Are you sick of driving for an average truck driver salary? Running your own trucking company can be a lucrative business. To be a success, though, you’ll need knowledge of the industry, skill in building out a business, and perhaps most importantly, access to capital. The good news is if you want to start a trucking business, now’s the perfect time. There’s a current truck driver shortage of an estimated 60,000 drivers that will likely grow in the coming years as more drivers retire, according to the American Trucking Associations. In other words, your service is in demand, and demand can drive major revenue and profits.
How to Start a Trucking Business
Knowing there’s a business opportunity in trucking and creating a successful new company are two different things. There are a series of steps you’ll need to take to get from the drawing board to profitability. The good news is there are a number of companies and associations that can help you along your way, with everything from regulatory requirements to startup business funding. The key is to not overlook any of the important stepping stones along the way to success.
While there’s no one path to success for you to follow — part of your success has to come from having a knack for business and an eye for detail — there are some basic steps that all trucking owner-operators can take to ensure their trucking business is positioned for a positive outcome.
Need truck financing to get your business up and running? Contact Seek Business Capital today to see if you qualify.
Here are 10 steps you can take to start a trucking company:
1. Assess Your Strengths and Weaknesses
Honest self-assessment is an important first step when opening any business, including trucking. Ideally, if you’re starting your own trucking company, you’ve already got first-hand experience in how the business operates, either as a driver or other type of employee. However, inexperience doesn’t necessarily mean you can’t succeed in the trucking industry; you’ve just got to realize that it’s more of a drawback than a strength. For example, if you don’t know the difference between a tractor and a trailer, this might not be the industry for you, even if you can smell the opportunity in the business.
Ultimately, you’ll want to identify your strengths and weaknesses when it comes to running your own trucking company so that you patch the holes where you may fall short. For example, if you’ve got 10 years of driving experience, you likely understand many of the shortfalls of the trucking industry, including the potential of a lonely or unhealthy lifestyle for your drivers. This can help make you a more empathetic boss. If you don’t have this type of first-hand experience, you might need to employ some drivers or other personnel that can explain this side of the business to you.
If you have no driving or trucking industry experience yourself, you can still be ahead of the game if you’re a master at the financial side of starting and running a business. Although you’ll still need to learn the specific requirements and unique demands of the trucking industry, understanding how credit, insurance, licensing and other aspects of running a business will come into play can help set you up for success.
With time and effort, you can learn aspects of the trucking business that you might not have first-hand experience with. But before you can do that, take an honest look at your talents and capabilities to see if you have what it takes to create a trucking business out of nothing.
2. Draft a Business Plan
Creating a business plan is an essential step in setting up any type of business, including a trucking company. Although many entrepreneurs fly by the seat of their pants when it comes to setting up a new company, those without a written road map are more likely to fail. Knowing how to write a trucking business plan, however, does require some inside industry knowledge.
A business plan doesn’t need to be an intimidating, 1,000-page document that specifies each individual step you’re going to take for the next 20 years. Rather, it’s helpful to think of a business plan as a simple guideline to help you get where you want to go — and to help you stay the course when things get rough. Even the best-run companies have growing pains, and when times turn difficult, it’s essential to have your path already laid out for you.
A good business plan can help you in multiple areas. One of the most important is that it can help you when you apply for commercial truck financing. A well-written executive summary alone may be enough to explain why finance companies should extend you a loan. Beyond the broad strokes, a good business plan will detail how your business is going to operate, from sales and marketing to pricing, business operations, fleet management and other considerations.
More than anything, the very act of writing a business plan can help you articulate exactly what type of trucking company you want to operate. For example, will your business be a sole proprietorship, an S-corp, a C-corp or a limited liability company? Do you plan to focus on long-haul or short-haul trucking? Should you buy trucks, or acquire them via an operating lease? Will you be an owner-operator? Do you have future expansion plans? Have you budgeted for ancillary costs? What are your financial projections? These questions, among many others, should be resolved as you go through the process of formalizing your business plan.
Looking for truck financing to start and grow your own trucking business? Contact Seek Business Capital today to see how we can get you the financing you’re looking for.
3. Get Applicable Licenses and Permits
The trucking industry is highly regulated. Before you can even get rolling, you’ll need to understand and acquire the necessary licenses, truck permits and other documentation to operate a trucking company. Some of these required documents include:
- A commercial driver’s license (CDL)
- A USDOT number
- A Motor Carrier number
Getting a CDL is a bit more involved than getting a simple driver’s license, if you don’t already have one. In addition to choosing a specific type of vehicle and kind of driving you want to do, you’ll have to pass a three-part skills test.
