The trucking business can be very profitable. This is the reason why many truckers have taken their chance with starting their own trucking company, in order to make a profit and, well, to have their own business that revolves around what they like doing.
However, a few of them know how competitive this type of business can be. As a result, many of those that try their luck end up with a failing business and with more issues on their head than when they thought about starting the company.
That’s why, today, we thought of sharing with you the seven steps that you need to follow in order to start a successful trucking company. Pay close attention to each of them, as every step is required if you want to acquire success! For more detailed steps on creating the trucking company, read this article on how to start a trucking company first.
- Find the Right Market Niche
Naturally, the most important step refers to finding the right market niche for you as well as for your business. No matter the size of your trucking company, you’ll want to choose a niche that you can handle, so to say.
This is because the market that you are going to activate in will determine the rates you charge, the equipment you’ll have to buy, as well as the freight lanes you can service.
You might want to choose the most profitable one, but you also have to approach a niche that you feel safe operating in.
- Charging the Right Rate per Mile
When determining the rate that you’ll have to charge your clients per load, you’ll want to go for the ones that are high enough to turn in profit and pay your operating costs as well.
Before you start making sales and calling shippers, you need to know exactly how much you can charge, keeping in mind that you must be competitive with the rates that brokers charge shippers.
In order to round up a proper rate per mile, you start by selecting a freight lane and go to a load board. Then, you’ll find ten loads that are going in the same direction and call the brokers to find out how much they pay.
Take all the rates and get the average, to which you add around 10% to 15% to find out the price that brokers charge shippers. The process is repeated in the opposite direction.
- Determining Your Operating Costs
If you want to know whether you make a profit or not, you’ll have to know exactly what your operating costs are.
First of all, find out your fixed costs, such as permits, insurances, truck payments, and so on. Then, move on to variable costs, such as fuel. These two types of costs will be used to determine an all-in-cost per mile. You find out how much profit you make by subtracting the all-in-cost per mile from your rates.
- Proper Fuel-Buying Strategy
Many truckers and trucking company owners believe that the cheapest pump price means that they’ll get the cheapest fuel. However, that’s completely wrong and, if you buy fuel following this rule, you may end up losing more than just a couple hundreds of dollars.
Because truckers pay fuel taxes based on how much fuel they use as they drive through different states, it is recommended that you buy fuel at the cheapest base price. The base price equals to fuel price minus tax.
It doesn’t matter where you buy the fuel from – you’ll pay taxes on how much fuel your truckers spend.
- Working Directly with Shippers
Even though using load boards and brokers can prove very useful when you find yourself with an empty truck, it is better to not fully rely on them. Keep in mind that brokers keep around 10% to 20% of the total load price.
This is why it is recommended that you build up a list of direct shippers. Naturally, you’ll charge them prices that compete with those of the brokers’ and, in the end, manage to keep your trucking company busy all-year long, via both load boards/brokers and direct shippers.
- Have an Efficient Back Office
Naturally, every business needs a good, efficient back office. When it comes to trucking companies, you can handle this task yourself, as you need only a laptop, Internet connection, and printer.
Obviously, you’ll also need accounting software, as well as some knowledge on a variety of things/procedures.
You could also outsource this task to a dispatcher, but you need to be careful when choosing one. It is well known that a wrong dispatcher can literally kill your entire business.
- Avoiding Cash Flow Problems
As you may know, trucking is cash flow-intensive. You are always doing something with your cash flow – buying fuel, truck payments, insurance payments, and so on.
Moreover, your brokers and shippers can take up to 45 days to pay their invoices. Obviously, this can create a serious cash flow problem to your business. One easy way to avoid this issue is by relying on freight bill factoring.
In short, factoring advances up to 95% of the invoice while the rest is rebated at the time your shipper pays. Factoring companies also come with several other advantages, such as cards and fuel advances that can really help your business move on.
Starting a trucking company may not be that hard – but starting a successful one sure is rather tedious. There are a lot of things you have to keep your eyes on if you want your business to evolve and turn a profit. Moreover, depending on the size of your business and its routes, we also recommend you take a look into truck accident lawyers, as one can prove very useful when it