The Hustler's Digest StaffWant to know how to start a trucking company? It’s a wonderful idea to start a company of your own, but it will take some serious work from you. If you are starting a business for the first time, read on to get a detailed account of everything you need to do to become a business owner.
Trucking business is a profitable business in the United States, and statistics show that 70% of all freight is transported on trucks. Do you know what that means? This means billions of dollars in shipping. If you are thinking of starting a trucking company, these stats should be compelling.
However, upgrading to an agency of your own or starting one without any prior experience is no piece of cake. You will have to face quite a few challenges. Although challenges are part and parcel of business, having prior knowledge of them and a plan to act upon for salvation can help.
This article helps all those who think trucking is a lucrative business and should try their luck in it. We have discussed the steps to start a trucking company in detail below. These steps give you a basic plan and a roadmap to start a company. The steps differ every prerequisite in detail and help all those who aspire to start a business in trucking. From drafting a business plan to insurance and financing, you will find help on every topic related to starting a trucking business.
Here are the steps to take while you are starting your own trucking company:
1- Do the mind work
It might come as a surprise to see mental work at the top among the steps to start a trucking business, but your critical self-assessment is the first step towards a successful trucking company. Start with your self-assessment; ask yourself if you have the knack for it? Usually, it is the truck drivers who start their own companies to boost profits, and they have good experience of all things related to the line.
However, that does not mean newcomers can not do this job. It’s just that having experience in this field will be a huge plus point. Acquaint yourself with all things related to the trucking business; find out the details about the industry and the lifestyle that comes with it. Before you start looking for capital and expertise, you might want to make peace with the fact that trucking comes with a lonely lifestyle, and as a boss, you need to be empathetic.
There will be hundreds of things waiting for your serious consideration. All the steps you will need to go through will require your action and attention. You can learn all those things along the way when you are in the game, but sitting down before you begin realizing your potential, shortcomings, strengths, and weaknesses goes a long way. While you do the most-wanted self-assessment, you come face to face with many issues and potential conflicts, and you can make up your mind if you want to fight or flight.
In short, before you dive, take a dip and see how it feels to be “underwater.” You will be able to decide more accurately if you would like the profession or not!
Plan everything
You will need to involve yourself in a lot of planning and preparation before you actually start a trucking company. You will have to decide if you are going to start your company as an “Owner-operator, or Hire-Drivers. This may seem simple, but this decision will be crucial for your business to manage finances and setup.
Owner-operator
The usual approach is to go for an Owner-operator setup. It’s simple as well as efficient. As a starter, you will be able to keep a close eye on the operations and transactions. It will give you a sense of control which helps strengthen your confidence in the newfound business. However, it is usually for the experienced kind because they are well acquainted with the field and its work patterns.
Alternatively, you can hire drivers for your business and even operators. This will, however, increase the overheads quite a lot. You are good to go if you have the finances to manage these things.
If you are not experienced in trucking, you will have to get your driver’s license. If you have been driving your truck, you will already have it. Otherwise, you need to apply for one. It will be one extra task. Your personal driver’s license will not work; you need a new commercial driver’s license for this business. So deal with that first of all.
Who is an owner-operator?
Owner-operators are independent freight transport drivers who manage their transportation business with vehicles solely owned by them. They hold a truck or a fleet, and they take the shots in all matters about the fleet. If they choose, they can also lease out services.
Owner-operators own the fleet and manage the day-to-day operations of the business as well. An owner-operator may even be a driver and an employer in his own business. This is what the term means- an owner who operates and owns the business simultaneously.
Pick a name
Deciding on your trucking business name is hardly a fun factor. It is crucial because you will need it while registering with the authorities. A suitable name also helps win over new clients.
So start by brainstorming some ideas and see if the names you like are in use of others or not. You can do this by using tools employed to search for business names or go for trademark searches online.
What name you choose will not just be dependent on its availability. You will have to see what kind of structure you are using for your company, such as a sole proprietorship or LLC, or some other structure.
Select a target market
Targeting the right market niche is also crucial when opening a trucking company. In fact, this is the most critical decision about making money and earning clients. You can even avoid active competition with the right decision, which means an easy journey and more money.
Becoming a niche carrier may help you avoid competition with giant haulers, establish your name in the industry, and optimize your sales opportunities.
Specialized trucking niches can help you streamline your operational processes and resources instead of “anything to anywhere” freights, which can be too dynamic and expensive for startups.
To select a niche for your trucking company, ask yourself the following questions:
- Which products, industries, or companies in my target locations and shipping lanes do I find interesting? If I invest sufficient time and energy to learn about the niche, will I enjoy doing so?
- Who among the different shippers I engage with gives me the most positive reviews?