Your USDOT number is unique to your company and helps the U.S. Department of Transportation create a safety file on your business. This information is used during inspections, compliance audits and crash investigations. Any trucking business involved in interstate commerce/transport needs a USDOT number, as do intrastate companies that carry hazardous materials. A total of 37 states also require trucking companies to get a USDOT number regardless of their type of business, even if it’s completely intrastate, so it’s essentially a requirement for nearly any type of trucking company.
Technically, not all trucking companies need a Motor Carrier number, but in reality, most do. According to the Federal Motor Carrier Safety Administration (FMCSA), you’ll need an MC number if you operate as a for-hire carrier, if you transport passengers in interstate commerce, or if you 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.
Before you can start operating your fleet, you’ll also need to install electronic logging devices, or ELDs, by congressional mandate. These devices sync with a vehicle to automatically record driving time and other data points to help promote a safe driving environment for drivers.
4. Buy Insurance — Then Buy More Insurance
Insurance is the tradeoff of a small, certain loss in exchange for protection against the possibility of a large loss. You make regular premium payments — your small, certain “loss” — so that the insurance company bears the risk of calamity, such as all of your trucks breaking down. Since a single disaster is often enough to send a startup company into bankruptcy, you’re going to need many kinds of insurance for your new trucking business.
One of the most important truck insurance policies you’ll want to take out is one that covers damage to your vehicles. As your company will only make money when your trucks are out on the road, you’ll actually want your vehicles to rack up mileage. Of course, the more mileage a truck has, the more likely it will break down. Even with preventive maintenance, you should expect to encounter some periods when a truck is out of service. In some cases, you might even be faced with a total loss of a truck. Without insurance, the loss of your source of revenue is a sure path to insolvency, so you’ll definitely need coverage on every single one of your trucks.
Liability insurance is another requirement for your business. If one of your truckers runs someone off the road, your business will be liable. Just like the breakdown of your trucks can spell financial disaster, so can a lawsuit. Insurance can help you avoid the risk of paying out a large settlement should something happen. Beyond that, it’s the law. According to FMCSA regulations, you’ll need somewhere between $750,000 and $5,000,000 of liability insurance alone, at a minimum.
A final critical reason to get insurance for your trucking company is that you’re unlikely to obtain truck financing without it. No lender is going to give you money for your business knowing that they’ll face a total loss in the face of an accident.
5. Secure Truck Financing
Understanding how to run your business, and securing the necessary licenses and insurance to operate it, are fundamental requirements for starting your trucking company. However, the true lifeblood of your business comes in the form of financing. Without financing, your business simply can’t operate, no matter how much documentation you might have. So, once you’ve set up the foundation of your business, your top priority should be to acquire truck loans to run it.
With commercial trucks typically running $80,000 or more, even a small trucking business can get expensive fast. The problem is, if you’re a new operator, it can be hard to get financing from some of the more well-known banks, who commonly require two or more years of operating history before they will even look at a loan application.
The good news is that some finance companies have emerged that offer both convenience and the ability to finance small or startup companies. Rather than spinning your wheels trying to get startup financing from an international bank, search for a reputable online lender that specializes in companies like yours. In some cases, these types of companies might be the only answer to question of how to start a trucking company with no money. What you might find is that in addition to getting financing, you might find that these smaller companies, such as Seek Business Capital, have expertise in meeting the needs of startups.
6. Build Your Fleet
You can’t run a trucking company without trucks, so once you’ve got your financing secure, you’ll need to buy your fleet, whether that’s a single truck or 100.
Your trucks are quite literally the drivers of your company’s revenue, so you’ll need to be astute in the types of vehicles you acquire. Are you running a long-haul business or will your routes be strictly short-haul? What type of cargo are you planning to handle? Do you need trucks with refrigeration? Do you want cheaper, high-mileage vehicles — which might require more maintenance — or more expensive, low-mileage vehicles?
In addition to matching your fleet to your business plan, you should understand how your choice of vehicles could affect your financing. For example, since high-mileage trucks intended for long-haul trips are more likely to break down, your lender might require a higher down payment or charge a higher interest rate on your loan. In some cases, you might not be able to find any financing at all on a very old vehicle.
The bottom line is that to optimize your chances for success, you’ll have to find trucks that are an exact match for the type of company you intend to operate. The more successfully you can match your vehicles to your business plan, the more efficiently you can run your business.
If you are looking for truck financing to take your company to the next level, contact Seek Business Capital.
7. Join Industry Associations
No person is an island, and neither is a business. The further you can extend your reach as a company, the more likely you are to attract customers and generate revenue. If you’re starting a trucking business, one of the most critical moves you can make is to join the American Trucking Associations.
As a trade organization, the ATA’s whole reason for existence is to help companies like yours become more profitable while operating safely. In addition to keeping current with trucking industry regulations, trade organizations offer conferences and other business education and development opportunities that can be extremely helpful for companies, especially startups.
