The most difficult step in starting a trucking company is often first step – getting started. The best business plan is useless unless you put it into action and start implementing it. However, this step can be difficult for many first-time trucking entrepreneurs.
This article helps you take on the four most difficult steps of implementing your business plan: estimating your revenues and costs, financing your equipment, finding clients, and financing your operations.
Step #1: How much money will your trucking company make?
The most important question you can ask yourself as a new owner-operator is how much money will you make? There is no standard answer to this question.
The amount of money you make as a trucker is determined by the industry you plan to support, the equipment you get, how much you charge per mile, how many miles you drive per month, and what your costs are (especially fuel costs). Do not buy equipment or pull a load before you have figured this out. Here are some resources to help you with this effort:
- How much should you charge per mile?
- Easy way to calculate your cost per mile
- How to buy the cheapest trucking fuel (explains IFTA)
Step #2: Finance Your Truck/Equipment
Getting your first truck is your largest start-up expense for the business. It is also one of the hardest and most important choices you must make. Owner-operators usually have two financing options: they can buy the truck through a loan, or they can lease one.
Loans are fairly straightforward – you make a down payment and then pay monthly installments. Once you have paid all the installments, the truck is yours. On the other hand, leases (or lease-purchases) can be structured in different ways. A purchase option is often bundled at the end of the lease, which allows you to own the truck for a payment.
This complex choice can have longstanding financial and tax consequences. Unless you have a background in finance, don’t make this choice by yourself. Ask an accountant to help you make the right decision. The visit is money well spent, especially if you plan to build a fleet. Loans and leases have advantages and disadvantages, and there is no best option that applies to everyone.
Note: Commercial Capital LLC does not finance trucks or equipment.
Step #3: Find Profitable Trucking Contracts
One of the most difficult parts of starting a trucking company is finding loads to haul. Most truckers, especially owner-operators, start by using one of the many free load boards that are available on the internet. While load boards are convenient and have advantages, they do not help you find high-paying loads. Most loads posted on boards pay very little because of the high competition.
The best way to find trucking contracts is through old-fashioned selling and relationship-building. You must find direct shippers in your area and establish relationships.
Looking for direct shippers and establishing relationships is hard work, which is why few truckers do it. This work gives you an advantage over competitors, who are probably looking for loads on the internet. One simple but very effective way of building relationships involves using a promotional item, such as a pen with your logo and contact information.
Just follow these steps:
- Make a list of local shippers. Good sources are local members of industry associations.
- Call them and ask to speak to the shipping department.
- Schedule a visit.
- During your presentation, give each participant a promotional pen (keeps your number handy).
- Follow up by email/phone once a month.
It will be hard at first, but eventually you will build a list of reliable shippers who will start using your services. Before long, you will have a successful trucking company.
Step #4: Finance Operations
Unless you have enough startup capital, you need financing to operate and grow your trucking company. Few truckers and owner-operators consider this matter when they start. However, cash flow becomes an issue as you grow your company and implement your business plan.
Most shippers and freight brokers pay their bills in one of two ways. They pay in standard commercial terms of 30 to 60 days, or they pay using quick-pays. Most pay in 30 to 60 days. Consequently, your trucking company must be able to pay for fuel and other expenses while waiting to get paid.
Most truckers don’t account for slow payments when they start their companies. They soon run out of money and are forced to stop driving until some freight bills get paid. Many go out of business simply because they can’t pull enough loads to make it worth their while. Fortunately, it doesn’t have to be this way.
One simple way to improve the cash flow of your trucking company is to use a freight factoring financing plan. This type of financing provides you an advance for your slow-paying freight bills. Instead of waiting up to 60 days to get paid, you get paid by the factoring company in a day or two. This advance provides you with money to pay for your fuel and other expenses.
Factoring allows you to take on new clients without worrying about slow payments. When used correctly, factoring can help you grow your company and add shippers with confidence.
Need to finance your trucking company?
We are a leading freight bill factoring company and can provide you with competitive terms. For a quote, fill out this form or call us toll-free at (877) 300 3258.
Note: Factoring is only available to owner operators that operate under their own authority.