Last Updated on July 27, 2021
According to statistics, 70% of the freight in the United States is transported using trucks. With this in mind, it is safe to say that a trucking business is one of the businesses with a high possibility of venturing from a startup to a large company within a short time.
Unfortunately, as in any other business, starting and running a successful trucking company is easier said than done. You need to brace yourself with all the necessary tips and tactics of running a trucking company to ensure that your investment will not be in vain.
Are you confused about how to start and run such a business? Read on the comprehensive information below and ease the tension and confusion of starting and running a trucking company.
Write a Business Plan
Having a business plan is one of the crucial initial steps you need to take when you have a startup company, and a trucking company is of no exemption. The business plan will state essential factors about the business, such as its mission, goal, structure, and a general picture of how the business shall operate.
It is a road map that you can refer to and know whether you are headed in the right direction. Additionally, you need to have a professional business plan to seek investors, lenders, or partners to offer you financial help.
Some of the details to include in your trucking business plan include:
Selecting a Target Market
As its name suggests, selecting a target market section of the business plan states your target market in the proposed business. You declare the gap you identified and how you intend to narrow this gap.
You can identify your target customers by examining your competitors. This helps you make marketing easier as you think of marketing methods specific to this group of people.
Additionally, your trucking company stands out if you narrow down your target market to the group that has the highest sales.
Competitive and Market Analysis
The competitive and market analysis section is where you state your knowledge of the market you want to venture into.
To write this section, you need to brace yourself with enough knowledge on the current trends in the business, what does and does not work in this business, and the market demands.
If you need to apply for a loan, how you write the competitive and market analysis sections helps the lender build confidence in you and your business.
Some of the crucial details to discuss in this section include:
- Market outlook and description – give detailed information on the trucking industry, stating facts such as the industry’s current size in both dollars and carriers. Identify who will be your competitors in the business and what their competitive edges are.
You should also state the average revenue that the business generates per annum. Additionally, state the growth expected in the company in the next decade.
- Market share – what percentage of the market will your business hold, and how much do you intend to grow within a specific time? Give these methods that you shall use to expand the market share.
- Competitive analysis – carefully study your competitors in the trucking business. Examine their strengths and weaknesses and state how you intend to use their weaknesses to your benefit.
- Pricing and margins – give information on how you intend to charge your trucking company services and how this relates to your competitors. Additionally, identify what margins you can create to help you sustain your customers and still make profits.
Determine Your Competitive Edge and The Services You Offer
This section identifies the services you offer your customers and how they help solve their needs. It should also include your pricing, industries you will serve, materials you haul, and the areas you serve.
Additionally, determine your competitive edge, which entails the techniques you intend to use to stand out among your competitors. For instance, you can give discounts or charge at a lower rate than your competitors.
However, be careful when selecting a competitive edge to avoid running the business at a loss.
Marketing and Sales Strategy
This section shows how you intend to market and sell your company to lure more customers.
You include activities and techniques that you will use to convince more people to use your trucking services. In this section, you need to have effective strategies that will work for your specific target group.
The significant parts to discuss in this section are:
- Marketing strategy – state the methods you will use to make your business known to people. You can use techniques such as social media advertising, buying email, and phone lists.
Advertising on industrial websites, visiting trade shows, or using all of the above. Identify your target market for each strategy and why it is likely to work on them. Additionally, state the amount you intend to spend on marketing the business.
- Sales strategy – this section states the techniques you intend to use to sustain the customers you win and lure more. Additionally, it entails the type of sales operation you intend to set up.
For instance, do you want to hire sales agents? If yes, how much and how often will you pay them. Additionally, identify the companies you could use to hire a third party to handle sales. Have a clear budget of the amount you intend to spend on these sales strategies.
The financial projections section is where you show the company’s financial information and its ability to meet its intended goals. The information to include in this section includes:
- Cash flow statements
- Profit and loss statements
- Company balance sheet
- The company’s sales forecast for the next five years.
You can also include information on ways you intend to cover costs and generate income for the business, especially before making enough profit to sustain the business.
The employee plan section identifies the staff members you intend to hire to help you run your business. For instance, indicate how many drivers you intend to hire to help you drive the trucks.
Additionally, identify other employees that you will need for the success of the business. State the qualifications you intend these employees to have and the criteria you use to determine the best among them.
Indicate the payment for each of the posts and how often they get paid.
Management and Organization
This part explains the official organization of your trucking company. One of the important details that it should include is whether the business is a partnership, a corporation, an LLC, or a sole proprietorship.
Give the structure of your management team and their duties and strengths at different levels. Include information about the responsibilities of employees in the business and how these duties differ based on their experience and credentials.
Without a doubt, your company’s business plan is an important document that helps your business succeed in the long haul. Therefore, take time to ensure that you write a professional and well-detailed business plan.
If you need help, ask a professional to write it so that you can have a document that proves to potential lenders that your business is worth investing in.
Before you hit the road and start your trucking business, you need to ensure that you have all legal requirements at hand. Otherwise, you risk always being at loggerheads with the authorities since you are running the business illegally.
These legal documents that you need to secure for your trucking company include:
Get A Commercial Driver’s License
Your driver’s license is not valid for use when running a trucking company. Instead, you need to have a commercial driver’s license. The same case applies to the drivers that you hire; they need to have commercial driving licenses.
To apply for this license, you need to be above 21 years, have a valid social security number, and prove US residency. To qualify for the license, you need to pass knowledge and vision exams. Additionally, you take another test for pre-trip inspection and road skills.
After passing each of these exams, you pay the application fee and receive your commercial driver’s license.