- What am I already aware of regarding these goods and logistical activities? What are their most critical needs and requirements? How can I meet them better than other haulers?
- Who will my trucking company’s services benefit the most?
- Who are my ideal customers and shippers? What are their needs, strengths, and weaknesses? As their niche carrier, how can their operations benefit from my service?
Identify your rates per mile
This may be a point deep down the lane, but it is necessary nonetheless. Do not get carried away by the profit your established competitors are making. Keep your profit percentage a little low to attract new clients initially. However, your rates must earn you some profit. After all, business is done to make money, and you have to cover the expenses too.
That being said, do not keep your rates too low in fear of losing people; too low can excite doubts about your services, but it can also lead you to losses.
Steps to determine your rate per mile:
- Choose your freight lane and head to a load board.
- Next, Look for ten loads that are going in the same direction.
- meet the brokers and find out how much they’re paying for those loads
- Calculate the average
- Add 10-15 percent to estimate the price brokers will charge shippers.
- Repeat the same steps for loads that are going in the opposite direction.
Write a business plan
It seems a bit cliche to say “write your business plan,” but it’s essential. You are not going to become an owner-operator without a roadmap or plan. You need a concrete way, detailed out step by step to reach your goals and profits that you have in mind.
A business plan is necessary for any business, and it’s the same for a trucking company. There are no templates or formulas involved in writing down a good business plan. There is no need to impress someone or spend your energy making it an intimidating document; you do not need to take a course to write it.
Think of your business plan as a simple guideline that will clarify the steps to reach where you want to go. A business plan helps make things real, practical, and doable. It brings our business goals out of the world of reality from the ditches of mere conception and dreams. You have specific and concrete actions before you once your business plan is done.
For a trucking business, you will perhaps need some inside knowledge of the field, but not necessarily be in the field yourself to succeed. You can hire an insider to tell you all you need to know to fill in the details and craft a winning roadmap. A business plan doesn’t just give you a direction to go in the beginning when you are a little clueless, but it also helps you stay on the right course when things go grim, and troubles find your way.
Even the biggest companies face difficulties, and the best brands have low days. In those times, having a concrete plan spread out in front of you will help you stay connected and even hopeful.
In the trucking business, a well-written (detailed, concrete, and practical) business plan will be nothing less than an asset. It will help you tremendously while you are searching for financing options to fill in the investment gaps. A business plan allows investors to see a future for the startup- at least on paper. So, there are quite a few concrete and solid reasons you should be investing time and energy in writing down a business plan.
Get applicable licenses and permits
The trucking industry is pretty formal and highly regulated. Before you can even think of making an entry, you’ll need to acquire all the necessary licenses, documents, permits to start legally and formally. It will be a lie to say it’s going to be easy: there are quite a few things to do, and it will take time.
Some of the required documents include:
- A commercial driver’s license (CDL)
- A USDOT number
- A Motor Carrier number
Getting a CDL ( Commercial Driver’s License) is a tad bit more complicated than getting a simple driver’s license for your domestic vehicle. In addition to describing the kind of driving you will undertake and the specific vehicle you will be driving, you will have to go through a series of skill tests containing three parts. Nothing makes it easier; it is necessary, and you must touch the finish line on this one if you want a trucking company of your own.
Your USDOT number is unique to your company, and this document helps the U.S. The Department of Transportation initiated a safety file on your business. This information on the doc is used during inspections, compliance audits, and crash investigations. Any trucking business that is legally involved in interstate commerce/transport must have a USDOT number; in fact, all intrastate companies that carry hazardous materials must have this number.
Of all, A total of 37 states require trucking companies to acquire a USDOT number no matter what type of business they are involved in. you will need this document even if you are doing an interstate business.
When it comes to MCN, not all trucking companies need it. However, most do. According to the Federal Motor Carrier Safety Administration (FMCSA), you’ll require an MC number if your carrier is working in a commercial capacity, like if it’s working as a for-hire carrier if you transport passengers in interstate commerce. You need an MCN if you transport passengers interstate or transport federally regulated commodities in interstate commerce.
Unlike a USDOT number, which is unique and applies to an entire business, you might need to file for more than one MC number, depending on your business. Interstate companies must also file for an MC number with the Federal Motor Carrier Safety Administration (FMCSA). An MC number gives a company an interstate Operating Authority for a specific type of trucking. Depending on your business, you might need to obtain more than one MC number.
There are some SOPs that you must follow before you can start operating your fleet, you’ll also need to install electronic logging devices or ELDs, a must by congressional mandate. These devices automatically record driving time and other data points, which help regulate the system according to the law and help promote a safe driving environment for drivers.
