There are owner-operators out there for a reason. Plenty of people want to work in the trucking industry. Perhaps you have always wanted to run your own trucking company. Do you want to be your own boss? Don’t worry, we’re here to help. We will first break down many of the common elements of a business plan and explain how they apply to trucking companies.
Top Considerations for your Trucking Business Plan
No matter what company you create, a business plan is critical to achieving success. Creating a business plan helps you prevent pitfalls before they occur. There are a lot of elements that go into running a successful business. A business plan helps you organize these elements. The most important thing to remember is that a business plan is vital for long-term success.
When you begin brainstorming your trucking business plan, a good first start is to ask yourself what type of services you will provide. Do you plan on hauling freight interstate or intrastate? Have you considered long haul, OTR, or otherwise? Perhaps there is a certain geographic region that interests you. These are important considerations.
Next, consider who your employees will be. You could be an owner-operator, or you could hire a truck driver. You need to consider whether you will work with vendors, utilize back-office support, or have in-house dispatch services. Figuring out your staffing needs ahead of time will prevent your business expenses from exploding.
How will you finance your trucking company? Freight factoring is one way you can help keep your cash flow positive. Freight factoring provides a trucking company with a way to ensure fuel gets pumped, repairs get made, and benefits get paid out. The companies that offer freight factoring advance the money based on accounts receivable. Learn more about freight factoring here.
Focus on Services and Gaining the Competitive Edge
Newly formed trucking companies may all look the same from the outset, but it’s the competitive edge that sets them apart. Look for operators that provide a high level of industry experience. They must be reliable and dedicated. And don’t be ashamed to use referrals, references, or connections to get the business you need.
Where will you get your customers from? Do you have preexisting relationships with brokers and shippers? These are relevant questions you will need to answer as you form your trucking company. The first thing you need to do is to know where to find loads. We are proud to offer a wealth of resources here at QuickTSI, but there are many other load boards and resources out there as well.
Businesses succeed or fail based on the main goals of those who start the company. Some may want to become their own boss. Others might want to build a giant fleet and leave a legacy for their families. Whatever the reason, you need to make sure your actions align with your goals.
Have you considered your break-even point? A break-even point is the point at which the total costs and total revenue are equal. There is no loss but also no gain. The break-even point will help you understand what freight rates to look for and which loads are worth your attention. The most important thing is to ensure you maintain a steady and reliable cash flow.
More on a Break-Even Point
Once you have an estimated expense total, you can use it to figure out what your break-even point is. Your break-even point tells you how much your company needs to generate revenue. The most important thing is to properly cover your expenses. Your break-even point represents your company not making a profit or operating at a loss.
While it might seem inefficient to calculate what your trucking company needs to break even, this is the point from which you determine how much revenue you need to make to be profitable. Also consider your direct and indirect expenses. Direct expenses are the costs like fuel and payroll, they are related to the production of a good or service for the company. Indirect expenses represent costs that come from running a trucking company but are not directly related to the product or service offered.
Once you have calculated direct and indirect expenses, the next thing you want to focus on is your target rate-per-mile. The target rate-per-mile approximates how much revenue you need to earn per-mile to operate a successful trucking company. To find your effective rate-per-mile, you’ll need to estimate your desired monthly profits and then divide that by the number of miles you expect you or your fleet to drive in a month.
Properly Track Expenses, Profits, and Make a Mission Statement
In the trucking business, you often don’t get paid until after the job is done. The problem? You have expenses to pay before the job is finished. Form fuel to insurance and equipment, there are a lot of expenses that won’t wait for a shipper to pay a bill.
Also consider how you will make a profit. There is a simple calculation:
Revenue – Expenses = Profit
You must be able to project your revenue and expenses. This will also help you establish your break-even point. You’ll also need to set up an income statement projection. By completing all these steps, you will be well on your way to starting a professional trucking company.
Believe it or not, developing a mission statement is a critical part of starting your first trucking company. Why? Because it will act as a guide for how you run your company. Your employees will expect to see your mission statement reflected in how you treat them. That doesn’t necessarily mean your mission statement has to be overly complicated or lofty. Set a simple goal and then lay it out in clear language.
What should go into your mission statement? First, try to stick to just one sentence. It does not need to be an overly wordy paragraph. The ideal situation is to aim for under 12 words. And be specific. One example of a good mission statement could be, “We are committed to safely and efficiently hauling freight for North Americans.”
A Closer Look at the Financials
So, how do you come up with your estimated revenue and expenses? Try doing some research and talking to people who have some experience in the industry. If you don’t have a financial advisor or back-office accounting first, consider expenses that consistently occur. These could include monthly truck payments, monthly insurance payouts, or administrative payroll.
On an annual basis you will need to pay for permits or license renewals. Fortunately, these payments are generally the same every pay term. This should allow you to budget for these expenses and make your life simple. Also, consider variable costs. Variable costs are connected to how often your company hauls loads. They include repairs, meals, lodging, and more. Variable costs are harder to anticipate than fixed costs, which is why you must pay close attention to them.
Quick definitions for your reference:
- EXPENSES: The costs of operating your trucking business.
- REVENUE: The income you get from providing your services.
- PROFIT & LOSS STATEMENT: Also known as an income statement, this is a financial report that lists your revenue and expenses over the course of a certain period.
- NET INCOME: The amount of money left after expenses have been deducted.
Final Considerations for Your Trucking Company
Getting started with your trucking company involves a lot of planning and preparation. The most common approach is to start out as an owner-operator. Many owner-operators started out as truck drivers for established trucking companies. They have learned the job by doing it.
Have you picked a name for your trucking company? Branding and marketing are very important. Brainstorm some ideas, then check on whether your ideas aren’t in use by other companies. You can use search tools or perform a trademark search online. If you want a business name that excludes your first and last names, file a “Doing Business As” form, otherwise known as a fictitious name form. You can also set up an LLC or other entity.
Also make sure you select the right target market. Targeting the right market niche is also crucial when starting a trucking company. Specialized trucking markets and niches provide the perfect opportunity to streamline operational processes. When deciding what niche to operate in, consider the products, industries, and logistical activities you want to be involved in. How will your trucking company’s services outcompete other haulers? How you answer this question will determine whether your trucking business succeeds.