Starting a trucking company may seem like an intimidating goal, but it’s more accessible than you might think. You can actually start your own trucking operation with just one truck, and you’ll be in good company too – 90% of U.S. trucking companies have just six trucks or less. The question is, how can you turn a profit in the trucking industry with just one truck? It takes plenty of work and planning ahead, but it can be done.
The trucking industry currently faces a number of challenges, such as driver shortages, rising gas prices, and so on. If you’re serious about getting your own trucking business going, it would help to stay up-to-date on news from the truck driving industry. That way you’ll stay informed on current challenges, and maybe even identify upcoming speedbumps. In addition to that, here are the most important steps to take when starting your own trucking business.
Decide which type of truck you need
Even though most people associate trucking companies with semi-trucks rolling down the highways, there are actually several options of trucks to choose from. The one you end up getting will depend on what you want to transport. Will it be construction materials that are transported via dump trailer, or items that require a flatbed trailer? Will you be focusing on long-haul deliveries that require powerful rigs, or would you need a smaller delivery truck that will travel local routes?
Another aspect to consider is whether you’ll get a new or a used truck. The advantage of getting a new truck is that you know you aren’t buying someone else’s problem vehicle; you can expect to get a certain amount of use from it before it wears out. Then again, used trucks are much cheaper than new ones, meaning they’re more accessible for someone who wants to start a trucking business as economically as possible.
Calculate expenses
The trucking industry is known for having razor-thin margins. Even if you end up making a couple hundred thousand dollars annually after breaking even, a lot of that will be used to cover various expenses. And of course, you’ll also have to calculate the initial expenses of buying (or leasing) your first trucking rig, registering your business, etc.
If you’re getting a used truck, it could cost tens of thousands of dollars; for a new vehicle, the cost could range from $100,000 to $200,000. The price will depend on the make and model of the truck either way, but you can depend on the cost being fairly steep. These are some other expenses that you should expect to pay:
- Rent for a facility or storage lot
- Permits
- License plate(s)
- Workman’s comp insurance
- Health insurance
- Cargo insurance
- Deadhead insurance
- Collision insurance
- Advertising
- Driver’s salary (unless you’ll be doing the driving)
- Fuel
- Truck maintenance and repairs
- Tolls
- Miscellaneous expenses like a phone bill, accounting services, office supplies, etc.
It’s essential to get an accurate estimate of what your monthly expenses will be. Cash flow issues can make or break a trucking company, and just a couple of surprise expenses can spell serious trouble for a new business.
Establish your business
This process will vary slightly from state to state, so make sure you know what your state requires. The goal is to create a separate business/tax identity from the ones you already have personally. It’s important not only for tax purposes, but also from a liability point of view – if there’s ever an accident involving your truck, your company will be liable, rather than you as an individual.
There are a few different options when it comes to the type of business model you can form. These include a sole proprietorship, a Limited Liability Company (LLC), S-corps, and C-corps. If you’re starting off as a small trucking company, you’ll probably end up choosing one of the first two options. The second two are better suited for complex organizations with dozens to hundreds of shareholders.
Secure funding
Any business needs capital before it can get started, and a trucking business is no exception. In fact, you may need more funds to start your own business in the trucking industry, even if you’re only buying one truck. The good news is that you may qualify for set-aside loans from the Small Business Administration (SBA), which can be instrumental in getting your business up and running. You could also look at generic small business loans, commercial truck leasing loans, or other funding options.
Wherever your money happens to come from, don’t forget that you’ll need to cover more than just the startup expenses. Sure, it’s important to secure your vehicle, insurance and licensing fees, and so on, but you shouldn’t stop there. You should also have at least two months’ worth of capital on hand to cover operating expenses. When you invoice clients, they’ll typically pay within 30 days – so where will your money come from in the meantime? For those first couple of months, it’s crucial that you already have the money you need to keep daily operations going, rather than depending on invoices getting paid in order to keep your truck on the road.
Stay compliant with regulations
The trucking industry is highly regulated, and those regulations tend to get updated (or added to) pretty frequently. This requires trucking companies to stay on their toes, since even a couple of neglected regulations can result in fines, increased insurance fees, and other potential consequences.
As the owner/operator of a small trucking company, you could keep up with these regulations on your own. However, most companies decide to hire a specialized lawyer to make sure they stay compliant. Even though this would involve yet another expense, it pays off in the long run.
The takeaway
Starting a trucking business will involve jumping through a few hoops, but you don’t need a huge fleet in order to turn a profit. Even if you just have one truck, you can use it to run a successful business; you just need to plan thoroughly, and be willing to invest the time and money to make it happen.