Buy insurance
Insurance is hardly a choice; it is a necessity when you are about to begin a trucking journey. The Federal Motor Carrier Safety Administration (FMCSA) requires certain types of insurance before you are even issued a permit. So you better start researching the topic and get ready to buy your trucking business insurance.
The fact is that you would like to buy insurance even if it weren’t for the legal formalities. You are running a trucking company, and trucks are high mileage, high-maintenance vehicles. They are gigantic, and so is their maintenance allowance. If you have a truck that needs maintenance and you lack the money, it will really affect your business badly. For startups, a truck not working may be the final nail in the coffin. So insurance comes in handy in all such situations.
You keep paying small premiums, and the insurance company hedges against a bigger, more difficult loss. For example, you are a nascent business, and all of a sudden, all of your trucks stop working for one reason or the other. You surely won’t be in a position to manage a grave situation like this on your own. BUT your insurance partners can. Your small premiums will come in handy now.
Insurance is essential for all companies, but it is all the more necessary for small startups which can land into bankruptcy with a single instance of calamity.
The next important thing about trucking insurance is that you will need many types of insurance. The essential insurance that you need is the one that covers the vehicle. Since your trucks are going to cover heavy mileage, there are high chances that they will break down here and there. Even if you have maintained a high level of preventive insurance, there are chances that you will land in difficult situations with your trucks.
Liability insurance is another type of insurance that your business requires. If one of your truckers runs someone off the road, your business will face a lawsuit. The breakdown of your trucks can mean a huge financial disaster, so can a lawsuit. Insurance will again save the day for you. You can avoid the risk of paying out a large settlement in case something terrible happens.
According to FMCSA rules, you’ll need somewhere between $750,000 and $5,000,000 of liability insurance alone. You can see how much aid it is to have this particular insurance.
Last but not least, insurance and its need is the fact that it is indispensable while you are looking for finance options for your trucking business. Think of it like this no one will trust you with their massive money if you are not backed and secured by solid insurance.
Secure truck financing
Trucking is a demanding business when it comes to financing. In fact, it may need bigger and more financing options as it is heavily reliant on equipment- the vehicles. The conventional costs that are attached with all businesses alike come with this one without fail, but the additional cost of a vehicle can really tip the scale.
Now, trucks are big vehicles. It’s not easy to buy even one because it can cost anything around $80,000, and as a businessman, you have to manage a fleet for smooth operations of the business. So look for investors and smart financing.
Banks may not be accommodating for you if you are a new business; you will have to look for a company that not just agrees to give you money but understands your needs as a new setup as well.
The good news is that there are finance companies that offer both convenience and the ability to finance small, nascent companies. Rather than trying to get startup financing from an international institution, look for a suitable, highly reputed online lender specializing in new and small companies like yours.
In some cases, such companies may be your only option for financing as banks are quite risk-averse, and any new business comes with a great deal of risk.
Join industry associations
No business can operate alone in its own balloon. Business is all about your outreach and associations. It is through your outreach and associations with other companies and clients that you will find new clients, secure finances, and make your business firm solid. Joining authentic and actually helpful associations like the American Trade Association is the first and the best thing you should do as a trucking company. ATA helps new companies make their mark in the industry, and it also helps secure small ventures. The sole purpose of this association is to encourage new businesses. So, if you are a small business just starting out, you need to find a place for yourself on the ATA for survival and strength.
Hire competent employees and acquire customers
Power your business with loyal and competent employees. They are the bloodline of your business. It is very important to find competent and reliable people, especially when you have a small company that can’t bear many losses. Put in a good effort to make the startup work: find employees who understand the industry, its needs, and your business values. They should be on the same page as you when it comes to loyalty and understanding your business.
In order to give your new business an actual start, you are going to need customers. Find yours to start, and you are good to go. You have the fleet, your finances, Insurance, and all the permits required. Nothing should be causing issues now. IT you, your determination, knowledge, and a knack for trucking business and your business.
Conclusion
Trucking is a demanding business; no one can master it without showing skill, talent, and attention to detail. Like any other business in the world, trucking demands time and energy along with all the steps required to start a business. You cannot think of a trucking business as something that can thrive and bear fruit on its own.
The above-mentioned steps are just the basics of what you will need to do while you are setting up a business for yourself. As you tread your way in the real world, you will learn precious lessons about how things work in the trucking business. Trucking is a profitable business, and trends support this assumption, but that doesn’t mean anyone entering the market is going to earn profits. You are going to have to work hard and follow the necessary steps in order to establish your company, find finance options for it and start operations in a decent manner.
If you succeed in choosing the right kind of employees and supportive finance options, you have all the chances of making a mark in this business.
