Are you a truck driver that is wanting to get a start in the trucking industry with your own trucking company? Then you have probably found yourself searching how to start a trucking company. Well, you are in luck as we will be covering just that in this article.
It’s true, trucking can be a very lucrative small business to get started in, but only if you are smart in how you go about it and willing to put in the hard work. Trucking is not a get rich quick scheme by any means and it is not for everyone. However, if you are willing to work hard and invest the time and dedication into setting up your brand, you can develop a successful trucking company. In this guide we will go through the main steps of how to get your trucking business off the ground the right way and give you a leg up on getting off to a successful start in this industry,
We will be covering some of the basic aspects that you will need to address in starting your trucking company such as writing a business plan, legally establishing your company, obtaining all necessary licenses and permits, networking, buying or leasing the right equipment for your needs, selecting the proper insurance coverage for your company, understanding your income and expenses, as well as growing your business to a successful level.
Write a Business Plan
If you are serious about your trucking business and want to start it off in the right direction then a trucking business plan is vital to set that course. Not taking these steps to consider the big picture is why trucking companies fail. A business is not something that you can count on being successful if you simply “wing it”. Especially as a new business, you always want to start out with a solid plan and clear understanding of where you plan to go with this endeavor and how you plan to get there. This will also prove to be imperative if you are needing investors, business partners, trucking business loans, or even trucking equipment financing in order to get your new business off to a strong start.
Legally Establish Your Company
Legally establishing your trucking company in the United States as a business entity is really the first major step in the process for new business owners and is how the government knows that you are a business. Depending on your actions, it can also offer a level of protection separating your personal assets from your businesses. There are many options available to you here such as a sole proprietorship, LLC (limited liability company), or Incorporation, but you need to choose wisely as how you establish your company will also determine how your company is taxed by the IRS. Some options can prove beneficial for one type of business while not so much for another. You need to make sure it fits your particular situation correctly and may be smart to seek professional help here to make sure that you are covered.
Obtain Necessary Business Licenses and Permits
If you plan to be a driver and not just an owner in an office, then a CDL or commercial driver’s license should be a no brainer for operating a trucking company, however, there are more requirements that you will have to take care of before you can really get your company off the ground. Some of these are as simple as registration fees and getting license plates for your trucks and trailers registered in your home state while other requirements are more difficult. Depending on the type of cargo that you will be hauling different licensing and permits may be needed to keep you in compliance. An example of this would be if you are going to be carrying hazardous materials or cargo of that nature which would bring additional requirements from standard cargo. The exact requirements of what licenses and permits are needed for truckers to carry for their trucking company beyond the basics of commercial drivers license, operating authority number from the FMCSA or your USDOT number (Department of Transportation) and or MC number (Motor Carrier), it really depends on the specifics of your company. We strongly encourage you to do your research here to make sure you are in compliance from the start. Good sources to contact for this information in relation to your specific needs would be the department of transportation (DOT) or the federal motor carrier safety administration (FMCSA).
Transitioning from company driver or owner operator to a business owner with employees can be a huge step for truckers, and becoming an expert in every aspect of owning a trucking company can take years to accomplish in the trucking industry. No matter the industry of business you are in, getting a coach or making those valued connections with people who know the industry can be vital to your success. You don’t have to make the same mistakes that others have to learn the best route but you can instead learn from their mistakes to set you on the best path with your company. It is important to know that issues will come up throughout the time you are in business. Having a strong network of dependable resources that have proven to be successful in the industry can make a huge difference in your own success. A great start here is to meet others in the industry to network with first. Don’t be afraid to spark that conversation with other truck drivers you meet as well as attending industry events and more. You can also learn a great deal from online publications in an effort to become further educated in the knowledge of the industry and continuing that knowledge as the industry grows and evolves along with you. Knowledge is key. Another great source is a trusted factoring company which can help you with both tackling your accounts receivable as well as being a strong knowledge base and source for quality connections in the industry that could be otherwise hard to make. A factoring company is usually a good partner because they only succeed when you succeed. Always remember to be careful with who you take advice from as well. Some people don’t have your best interest, and may look to take advantage of your inexperience for their gain.
