Being your own boss, whether it be through owning and operating your own tractor trailer or by owning your own business, is fun, but not without hard work. No matter what venture you decide to start and invest in, many moving parts must be put into place before you can consider your operation a true success.
The same goes for trucking, and when we refer to moving parts in this industry, the statement is literal. Everyone who works in trucking or has investigated the costs associated with owning a big rig or starting a trucking company knows that it requires quite a lot of initial capital. But before we get into money, there is something even more important you must consider; indeed, some would say is the most important: Your name.
What Makes a Good Trucking Company Name?
First, pat yourself on the back and give yourself some congratulations. You have decided to go into business for yourself and take control over your professional destiny by starting a trucking company. But now what to name it?
In any business, choosing the right name will be one of the most important decisions you will make. A company’s name is more than just an identifier; it is a critical part of your overall business and marketing strategy. Yet coming up with a good one is not a simple task.
Consider the following when evaluating what your trucking company’s name should be:
- Your business goals.
- The company’s formation, whether LLC, limited partnership, or otherwise.
- What the company logo may be and how a visualized image will fit in with your intended name.
- Your home state’s law governing names that sound “too similar. Don’t hesitate to check the U.S. Patent and Trademark Office’s trademark search tool.
- Unique names that will let you stand out from the pack. Something like Thompson or Smith Trucking might be less appealing than more creative options.
From location to family name or even something uniquely special to you, the name of your trucking company will shape its future. But so will the dollar signs.
What It Will Cost
Just to illustrate the point, let’s look at some interesting facts someone who is interested in becoming an owner-operator might want to know:
- A single fill-up amounts to the same fuel capacity as 18 mid-size passenger cars.
- The average number of miles a long-haul trucker clocks is 100,000 to 110,000 per year, which equates to circling the Earth nearly five times.
- The average purchase cost of a big rig runs around the same as a 10-cylinder Audi R8 supercar: approximately $185,000.
- Average lifetime truck costs represent 66% of spend, whereas truck driver costs make up the other 34%, with fuel making up the largest of the vehicle expenses and truck driver health and wellness making up the largest of those expenses.
- The expense is broken down to anywhere between $115,000 to $135,000 for the tractor and $35,000 to $65,000 for a new trailer.
- Repairs and maintenance issues, from air lines and hoses to wiring and alternators, can run up to $15,000 per year.
The way you pay for your truck, both upfront and over the – pun intended – long haul is driven by the condition, make, and model of the vehicle. While the price we mentioned above for a new tractor can seem eye watering, things like looking to higher mileage used vehicles or making a higher initial down payment can help mitigate the cost.
The high cost of equipment leaves little room for surprise freight costs. Of course, other factors play into how much individuals or entities charge or spend on moving goods, but the cost of ownership surely plays a part.
Even more, analysts think that the trucking industry is looking at an uphill climb when it comes to lowering operating costs. Whether you look at additional costs related to the ELD mandate or those associated with raising truck driver pay and offering greater recruiting and retention bonuses.
With fuel costs on the rise in an unstable geo-political environment, truckers and trucking companies shouldn’t expect to find relief at the gas pump. And those looking to insurance to help lighten the load will be disappointed to see the direction insurance costs are going in.
Evaluating Trucking Insurance Costs
Next to fuel, one of the biggest costs owner-operators and trucking companies must budget for is insurance. And while the cost of tractor trailer insurance ultimately falls upon on many variables depending on operator or company, those costs have been on the rise.
Before one sits down to talk to an insurance agent, it would be wise to consider some of the industry averages. Here are some of the numbers associated with overall tractor trailer insurance costs:
- Owner-operator who is leased to a motor carrier can typically get a comprehensive policy for between $2,500 and $5,000 a year, depending on the vehicle and application.
- New authorities are typically looking at anywhere between $10,000 and $16,000 a year. While rates are higher in the first year, they generally drop as the years go by, especially if the fleet is operating safely and has a good record backing them up.
Rates also vary depending on the level of insurance the entity wants to invest in. The more level of coverage a policy has, the more expensive it will be. Some typical policy averages include:
- Primary Liability: $4,500 – $5,000.
- General Liability: $300 – $600.
- Umbrella Coverage: $300 – $500.
- Physical Damage: $2,500 – $3,000.
- Bobtail Coverage: $300 – $400.
- Un- or Underinsured Motorist: $75 – $100.
The overall cost of your insurance is determined through a risk assessment analysis the insurance company completes before they issue your policy. They want to know the statistical likelihood you may cost them money down the road.
Your risk assessment will be made using the following factors:
- Your driving record and time and experience behind the wheel.
- Where you will be operating the vehicle.
- Where the vehicle is based out of.
- Factors such as age, credit rating and MVR report.
- What your truck is worth.
- Whether your policy is bundled or individual
- What time and duration of payment plan you opt for.
Fortunately, there are ways to lower your cost of insurance.
How to Minimize Insurance Costs
They say it never hurts to ask, right? The same can be said for your insurance premium. All you need to do is simply ask your insurance company if they offer any coverage discounts for anything from installing safety equipment to maintaining a clean operating record. If you have a good relationship with your agent, you shouldn’t be afraid to ask for discounts.
You may also be eligible for a lower premium if you pay yearly, as opposed to monthly installments. Sure, not everyone will be able to drop $7,000 in a yearly insurance premium, but if you can, why not?
Finally, consider a higher deductible. For those that consider a low premium the most important factor, paying a higher deductible may not be such a bad idea. Just remember that higher deductibles mean higher out-of-pocket expenses should you get into an accident.
In the end, make sure to shop around. It isn’t a bad idea to request a few quotes from different insurance agents. They want to earn your business and will not hesitate to give you an honest figure regarding what you may need to pay.
Other Costs Associated with Operating a Trucking Company
Beyond equipment, fuel, insurance and individual truck driver costs, other factors that you must consider include those mandated by the federal or your state governments. From licensing fees to use tax and other permits, here are some examples of other expenses you must consider:
- Formation and registration documents, which include DOT & MC numbers, BOC-3, UCR, and others: $1,000 – $1,500 (depending on jurisdiction).
- Apportioned plates per truck: $500 – $3,000.
- Heavy vehicle use tax: $150 – $500.
- Ancillary state or regionally specific permits: $500 – $1,000.
You will also need to get your trucking authority, which is essentially the process you must go through to comply with the requirements of the state you are operating in.
There are also fixed costs associated with operating a truck or trucking fleet. These costs will be the same every month. If you are running a multi-vehicle operation, they will include payroll, health insurance, equipment insurance, and more. Long-haul operators have a higher average cost per mile due to the nature of their business. So, the type of trucking company you want to operate will have to factor into your financial decisions.
Although a lot of these numbers and costs may seem large and prohibitive, becoming an owner-operator or sitting at the helm of a successful trucking operation is an accessible and rewarding career. Once you have achieved your goal of earning your living in the supply chain, you will sit down and examine your trucking company’s operating ratio with a smile. So, what are you waiting for? Sit down, put pencil to paper (or fingers to the keyboard) and start planning for you future as a successful trucking entrepreneur.