fact, more often than not, a few people fill several roles in the business. The reasons why this may be the case:

  • The business is too new and has not built a name to warrant applications for work positions from others.
  • The business is not yet profitable and thus cannot afford to pay workers.
  • The owner of the business wants to keep it as a family business and hires only family members.
  • The amount of profit is not substantial enough to pay a diverse team. This would mean that the current employees would have to work in multiple roles without the pay to reflect those roles.

Due to these reasons, many businesses are familiar with the term owner-operator. Just because a business owner runs the day-to-day operations does not make the business less likely to succeed. In fact, in some areas, this will guarantee the business's success as the owner is financially and emotionally invested in it.

Example of Owner-Operator

To understand this further, consider this hypothetical example. A man, Jim, starts a transport and logistics company. But this company is currently made up of only Jim and his brother, and occasionally, their sister will help maintain the books. The company also only owns one truck. This means that Jim, the owner, will also double as the operator of the business. He will invest his money into the business through truck maintenance, paying for fuel and business permits, and more. He will also be driving the one truck they have. This makes Jim an owner-operator.

A second scenario to imagine would be a small pharmacy. Shelly started her pharmacy three years ago after completing her internship. Her pharmacy still barely breaks even annually. This is because some months she has high profits, and other months she had high expenses like taxes, permits, and certifications. This means that Shelly's pharmacy can only employ two full-time workers and an occasional freelancer. She decides to work as a pharmacist and occasionally employ an accountant to balance her books and do the taxes. This helps her save costs and invest any profit back into the business. Shelly is an owner-operator.

Owner-Operator vs. Employee

As mentioned above, some companies have small teams. This means that all employees usually handle multiple jobs. The receptionist will also be the cleaner and handle office food. The IT person will also manage social media presence. The manager will be in charge of every department. So how does an employee, in these cases, differ from the owner-operator? Here are four main differences between an employee and an owner-operator:

  1. An employee is usually hired by the owner-operator and is not a part of the business development team. They have no investment or shares in the company.
  2. An employee will usually receive pay. An owner-operator may not pay themselves and choose to instead invest the money into the company.
  3. An employee can quit since they are under contract. An owner-operator cannot simply quit. They have to decide if they are dissolving the business or selling it and may back any loans taken to run the business.
  4. An employee has little to no say in the running of the business. This is because they do not own the business. An owner-operator has all the decision-making power when it comes to running the business. They own it and have the most invested in the business.