Buy or Lease the Right Equipment
To run a trucking company, a truck and maybe even a trailer are rather immediate necessities. There are several points that you will want to evaluate in regards to securing commercial vehicles. While you need to have your own truck there is still the question if you should purchase new or used trucks, or simply lease them. Leasing leaves you a little less tied down to your equipment, but could cost more. Keeping in mind that your entire business is on the road and any down time will directly translate to a loss of income, you need to consider the quality of the equipment for maximum uptime and how you will go about obtaining it either through a purchase or a lease program.
Select the Proper Insurance Coverage
Trucking insurance is not only a legal requirement for a trucking business but will be a make or break factor for your business in the time of a claim depending if you have the right insurance for your company’s needs. With trucking there are several different aspects within insurance to make sure you are covered on. This includes your truck itself but also the cargo you are hauling as well. Many shippers will have very specific requirements on the amount and type of coverage you carry in regards to their load. In this industry you can’t expect to get by with just liability insurance. Your best option here to get off the ground is to speak directly with a reputable insurance provider that specializes in the trucking industry and will be able to get you set up with the best converge options and will be able to keep you on track moving forward for those needs as well.
Understand and Track Your Income and Expenses
When it comes to the finances of a trucking company, there are a lot of them. As quick as money comes in it can go right out. It is important to value your money and make the most of it such as by utilizing a fuel discount card. Especially when you are just starting out you need to have these startup costs in mind such as a down payment for your equipment. You may also need some initial capital available to business operations until you start seeing dependable cash flow into your bank account. Without knowledge and strategy behind your expenses, your company finances can quickly get out of hand leaving you in a bad spot. For these reasons it is important to know how to calculate cost per mile for your business so that you know what to charge to keep your business profitable. With most truckers being a one man show trying to run their business from the truck this can prove to be very difficult to keep up with. Professional bookkeepers can be a huge benefit for your business whether you hire an employee to manage this for you or a third party service to take over this portion of business for you. If this is a matter that you are determined to take on yourself you should at the very least obtain a quality bookkeeping software to keep you on track and make things a bit easier to manage.
Find Loads and Grow Your Business
For truckers to make money they need to be on the road and have paying cargo in the trailer. This means you will need to not only find loads but to obtain a constant supply of good paying loads to keep your business moving and growing. This means understanding the importance of cash flow. If you have only worked as a company driver or owner-operator at a trucking company that gave you loads, moving to finding your own customers and negotiating rates off of load boards is a much different world. The best opportunity here is to gain strong relationships directly with larger shippers but getting those relationships does not happen overnight. You will have to start out working with brokers. It will take time and proof of your skill and ability in the industry before you get there. A dispatching service can be another worthwhile option to keep you with a healthy lineup of professionally negotiated loads. There are many companies that go out of business simply because they don’t stay informed on average freight rates, or fail to diversify their customer base, getting complacent using large brokerages. The more limits you put on your company, like being home too often and only working regional routes and certain types of freight, the less chance you will have of making it.
If you are new to the industry you may be wondering what is an ELD, or what is this ELD mandate I keep hearing about? Well, ELDs are electronic logging devices and are the modern replacement for paper logs used by truckers for years and years. While ELDs were definitely met with some resistance for change they have really brought a great deal of advancement to the industry. ELDs are able to log not only the required information from trip logs but also a ton of diagnostic data and more in real time give you the upper edge in running your business more efficiently.
Stay in Compliance
By now you have surely noticed that there are many regulations in place to get started in the trucking industry. It is important to know that those and other regulations do not go away once your feet are in the door but will remain and be thoroughly enforced throughout your career. Staying in compliance with these various regulations is imperative to keeping your business in operations and profitable.
TAFS knows the trucking industry first hand. Let our team of trucking experts tell you more.