If you are confused on what kind of business you will run, you can put a trucking business on your list. The trucking industry is very profitable and still, has a lot of potentials. And, this kind of business could be also successfully established within the vicinity of your home.
Although it sounds easy, managing this business can be tough since the industry is very saturated and competitive. If you fail to understand the twists and turns of the business, you may fail. To help you with that, Master Drive has prepared a list of the things you must effectively undertake to start a successful trucking company from home.
Determine how your trucking business will operate
Most trucking businesses run by bidding on and fulfilling transportation accounts and contracts. They usually operate in one of these two forms:
This option allows you to run your business using sub-contractors as drivers. Here, you are the owner of the business but your drivers are not actually employed by your company. This options may give you some advantages like reduction on start-up costs, insurance costs, and required equipment. However, this option will give you less control over your drivers and cuts into your profits.
This option allows you to privately operate your business at all cost and operations. You utilize your own equipment, settle higher insurance prices and hire private drivers as your own employees. You have the full control over your business and its employees and you will have the most return on profits. However, bear in mind that choosing this option requires a great deal of start-up capital and operating costs.
Register your business
A trucking company, like any other business out there, obviously needs some paper works. Opening a trucking company from home also requires proper legal registration, tax registration, and correct driving and permit documents. You need to show adherence to the state and federal business guideline and follow the state requirements for interstate and intrastate transport. And these companies are regulated by the Department of Transportation that’s why you need to apply for a DOT license. But before you can apply for that, you need to be legally registered as a state business. This is done through the secretary of state office or website. Once your business name and structure are appropriately registered, your business entity is established.
Get the right equipment
Apparently, one of the first things you should also deliberate is how you are going to obtain the necessary equipment as this is how your business will run. This is often the most expensive verdict that you will face. Canvass to different dealers and look for the equipment that you feel will be the best for your business. Once you are decided, the next thing you should contemplate is how you are going to purchase the equipment or vehicle.
On the other hand, there is some equipment that can just be leased. While this can be more complicated, the payments are usually lower compared to buying the unit. There are also other types of the lease that will let you own the equipment after paying within a specific period of time.
Develop relationships and clients
When you are still in the initial stages of your business, you can look for customers from a network within the trucking community or a load board. This is actually the first step to build a solid client base and referral sources. List your services with large distributors and shipyards and focus on transporting cargo in good condition and on time. These are the keys to develop relationships and build a strong base of clients.
The problem is, there are a lot of other trucking companies there and to win a customer, you may have to bid low and you might not have even a room for profit. Moreover, this load board does not build a long-term relationship that is why you will have to look for new clients and compete with other companies often.
So the lesson is: use a load board only to get started. Meanwhile, the efficient way is to start making calls to build your own customer list. Although it is not that easy, it is the smartest thing to do because eventually, you will be able to find a regular customer where most of your income will come.
Obtain the necessary insurance requirements
A bond and an insurance are needed before you can be licensed by the Department of Transportation. And this requires a minimum of $750,000 and up to $5,000,000 in general liability and cargo insurance. A $75,000 surety bond is also necessary.
Bid well and know your expenses
To entice more customers when starting, you should set your rates low. But be careful because it may be too low that you are only breaking even or even losing money on a haul. The only way to determine the best profitable rate is to know your expenses like maintenance, truck repairs, truck and trailer payments, fuel, salary expense, the cost of your work, and other miscellaneous expenditures.
Also, don’t forget to include the cost of your plights. For example, if the destination is in heavy traffic areas, you should cost more. And it is wiser that once you have transported the load, you must look for a backload or a load that you will have to deliver back because the cost of empty loads can kill your profit easily.
Run the back office efficiently
Trucking businesses typically operate on the roads, but it doesn’t necessarily mean that you don’t have to back it up efficiently by a back office. The type of your office should definitely depend on the size of your company.
Obviously, a bigger firm requires a more complex back-office compared to a single owner-operator. Nevertheless, it has to run efficiently and effectively. So you should determine how it will run, and set standards and steps to ensure that everything will go according to plan.
Manage cash flow
One of the most common difficulties trucking companies face is their issues with their cash flow. Often, your clients will ask for 30 or 60-day terms before they make their payments. Essentially, you have to wait for one or two months before you can collect the fees that you have netted today.
This is why you need an emergency fund, even for your business.
In contrast, your expenses like fuel, maintenance, and overhead expenses must be paid regularly. That scenario will leave a gap that if not paid attention to, might cause you serious series of headaches. You will run out of cash to operate today, and what’s worse is your potential customers will look for other companies to attend to their needs.
Fortunately, there is a financing option called freight factoring that can help you. You can get cash in advance so you can let your money circulate into your business.
Even if you start trucking as an independent owner-operator, you can scale your workload into a small business in the coming years. Hopefully, this article has given you a glimpse of the what it takes to start your own trucking business.