Starting a trucking business is one of the most sought-after ventures in the USA. There is great demand for trucking services and the USA is facing a shortage of qualified drivers. Now, is the best time to start a trucking business due to the rise in trucking demand, high freight rates, and an upbeat economy.
There are lots of benefits of running your own trucking operation. You can be your own boss. And choose the loads you want to ply, how often you want to make load runs, choose the rates you want to charge, and also choose the routes you want to run.
Despite the obvious benefits, there are a lot of hurdles and challenges, which makes starting a trucking business seem overwhelming. That’s why a lot of people don’t dare to start a trucking business.
The below article explains the steps you have to follow in creating a fruitful trucking business plan if you are a budding owner operator, who wants to know how to set up a trucking business.
- Step 1: Make a plan and prepare well
- Step 2. Creating a trucking business plan:
- Step 3: Legally Starting Your Business
- Step 4: Get all needed business licenses and permits
- Step 5: Funding your trucking Business
- Step 6: Buying assets for your new trucking company
- Step 7: Get insurance for your assets
- Step 8: Get ready your trucks for the road
- Step 9: Hiring and Retaining Drivers
- Step 10 Setting up a Fleet Management System
- Step 11 Growing your client base:
- Other urgent requirements for a owner operator
Step 1: Make a plan and prepare well
Starting a new trucking operation involves meticulous planning and preparation. You as an owner-operator must drive and also engage in the daily operations of your business. And if you have a fleet you need to engage in daily fleet management activities.
If you don’t have prior experience in trucking you should get a commercial driving license. you can also hire truck drivers.
Planning is needed to accommodate each element of your trucking business so that you are not surprised and overwhelmed by an unknown factor.
1.1 Naming your trucking business:
Selecting a unique name for your trucking business is a very important step in the formation of a trucking business. You can search the trademark search on the internet to see if the names you are suggesting are taken or is available.
If you want you can include your first and last names in a business name. You can also file a DBA (doing business as), otherwise known as “fictitious name,” or set up an LLC or INC with your business name.
1.2 Selecting your market niche:
You need to find a segment of a market you can easily serve or a niche. If you select a niche you can concentrate your energies on <a specific segment and serve it very well>. Being a niche carrier helps you avoid general haulers, establish a reputation or name in the industry, and optimize sales opportunities.
You need to be a specialist in one of the niches, which helps you to seamlessly sync your operation, also this brings a reputation compared to anything and anywhere freight operators. Also, pulling all types of loads will be too overwhelming, dynamic, and expensive for startups.
Following questions need to be asked to select a niche in trucking:
- What products, which industries, and companies near my location or shipping lane do I find interesting? Should I invest time and energy to know more about the niche, will I as owner-operator find something interesting from that effort?
- Who will give you the best reviews among the shippers you are engaged with?
- What do I already know about the goods and logistical activities? Which are my customer’s most critical needs and requirements? How can I meet shipper needs better than other haulers?
- Who will my trucking company’s services benefit the most?
- Who are my ideal customers or shippers? What are their needs, strengths, and weaknesses? As a niche trucker, how can I augment their operations and create a benefit for them?
1.3 Finding out your rate per mile
Finding the exact rate per mile you want to charge for your hauls is very important as an owner-operator. The rate should be good enough to cover your expenses, to be compatible with charges brokers charge shippers and make you profit on load hauls.
You can reach your dollar/rate per mile following these steps:
Select a freight lane
- Go to a load board
- Look for an average of 10 loads going in one direction
- Touch base with brokers and know what they are willing to pay
- Find out the average rate charged
- Plus a 10-15% to average rate the brokers will bill shippers
- Repeat the exact steps for loads going to the opposite direction
Step 2. Creating a trucking business plan:
A business plan for your trucking operation gives you a fresh perspective and you can have long-term and short-term goals for your business. A business plan is a dynamic roadmap document that can be edited to accommodate your growth.
This document helps your business be organized, identify goals, articulate your value proposition, and present potential obstacles down the road.
Ironing out a good business plan is a lot of work, don’t worry we will make writing a business plan a lot easier with the help of hubspot business plan template.
Below are certain questions that could help you to create a super and effective trucking business plan
- Do you want to be an owner operator?
- What do you plan to haul/pull long or short hauls loads?
- Are you purchasing your trailer or are you leasing it?
- What are your near term and long term financial forecasts?
- Have you allotted a budget for ancillary expenses?
- What are your future expansion plans?
This is how your traditional business plan format will look like:
- Company description
- Market analysis
- Marketing and sales
- Service business analysis
- Sales strategy
- Financial projections
- Personnel plan
- Management and organization
- Executive summary
Step 3: Legally Starting Your Business
As a business owner, you need to either register your business as a Limited Liability Company (LLC) or a properly structured incorporated (INC) entity.
An LLC provides boundaries between your personal assets and company liabilities.
INC company protects your personal assets as a business owner, being an INC also provides several legal, tax, and business advantages.
When you are forming a corporation or LLC, you have to take the below steps:
Appoint a Registered Agent: Through a registered agent the state communicates with the business, having a registered agent is mandatory in each state. It’s the official point of contact for the Secretary of State, the registered agent must be present at a physical address (not a P.O. Box) to sign for and receive legal notices, state mandates, wage garnishments, and tax documents during specific business hours.
A registered agent should be always available and accessible. Missed deliveries could risk your good standing with the state or even enable a lawsuit to proceed against you without your knowledge.
Get your Employee Identification Number (EIN) for bank account opening: EIN is like a social security number for your company. EIN is a nine-digit number essential to open a bank account and it should be present all tax filings during the life of your business
Step 4: Get all needed business licenses and permits
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.3e
Step 5: Funding your trucking Business
How much money does it take to start a trucking business?
