Make your trucking business plan, and make the right moves. Being profitable and successful as a trucking company is not an easy job.
There are a lot of things that need to fall in the right place for your business to be successful.
Are you looking to improve your trucking business?
You need to be committed and dedicated for being successful in trucking. It takes an orderly step-by-step action to take the right decisions.
We have summarized eleven key steps for you to grow your new trucking business.
Whether it be finding the cost per mile or deciding the rate per mile. Whether it be working on your business model or controlling your fuel costs. Whether it be finding well-paid loads. Whether it be managing your cash flow.
Making all your business’ operating elements work in sync to create a well-oiled machine that automatically scales.
Here, the first four steps are crucial. Manage them correctly before your company is ready to handle growth.
We have also given 2 bonus steps to master to really find your growth ladder in the trucking industry.
- Step No.1: Writing your Trucking Business Plan:
- Step No. 2: Register your Business
- Step 3: Get a business license, permits, and insurance:
- Step No.4: Find out your rate per mile of your trucking business:
- Step No.5: Find out your cost per mile of your trucking business:
- Step No.6: Does your business model work:
- Step No.7: Control your fuel cost (and IFTA)
- Step No.8: Funding well paid or profitable loads
- Step No.9: Manage your cash flow to patch issues
- Step No.10: Select a Dispatch Service Partner
- Step No.11: Put the Legos together
- Bonus 1: Being ready for new trucking regulations
- Bonus 2: Being trucking tech-savvy
- Bonus 4: Using a Good Fuel Card:
Step No.1: Writing your Trucking Business Plan:
You as a trucker and owner operator feel like there’s no need to write a trucking business plan for your trucking business. Because your trucking operations are straightforward and simple.
You can focus on the core parts of your company after putting your general freight business plan in black and white. A good trucking business plan lies down the reason why your company was founded, the capital required to kick start it, expense or overheads versus profitability projection, and other strategic numbers and details.
Your company’s trucking business plan is a blueprint on which you can lean and refocus on your overarching strategy to build your company when you are lost doing the daily dredge and dirty work of building your company.
You need to have a trucking business plan when you are applying for a business loan or working capital loan from any bank or funding institution. If you are applying for funding you need a solid business plan to show the bank or funding institution that you are serious.
Step No. 2: Register your Business
After writing a stable and solid general freight trucking business plan, you need to start the process of registering your company with the local or state government.
There are different business entities available for you to pick from while starting a company. These entities differ in personal liability protection, taxation methods, ownership structures, and other technical details.
You can look into One Person Company (OPC) if you are a single owner or Limited liability Partnership (LLP) if you have 2 owners working as partners or look into Limited Liability Companies (LLC) if you wish to have more than 2 owners. All these company types give you to protect your personal assets.
You can choose either One Person Company or Limited Liability Partnership, these work best for small truckers and owner-operators trying to start their own enterprise.
The business incorporation process is very straightforward, even if it’s a little paperwork heavy.
All it takes is some supporting documents about the enterprise’s principals and founders, tax identification information, general business agreements, and some other documents connected with your would-be company (these documents differ from state to state where you are registering).
Choose an apt business name:
You need to have a catchy and crisp business name, that reflects your principles, brand, specialty, and personality to your customers.
You need to make sure that the name that you selected is unique and it’s not taken by any other business. do a quick secretary of state and U.S. Patent and Trademark search to ensure the name you’re considering is available for use.
Step 3: Get a business license, permits, and insurance:
Every state, local government, the county requires trucking companies to have the right licenses and permits in place before they start their business,
On average there are 150,000 filings jurisdictions in the country all with independent requirements. The license and permits that apply to your trucking operation depend on your type of service, where you operate your company from.
Every owner-operator should determine if the following items are required to run a successful trucking company:
A commercial driving license (CDL) and other needed endorsements: Federal law requires drivers to obtain a Commercial driving license to drive commercial vehicles. Connect with your state licensing agency for more details.
A USDOT number: Federal Motor Carrier Safety Administration (FMCSA) uses a unique USDOT number/ identifier given to companies who engage in interstate commerce or intrastate commerce. USDOT number helps to sync safety compliance and it is also used while conducting official reviews, audits, and accident investigations.
A Motor Carrier Operating Authority (MC Number): Your trucking business may have to obtain multiple MC numbers according to the breadth of your trucking operation.
Unified Carrier Registration (UCR):
The UCR system aims to validate active insurance coverage within every state the trucking company operates. Register your company in the program using your USDOT and MC numbers.
Heavy Highway Use Tax Return (Form 2290)
If your business uses trucks weighing at least 55,000 pounds on the highway, you should comply with the IRS in paying the Federal Excise Highway Tax or heavy highway vehicle use tax.
A BOC-3 filing: Every motor carrier, freight forwarder, or broker is required to select a process agent that can file Form BOC-3, or blanket of coverage, on your behalf of the Federal Motor Carrier Safety Association (FMCSA).