8. Hire Competent Employees
Even if you have years of experience in the trucking industry with a spotless driving record, you can’t operate a trucking company completely by yourself … at least not for very long. Even if you decide to go the owner-operator route and drive your own truck, it can be nearly impossible to do all the heavy lifting and still have time to successfully man a home office at the same time. While this might work for a short time if you exclusively run short hauls, it’s not a winning formula for the long run.
To properly maintain and grow your business, you’re going to eventually need someone to answer the phones, book jobs and maintain your business records. You can certainly outsource some of these tasks, perhaps via a legal, financial or tax advisor, but you’ll ultimately need good employees to help your business grow. In most cases, even as an owner-operator, you’ll need to hire at least one additional driver, so that you can swap time off. If you’re not intending to man a rig yourself, one of your first hires will obviously have to be a driver.
9. Acquire Customers
Your truck fleet may be the revenue-generation machine of your company, but without customers, those vehicles will never be put to use. If you’re entering the trucking business, it’s likely you’ve already got at least one or two customers in mind that you intend to serve. If not — or if you plan on expanding right off the bat — you’ll need to market, network and advertise your business immediately.
Joining trucking associations can be a source of good leads and networking. In the digital age, having a good website and understanding how to market via social media are also essential steps. Although you may only have a small number of customers when you first start your business, your ultimate goal should be to diversify your client base via an effective sales strategy. If you rely too much on a single customer, variations in order flow could seriously disrupt your business.
10. Manage Your Finances
Once your business starts rolling, you’ll have to keep a close eye on your finances if you want to run a profitable organization. Generally speaking, you’ll always need more capital than you think you do. When you first start a trucking business, your operating expenses will often exceed your income until you start generating more business. This is why you should always aim to raise money in excess of what you think you’ll need for your initial operating capital.
Remember that many businesses, especially trucking, are cyclical. When the economy is booming, everyone needs truckers to get their goods from point A to point B. But when the economy contracts, such as during a recession, demand for goods declines. You’ll need excess capital — the business version of an emergency fund — to make it through the leaner times. In fact, you may not even be able to get initial funding from a bank unless you can demonstrate that you already have cash reserves, as a company with inadequate funding is a riskier venture from the perspective of a lender.
Once you’ve got your funding, be sure to protect it. Always make your loan payments on time so that you can keep a good credit history. Just like you need good credit to get your initial round of financing, you’ll need to keep it to get additional financing in the future at reasonable rates.
How to Start a Trucking Business as an Owner-Operator
Starting and running a trucking business as an owner-operator incorporates the same steps as if you’re just running your business and not operating the trucks yourself. However, you’ll have to decide whether you’re going to lease your services out to an existing trucking company or find your own loads to haul. You’ll also have to consider how to run your home office while you’re out on the road, and how many additional drivers you intend to hire over time — if any.
How Much Does It Cost to Start a Trucking Company?
Now that all your ducks are in a row, what is the amount of money you’ll need to start your business? The answer is, of course, “it depends.” The size, scale and scope of your company will make a huge difference in what the total cost of starting your company will be. However, here are a few of the definable costs that you should factor in:
- Registration and formation documents: $500+
- IRP plates: $298
- Heavy vehicle use taxes: $0 to $550
- Truck Driver salary: $43,680 on average
- Price of truck: $15,000 to $175,000
- US DOT number: $300
- Unified Carrier Registration: $76+
- Insurance: $10,000+
- CDL endorsements: $142.25
- Marketing and customer acquisition: $5,000+
Some of these costs are mere estimates that can vary wildly depending on your state, the enactment of recent legislation and your goals as a company. For startup fees alone, you should likely budget $10,000 to $20,000 and then add on the price of your truck(s), driver salaries, maintenance costs, ongoing insurance and office expenses.
The Bottom Line
There are two entirely different skill sets involved in learning how to start a trucking business and actually knowing how to run a successful trucking company. The former requires attention to detail, while the latter demands business acumen and an understanding of how supply and demand works in the trucking industry.
These 10 steps to starting a business in the trucking industry offer the basics of what you’ll need to do to get your trucking company off the ground. For more in-depth support, you’ll likely want to work closely with a startup-oriented finance company like Seek Business Capital to both obtain capital for your business and to have a business partner that understands the needs of your new company.
More From Seek
- 10 Tips for Female Entrepreneurs From Women Who Founded Companies
- Cities With the Most Female Entrepreneurs
- 7 Best Fix and Flip Loan Options for Real Estate Investors
- 15 Pro Tips On How to Flip a House for Maximum Profit
- Seek on Forbes: Can You Flip a House With Credit Cards?
Photo credit: Dabarti CGI/Shutterstock.com