Apply for Your Trucking Authority
A trucking authority is a permit that you receive from the government to get paid to transport goods across state lines. This permit is also known as operating authority or motor carrier authority.
The trucking authority enables you to choose your routes, schedules, and goods to carry without any restrictions. The steps to follow for you to receive your trucking authority are:
- Establish your business structure
- Get a USDOT (US Department of Transportation) number.
- Get an MC (Motor Carrier) number.
- Designate a process agent
- Get trucking insurance
- Complete the Unified Carrier Registration (UCR)
Get A Process Agent
A process agent acts as the link between the state and the business. In most states, as required by law, each business should have a process agent.
The agent should be present at a physical address to receive and sign documents such as wage garnishments, tax documents, legal notices, and state mandates.
An ideal registered agent is easily accessible. Otherwise, you risk missing crucial information, which could jeopardize your relationship with the state or even lead to a lawsuit without your knowledge.
Other Legal Requirements and Permits to Attain for Your Trucking Business Are
- USDOT and Motor Carrier Authority numbers
- International fuel tax agreement
- 2290 tax forms for heavy vehicle use regulation
- Standard carrier alpha code
- International registration plan
- Unified carrier registration
When starting your trucking business, you need to set aside some money for insurance. The insurance will protect the business in case of unexpected financial risks and cover expenses incurred in accidents.
The coverage options that you will find in most of these companies include:
- Primary liability insurance
- Auto insurance
- Cargo insurance
- Collision insurance
- Passenger personal accident insurance
Check out different insurance coverage providers and make sure that you end up with the provider with the best rates.
Getting and Financing Trucks
One crucial factor to consider when contemplating starting a trucking company is getting the trucks. There are two main ways through which you can acquire these trucks; that is buying and leasing.
If you have enough funds, it is best to buy a new truck that has not been used before. Be careful not to compromise on quality when trying to save cost. On the other hand, if you must buy a used truck, check all necessary considerations to ensure that the truck is worth your investment.
Some of the things to check on a used truck are:
- The trucks oil change history and maintenance
- Signs of body damage
- Tire tread
- The truck’s mileage
If you decide to lease the trucks for your business, have clear terms of service with the person leasing it. Additionally, ensure that they have a reasonable leasing cost to not spend all your profit on leasing the truck.
Preparing Your Trucks for The Road
Getting the trucks and customers does not mean that your truck is ready to hit the road. Instead, there are some final touches to do on the truck to help get it ready. For instance, you need Radio Frequency Identification tags on the windshield.
Additionally, you need to have license plates on the trucks, especially if you recently bought them. If you are operating the trucking business across several states, ensure that you have the international registration plates.
The drivers working in the trucking business determine how successful your business will be. For this reason, use an effective recruitment strategy to help you ensure that you hire the best drivers.
When recruiting the driver, identify the values you are looking for in a driver and shortlist applicants. Take time to interview and find out more about the shortlisted applicants and end up with the driver with the best interest for your business.
How Do You Retain Your Trucking Drivers?
Given the hassle of finding the right drivers for your trucking business, you will want to ensure that you retain them for long. Unfortunately, the driver shortage is one of the greatest challenges facing the trucking business today.
For this reason, you need to figure out ways to help you retain these trucking drivers you have since getting a new driver is easier said than done. To help you retain your trucking drivers, you should:
- Show the drivers that you appreciate them. Have methods such as giving bonuses, among others, to show your drivers that you appreciate the work they do in your business.
- Set realistic job expectations. Do not demand too much from them that they can achieve, such as unreasonably long business hours.
- Provide employer support for these drivers. The main areas to think about are their health, family time, and savings.
- Be smart with new technology. Think of technology as a way to better their lives and make work easier
- Invest in quality trucks. Let these be trucks to enjoy driving without any health issues, even if they are on the road for several hours.
Establish Your Fleet Management Process
Your fleet management system affects many areas of your trucking company, such as compliance, vehicle maintenance, supervision of driver behavior, and fleet safety. Therefore, before you launch the business, you must have a reliable fleet management process.
The fleet management process entails monitoring vehicles to check potential maintenance needs that they may have. Additionally, you can have driver safety benchmarks and driver coaching programs to help boost safe driving techniques.
Find Loads to Haul
Before your trucks start operating, carefully determine the loads that you shall haul in this business and where to find these loads. For instance, you can look for fleet owners looking for freight brokers and form a contract with them.
On the other hand, you can register as a government contractor and handle their trucking needs. Identify the area with a transport gap and make this your target.
Growing Your Client Base with Reputable Customers
If you have more clients, the more stable your business is. Having one client who accounts for about 40% of the business income is risky. Therefore, strive to sustain the clients in your business, win more customers, and increase your client base.
Offering quality services and continuously marketing your business will help grow your client base within a short time.
How to Manage Your Income and Expenses Well
Most startup businesses fail because of mismanaged income and expenses. Therefore, to keep the business running, take control of all accounting tasks in the business.
Manage payment received and income and the expenses in the business such as fuel expenses, salaries, and recurring expenses. You can invest in income and management software to help manage your income and expenses.
If your trucking company is struggling with cash flow due to oustanding invoices with long payment terms, you should consider freight factoring. Invoice factoring is the process of selling your receivables to a third party (or factoring company) in exchange for cash up front.
Starting and running a trucking company may be difficult but not impossible. With the right tips and tools, you can start a trucking business that later becomes the main source of your income. Use the cheat sheet above to help you overcome the challenges of starting a trucking company and enjoy its benefits.
Grey is the Director of Marketing for altLINE by The Southern Bank. With 10 years’ experience in digital marketing, content creation and small business operations, he helps businesses find the information they need to make informed decisions about invoice factoring and A/R financing.