Only one completed form may be on file and it must be all states for which agency designation are required. A carrier or broker at its principal palace of business should retain one copy of the BOC-3 filing.
International Registration Plan (IRP) credentials and International Fuel Tax Agreement (IFTA) decal: Trucking companies offering services in or across multiple states must obtain IRP credentials and IFTA decals for their vehicles.
Standard Carrier Alpha Code (SCAC) :
The SCAC is a standardized, unique, and privately maintained piece of code used to determine various transportation businesses. If you want to carry government, international, military, or intermodal products acquire SCAC.
Electronic Logging Devices:
As per the ELD mandate, of December of 2017, non-exempt carriers are also required to install an FMCSA-registered and compliant Electronic Logging Device.
Take a Comprehensive Insurance Policy
You need a good insurance agency/provider covering you for various circumstances/policy types. You need to take 3rd party liability, cargo, uninsured motorist, and trailer/equipment insurance.
Good insurance means you have peace of mind and it reduces the uncertainty of your operations. Take the policy good Provider or an agent, and select different companies for your different needs.
Step No.4: Find out your rate per mile of your trucking business:
A trucker/owner operator must know your rate per mile, it’s a key for running a successful trucking business. Knowing the rate per mile will help you find out what you can charge for your services, which directly affects your business profitability.
Rates are dependent on the equipment, lanes you ply, selected markets to operate, and other variables. It’s a bit complex to determine your rate per mile so it takes a lot of time the first time.
You can find the rate you can charge by taking an average of ten quotes of loads you want to haul. You can reach the estimate of how much you can charge per mile. The easiest way to get this information is to use load boards.
But the issue here is that load boards pay the lowest rates. You can actually get good rates by directly working with the shippers.
Step No.5: Find out your cost per mile of your trucking business:
An owner operator charging for his services should know his/her cost per mile to reach the viable fee for trucking service. If you don’t find the cost per mile, you won’t know if you are working at a loss until it’s too late to do corrective measures.
Many truckers find it hard to calculate the cost per mile, that’s why they don’t try to find out the cost per mile. This is the reason why many truckers go out of business.
To figure out the cost per mile you need to find out your fixed and variable costs. After finding out the fixed and variable costs, find out what it costs you to pull a mile.
Step No.6: Does your business model work:
Before you start a trucking company you need to know how the business model work.
After finding out the rate or dollar per mile and cost per mile. Subtract dollars per mile with the cost per mile. The result will be profit per mile, if it’s a sizable amount then your business plan works.
If your model works, it’s well and good. If the model doesn’t work, make changes until you find something that works.
You shouldn’t get stuck with a trucking business plan that doesn’t scale, such a situation will create problems when you want to scale up fast.
Step No.7: Control your fuel cost (and IFTA)
The major expense of a truck owner operator or fleet is fuel expenses. This is an expense that you can control with some systematic effort. You need to adopt a fuel strategy to decrease the fuel cost, thus increasing your load savings.
Calculating the fuel cost is very complex. The real cost of diesel is based on the route you ply and where you get fuel from. To add to that you need to factor in IFTA and calculate taxation and rebates.
Many truckers believe that their best option is to buy fuel from states with the cheapest pump prices. This is a wrong assumption because without factoring in IFTA you can’t really find out the cost.
Most carriers save a ton of money buying diesel at places with the lowest tax rate. This may sound counter-intuitive to you. But you need to do your IFTA calculation to find out this is right for you.
Step No.8: Funding well paid or profitable loads
Finding good shippers or loads is one of the toughest issues faced by an owner operator. As first resort truckers use load boards to find loads. There are some inherent advantages of this method, which are it’s very fast and it allows you to match your truck/trailer/equipment and routes you would like to ply.
Booking loads using a load board is not a viable strategy long term. Because load boards bring unwelcome competition on your lanes, which in turn forces you to reduce your rate/dollar per mile. You will have to make sure that pulling a particular load is profitable.
Using a load board is a quick fix solution for the scarcity of loads. Using a load board is easy but it doesn’t lead to long-term relationships with shippers/brokers. In such a situation you always work with new clients. Onboarding new clients every time a new load is needed is a time-consuming and frustrating activity.
More profits come when you have long-term relationships with shippers/brokers. A better strategy is to start using load boards only when you start your business. You need to try to find long-term contracts with shippers. Do some cold calling or networking in your area and find long-term customers that fit your persona. This is hard, but it will pay you rich dividends as you will earn more from each load you pull.
Our industry research found out that truckers using load boards earn $10,000 per truck per month, but truckers with long-term client contracts earn $20,000 per truck per month.
You can easily double your revenues by building the right relationships with shippers. The above numbers are a testament to the power of long-term relationships with clients/customers.
Step No.9: Manage your cash flow to patch issues
A healthy cash flow is needed to run and maintain your trucking business. If you don’t have cash flow an owner-operator will get stuck.