An owner-operator can start a new trucking company with funds of about $10,000 to $30,000. With this outlay, you can cover the cost of insurance, vehicle down payments, permits, and a variety of state-specific expenses.
You can finance your trucking company with a home equity credit line, or get a bank loan, sell properties or valuables or use your savings. To reduce your initial overhead, you can approach money lenders who provide you with essential assets
Step 6: Buying assets for your new trucking company
If you have enough funds and decide to buy assets (commercial vehicle), it’s also better to prioritize quality over price.
Paying a hefty price for a new truck/well-maintained truck means less money spent on repairs, maintenance, and downtime thus avoiding issues that might hurt your fleet’s profitability.
If you think of acquiring a second hand but well-maintained trailer/equipment from a reputed manufacturer
Here is a list of things you should inspect before you purchase a used truck:
Any obvious signs of body damage
The vehicle’s mileage
The vehicle’s maintenance and oil change history
Step 7: Get insurance for your assets
Every owner-operator or small or medium carrier should protect their assets from accidents, damages or vandalism, etc. So, owner operators should have liability insurance, cargo insurance, 3rd party insurance to point out a few.
You can ask for references from your friends, or advice from social media communities to zero in on the best insurance product.
For more information on legal insurance requirements, please check with our MaxTrucker insurance consultation.
Check out the FMCSA’s insurance filing requirements.
Step 8: Get ready your trucks for the road
Before your commercial vehicles are allowed to pull cargo, you need to have a USDOT number, also you need to have the company’s registered name decals on your vehicle. Radio Frequency Identification tags also should be displayed on your windshield.
Don’t forget your license plates or International Registration Plates if you plan to operate across multiple states.
Step 9: Hiring and Retaining Drivers
The trucking industry is facing a truck driver shortage, which is expected to increase in the next five years. American trucking association says that the driver turnover rate for large truckload carriers jumped to 94 percent in 2018 — 20 percent higher than the turnover rate in Q1 2017. It’s not also good news for smaller carriers, their driver turnover rate is 73%.
A good recruitment program will only result in a solid driver retention program. Use a pre-employment screening program to view the motor vehicle record (MVR) of the prospective driver and see the crash data for the last 5 years and roadside inspection data for the last 3 years.
You, as a small fleet manager, must focus on driver happiness and fulfillment. Use the ELD and safety score to rank drivers on performance-based rewards. Also reward drivers for keeping performance, safety, and efficiency benchmarks.
Hiring a good driver is a prerequisite for high profitability and smooth operations. So you need to have a comprehensive plan and strategy for driver onboarding, driver satisfaction, and driver retention.
Step 10 Setting up a Fleet Management System
As a fleet owner, you should spend a considerable amount of time thinking about your fleet management process.
You should set up a fleet management process because it affects aspects of your vehicle’s operation like maintenance, supervision of driver behavior and practices, compliance, feet safety, fuel management, etc.
A streamlined fleet management process means you can scale up fast, these are the example of some management processes (Driver safety benchmarks, Monitoring vehicles for potential maintenance issues, building driver coaching programs to encourage safe driving habits, discourage vehicle idling, etc.)
As the number of vehicles in your fleet grows, setting up a fleet management program becomes challenging. You can use fleet management software to streamline your fleet management process.
Step 11 Growing your client base:
As a trucking operation, you need to have a client base who can pay well for your services. But not more than 20% of your revenues should depend on a single client.
There are various ways to find, connect and close clients:
- Have load boards access: Load boards can be used to find loads to and fro. The loads marketplace can get you loads going to the direction you want to go, and also it can match your rate per mile parameter.
Good load board can fetch you multiple quality loads from A+ rated brokers/shippers, which makes collection of invoices a breeze.
Learn more about loads boards in market
- Have a Dispatch partner:A dispatch partner will help you to grow your business multiple folds by connecting, arranging good loads, and doing paperwork and operations.
A dispatcher also helps drivers in negotiating challenges while driving like inclement weather, road closures, accidents etc.
The dispatch partner talks to multiple brokers/shippers and arranges loads and takes care of your lumber, setting up of carrier packets and invoice management etc.
Learn more about MaxTruckers dispatch service, the best in the market.
- Digital Presence: Your company should have a good website with quality content on your services and specialty operation. You need to have a presence in Linkedin, Facebook groups, and Instagram. Create content that can impress, educate, and engage your prospects. Always use original, high-resolution photos and images
Multiple touchpoints will help you to reach prospective clients, employees, and industry influencers. Have a good social marketing plan, update twice or thrice a week with quality content and also operate an active presence on Facebook and Instagram.
- Create a client list. You need to create a telephone and email list of the brokers/shippers/ prospective customers in your locality. Do an email blast every week, sharing aspects of your trucking service. You can also set up meetings by cold calling your prospective clients.
Also build up your email list and telephone number list, keep on adding and editing the list as you do marketing activities using it.
- Network with your peers and customers: Go to trade shows, events, and association meetings. Network with your clients by using LinkedIn, truck shows, correspondence, and personal meet-ups.
Here you would find like-minded owner operators, customers/brokers, dispatchers, etc. You can collect information, make one-to-one relations with your clients/ prospective partners.
Other urgent requirements for a owner operator
Firstly, you need a good insurance agency/provider covering you for various circumstances/policy types. You need to take 3rd party liability, cargo, uninsured motorist, trailer/equipment insurance.
We need to enlist a factor who has competitive rates and above par service quality to make your business financial bottleneck-free. This will help you to have a good cash flow and working capital.