Are you thinking about starting a trucking company? With driver shortages increasing, demand for trucking services will continue to grow. If done right, becoming an owner-operator of a trucking company could be a successful venture.
Whether you already own a trucking company and are looking to increase your fleet, or you are just starting out, launching your own business is never easy. The best way is to start with a business plan, just like any other business.
Starting a successful trucking business begins with a well-thought-out business plan. Below you'll find steps and tips for starting a trucking business.
Starting a trucking company involves more than hiring a few drivers and some trucks. While it may not happen right away, you have to prepare for managing drivers, buying vehicles, meeting deadlines, transporting delicate goods, and other logistical challenges that will undoubtedly come up.
Writing a business plan will give you an operational strategy to guide you as you get your business going. Your business plan should include the following:
Writing a business plan forces you to think things through and address critical questions. It gives you a clear sense of how your trucking company will function, what your staffing needs will be, and how much money you will need. The most important part of your business plan will be the financial section, especially if you are seeking financing to get started.
You will need to determine what type of tax structure your trucking business will have and to do this, you need to form a legal entity. There are four options:
Most new trucking businesses are formed as an LLC. This allows you to shift liability to your business while keeping personal assets that may be used for business purposes. The tax structure is also more efficient than a sole proprietorship. Consult legal and tax professionals for advice on which type of tax structure is best for your business.
Transport trucks can be expensive, but you will need them if you plan to offer transport services to distributors and suppliers. You can start with one vehicle and build or purchase a small fleet and recoup the cost over time. The choice is yours.
Whether you purchase new or used trucks is also up to you, but keep in mind that you want vehicles that are safe, and that will have minimal maintenance costs. Consider this as you decide whether to purchase new or used trucks. You may find the sweet spot between brand new and gently used. A truck may cost you between $15,000.00 and $175,000.00. You can choose to seek financing, but a down payment of $1,000.00-$15,000.00 may often be required.
Leasing vehicles is another option. It can be more expensive than buying your trucks outright, but it has some benefits. No or low down payments and no long-term commitments are two of the most appealing factors. It can free up some of your start-up cash flow and leave you with a financial cushion to get your company up and running.
Because there are so many safety concerns involved, the trucking industry is highly regulated. The following industry standards are required to own and operate a trucking business:
Without these certifications, your company may be fined or shut down, so be sure you have all of them before your trucks begin rolling.
Unless you plan to be the sole owner, you will need to hire some employees. As your company grows, you may need to hire the following:
When you hire drivers, they must have a Commercial Driver's License and all the necessary safety training to operate a transport truck. You could run into serious liability issues if one of your drivers gets into an accident, so you want all your drivers to be well-qualified to do the job.
When starting a trucking company, you can purchase a variety of insurance coverage, such as:
Of course, you hope that an accident doesn't happen, but they sometimes do. You'll need the right coverage to protect your business.
There are a range of costs required to start a trucking company. Here are just a few of them, your costs will depend on how many trucks in your fleet and numerous other factors.
On top of this is the cost of equipment, office or warehouse space, and other expenses depending on your business model.
Starting a trucking company isn't cheap since there are a lot of costs to cover, including down payments on equipment, license plates, insurance, your license, and permit fees. In addition, there are fuel, repairs, parking, technological upgrades, miscellaneous supplies, taxes, and other miscellaneous expenses.
As you can see, costs are a challenge when starting a trucking company. Your new business may not qualify for a bank loan, or you may not want to get locked into repayment terms of cash advances or unsecured loans. Many truckers use factoring. This offers the cash-flow cushion you need to avoid running low on cash if your customers take a while to pay.
There is on the last set of requirements you need to prepare for before your trucks can haul cargo. In addition to your US DOT number, your company's registered name decals on your vehicles, and your International Registration Plates, you need your Radio Frequency Identification tags clearly displayed on your windshield.
Make sure your trucking business is diversified. A good general rule is to make sure no single client accounts for more than 20 percent of revenue. This means you should have five clients or more, sending you a steady stream of loads. To market your business and attract more clients, build a company website, use online freight boards, and establish a social media presence.
What is fleet management software? Running a successful fleet isn't easy, but it can become more manageable with the right tools. Fleet management software, for example, has numerous benefits for owner-operators. Depending on what you choose, you can take advantage of features such as vehicle diagnostics, idle time tracking, advanced reporting, and more.
We hope that helps answer your question on "How to start a trucking business?" Contact us today to learn more ways MiX's fleet management solutions can save you time and money.