Are you planning on starting your own trucking business but are uncertain as to how? The trucking industry can be highly profitable for operators with a good sense for business, but extremely rocky for those who lack proper planning and execution. It is a highly competitive industry that demands more than just road experience to survive. If you are starting your own trucking business or just got your authorities, this article will help guide your new company towards success. Trucking is the primary driving force of the supply chain and the backbone of the economy. 2018 saw record setting levels of freight demand. This 20 year high follows an impressive 2017 that generated over $700 billion in revenues for the industry. Despite concerns of a slower 2019, the American Trucking Association is predicting freight volume to increase more than 35 percent by 2029. This is fertile ground for starting a new trucking business. What You Need to Start a Trucking Company Once you have your Authorities and all Insurances in place, you are ready to start your own trucking business. These 9 steps will guide you in the right direction to starting your own business and become a successful business owner. Step 1: Follow a Business Plan A business plan is a useful document for any small business owner to help you outline action items, next steps, and future activities. It provides an outline of where you are, where you want to be and gives you the direction you need to get there. Writing a business plan: Helps to make decisions Is a must-have for investors and lenders Provides a reality check (is your business viable?) Can give you new ideas Creates an Action Plan Keep in mind that you don't have to wait until you have all of the answers to get started. You can create an outline of your plan now, filling in all of the information you have at this point, and then work on the blanks as you learn more about the market. The plan is a living document that should be reviewed and updated as time progresses. The easiest approach to develop your business plan is to follow a business plan template. Step 2: Acquire Working Equipment Once you have determined the niche market that your trucking company will serve, you need to acquire the working equipment suited for the type of goods to be transported. The first decision is whether to buy new, buy used or lease a commercial truck. This is a decision to be considered carefully as it will have tremendous impact on the overall costs of operating your business. Consider carefully the cost of owning a commercial truck. The second decision to make regarding equipment is the type of trailer you require. Depending on the niche market you have chosen to serve and the experience you have as a driver will determine the type of trailer you haul. Each transportation mode has advantages and disadvantages to both the shipper and the carrier hauling the freight. Trailer types include: Dry Van Flat Bed Reefer Specialty trailer types Livestock Tanker Determining the correct freight shipping method is key for delivering goods to a destination on time, safely and in a cost-effective manner. Learn more about trailer types and shipping options to best suit your trucking company. Step 3: Ensure Profitability The four key areas that help drive profitability in trucking are: Increasing volume and productivity Charging the right rates Reducing costs Increasing efficiency Increasing volume and productivity will allow you to stand out as the value option among other logistics firms. Achieving substantial productivity improvement requires creative thinking and a variety of options. Learn the fundamentals to increase productivity in trucking. Charging the right rate and reducing costs is a matter of proper accounting and knowing your numbers. In trucking, it is essential for the owner of a business to understand how much it costs per mile to operate. Knowing your cost per mile is one of the biggest key performance indicators and foundational metrics for ensuring your trucking business is profitable. This requires an accurate accounting of fixed costs and variable costs. Knowing how to calculate your cost per mile and using a cost per mile calculator on a regular basis is essential to maintaining profitability. Increasing efficiency is all about maximizing equipment utilization. Keep your truck moving with loaded miles as much as possible. Step 4: Streamline Back Office Running an efficient back office is essential in the trucking industry to maintain competitiveness and profitability. For small trucking companies, working out of the cab of your truck is the most cost effective method. All you require is a laptop, accounting software, internet access and a printer. The two main tasks are to issue invoices as soon as possible once freight is delivered and track DSO (Days Sales Outstanding). The number of days it takes to receive payment from your customers has a direct influence on your cash flow and determines your financial ability to support operations. Learn how to calculate DSO. Step 5: Find Loads If you’re not hauling freight, you are not earning revenue. Securing good paying freight and minimizing empty miles must be one of the main concerns of your working day. Work directly with shippers to get the best rates and establish long term customer relationships. The real challenge is to find loads to cover the back haul. Use load boards and freight brokers to fill the capacity gap. Step 6: Save on Fuel Fuel represents the largest operating cost to your company. It will pay huge dividends to establish and follow a defined purchasing strategy to save on fuel. Too often, even experienced operators mistakenly pump fuel at the closest convenient location if the displayed “pump price” is good. Truckers pay the “base price” at fueling stations as applicable taxes are paid through IFTA. Establish a strategy that offers the best costs for fuel at convenient locations along the lanes you run. The best solution is to use a fuel card program that offers fuel discounts at major full service truck stops. A good fuel card program will provide: Significant fuel discounts Credit terms Easy-to-use and comprehensive reporting Fuel cards are the ideal solution to save costs, control road expenses and facilitate fuel related tax preparation. Step 7: Identify Funding Needs Freight transportation is a capital intense industry requiring a significant investment at startup and daily access to funds to support operations. An estimated $10K to $30K is needed to obtain your authorities, secure all appropriate insurances and cover the up front costs of acquiring equipment. Additionally, you need to have a cash surplus available to cover the first 6 months of operations until you establish positive cash flow from reliable customers. Cash flow management is one of the main concerns that occupy the minds of trucking company owners on a daily basis. Banks are reluctant to fund trucking companies as they consider the industry to be volatile and unstable. Other funding sources include private investors, partnerships and leveraging your personal assets. A growing trend is the use of freight factoring to immediately establish and maintain positive cash flow. This form of funding is designed specifically for the trucking industry. It is easy to qualify for, even for new and small trucking companies, and funding begins within a few short days. Freight factoring provides significant supplementary benefits. Efficient AR management is included in the service, free of charge. This is an important feature as it protects your bottom line, streamlines the back office process and maintains positive interaction with your customers. Further, cash advances are available to cover over the road expenses, unexpected tax due dates, truck repairs, and more as circumstances occur. Step 8: Grow Your Client Base If you’re not growing, you’re dying! Freight transportation is a highly competitive space with new entrants continually appearing on the scene and larger fleets amalgamating to dominate the market. If you are not meeting your current customers’ needs and acquiring new customers to secure ongoing business, another freight carrier will. Avoid high customer concentration in which one client represents the majority of your business. Lose that one customer and your company fails almost immediately. As a general rule of thumb, never allow one customer to represent more than 20% of your overall revenue source. Diversify your customer base and always seek new clients. Step 9: Recruit New Drivers Along with growth comes the challenge of recruiting new drivers. The driver shortage is an industry-wide problem, and one that will continue to grow well into the future. Small trucking businesses have a greater success rate for recruiting and retaining drivers compared to the larger fleets. This is generally the result of a more focused attention to employees and a better work environment. There are no simple answers to the driver shortage, but implementing good recruiting and retention efforts are key to the ongoing success of your trucking company. Learn more on how to recruit and retain drivers. Plan to Succeed Your trucking company will succeed as a result of good planning and hard work. It is a matter of leveraging your skills as an operator with solid business practices and a dedication to providing good customer service with reliable and safe freight transportation. Good luck and keep on trucking! If you found this article helpful, we think you will love our free Trucking Business Startup Checklist. It’s easy to use and print, will keep your business on course for success, and free to download!