Some brokers provide quick pay for your invoices. This is well and good, but it doesn’t always happen.
After hauling a load and raising the invoice a trucker has to wait 30/45/60/90 days to get paid. This creates a cash crunch which in turn makes you short of money, to pay for repairs and upkeep, driver salary, tire change, driver amenities, or even for insurance premiums.
This can be solved by entering into a factoring agreement (recourse or non-recourse) with a factor. Who pays you upfront after you have delivered a load,(reducing 1.5% to 5% factor fee), for your trucking bills/invoices.
This upfront payment provides you with the money you need to run your business smoothly. Transactions settle once the shipper pays for the load.
Many factoring plans provide you with fuel advances. This add-on feature offers you funding when you pick up the load. You can also pay for fuel and other delivery expenses using these funds.
Step No.10: Select a Dispatch Service Partner
You need to be really careful while you choose a dispatch company.
Dispatch service is the extended logistics arm of your trucking business, so decide wisely while selecting a dispatching partner.
As an owner operator you expect your dispatcher performs a few key tasks, Booking the best paying and ideal load is one task and doing your load paperwork and operations is another task you expect them to do.
The service delivery quality of your dispatcher is a really important factor that decides if you thrive or slump in the competitive market.
Individual dispatchers have one point of failure, but a team dispatcher, more professional, specific or dedicated dispatchers, or a multiple person/structured company is a better option. We need to know that a dispatch team is better than an individual.
We need to select a dispatcher based on their subject knowledge, negotiation skills, troubleshooting, and firefighting skills.
Good dispatchers negotiate healthy rates ($ per mile) for your loads. An experience in dispatch knows the best routes where you get the best dollar per mile. Also, a good dispatcher can give you well-paid dedicated lanes and tri-haul loads.
You should also know that a good dispatcher can give you roadside assistance, one on one assistance when there is breakdown or weather trouble, road accidents, etc.
Some dispatchers have a direct connection with shippers. Experienced dispatchers will have other sources of loads like- shipper contact, broker agreements, etc.
Step No.11: Put the Legos together
A trucking business, like any other business, works only when multiple gig-saws fit together. Whether it be operational, load booking, reducing cost per mile, increase in dollar per mile, etc.
Find out or estimate your trucking cost and price and then you can figure out if your trucking business plan works or not.
Bonus 1: Being ready for new trucking regulations
Changes, amendments, and new regulations are always proposed or implemented in the trucking sector. There were 5 new regulations that affected the industry in 2020
What changes will take effect in 2022? It’s very unclear and it’s a big question as a new White House administration tries to make its mark on the trucking sector.
Democrats tend to be more supportive of regulations in the environment and safety sector. It is likely that Invest act will be passed with loaded Democratic party priorities that will likely end up on the new DOT policy agenda
Bonus 2: Being trucking tech-savvy
As an owner operator, you have a right hand, who can help to make your life simple, organized, and stress-free, i.e. technology. You are responsible to manage a lot of tasks. Sometimes, it’s really tough to manage everything else and be focused on the road while driving
You need to know that technology can help you get organized, manage finances, reduce stress, navigate the road and so much more.
For instance, use GPS to find the best routes and create ways to combine loads for cost efficiency. You really need to tap into apps to save time and increase efficiency.
Technology can have a positive impact on your operations and compliance, we are pointing out some apps and devices that every trucker should be attentive to like:
ELD (Electronic Logbook) :
Every truck has an ELD device it can use:
Get violation alerts, recap hours worked, and send logs via email.
Features include HOS alerts of upcoming required breaks, creating electronic DVIRs, and automated IFTA reporting. Keep compliant with KeepTruckin
As a driver, you would be privy to the broker/dispatcher/fuel card company’s mobile app.
Such apps will give you real-time traffic info, turn-by-turn directions, weigh-scale status, accurate truck stops along your route, weather conditions, nearest diesel prices, and more.
You as an owner operator can save money on the road, plus find and book premium loads using apps from brokers/dispatcher/fuel card companies.
Fuel Finder App:
Search the lowest diesel prices and find the best service station for your truck. Find trucker amenities and supermarkets in the best truck stops using the app. The TCS fuel finder app helps the trucking community to save 35¢ to 45¢ at in-network fuel stations and truck stops
Download TCS Fuel Finder for free and combine it with a convenient to use fleet fuel card for greater savings with cost-plus discounts pricing.
Bonus 4: Using a Good Fuel Card:
Using a fuel card will help you to save a lot of money while pumping fuel, doing repairs, tire changes, truck upkeep, or giving drivers amenities like shopping, lodging, or food.
A good fuel will give you an average saving of ¢5 to ¢8. But a fuel card optimized for saving like a TCS fuel card will give you a saving of ¢35 to ¢45 saving in select in-network locations in the USA.
To know more about fuel cards see this article.