The trucking industry is potentially very profitable, but it is also highly competitive. Many truck drivers start-up businesses every year and fail.
This can happen to anyone, including people who happen to be very good drivers, but who aren’t necessarily good business owners. Understanding how to manage and develop your trucking business is more involved than just knowing how to drive or choose a route.
Following these five guidelines will help you get started right, and make the transition to becoming a successful trucking business owner.
Choose The Right Equipment
This one is a no-brainer. Getting the right equipment will be the first, and possibly the most expensive, decision that you’ll face. After you’ve narrowed down the selections to those that work best for your kind of trucking business, you’ll have to decide whether to buy or lease the equipment.
There are several financing alternatives available to owner-operator businesses, which can cause confusion for business owners. Salespeople frequently only present the option that best benefits themselves, not necessarily the option that works best for you. Therefore you should have a strategy in place before hand.
According to Truck Dealers Australia purchasing equipment is fairly straightforward. You provide a down payment once your loan is approved. As long as payments are made on time, you own the equipment. Once the last payment is made, you’ll own the equipment free and clear.
Leasing is more complicated. It’s possible to have lower payments in some cases. Many leases are structured similar to rentals in that you pay a monthly fee in exchange for the use of the equipment. Other leases are structured so that you own the equipment after you’ve made the final payment. The number of options can be dizzying.
Should you buy or lease? The answer depends upon your particular situation. Each option has some benefits and some drawbacks. However, the wrong choice could be expensive and have the potential to derail your business.
The best approach is to meet with a CPA who has the experience to help you make the right choice. It may cost you anywhere from $100 to $300, but the money will be well spent. It’ll help you make more money in the long run.
Attract Loyal Customers
Often the first customers that new businesses find are from a load board. This is okay in the beginning, but it’s not a good long-term strategy for building your business.
Load boards are highly competitive, causing you to have to offer your services at rock bottom pricing. This leaves very little room to profit. It’s also very difficult to attract long-term customers, which makes matters worse. As a result, you’ll spend more of your time looking for new customers.
Only use a load board to get your business off the ground. At the same time, start making sales calls to begin developing a customer list of your own. It’s not easy work, but it’s the only way to go if you want to be successful. Eventually you’ll build a list of shippers that will become your most loyal customers. They’ll also be your most profitable clients.
While most people who exclusively use load boards to find customers earn about $10,000 monthly for each truck in their fleet, that number is often doubled by those savvy business owners who make sales calls and secure contracts with other businesses, like local grocery stores. It may seem like more work, but in reality they’ve doubled their earnings with less headaches and less work.
Know The Business And Make Good Bids
Your bid should be low enough to compete with other bids, yet high enough to remain profitable. The only way to achieve this is to know your business. Take into account the costs associated with maintenance, repairs, fuel, payments on equipment, and the cost of your work.
Also remember to take into account the difficult of the work. For example, if you’ll be pulling a load through a very congested area like New York, you’ll run into more difficulty so you should price accordingly. You should also make the effort to find a load near your delivery location to earn profits on the return trip. Deadhead miles can easily eat away at your profits.
Run A Successful Back Office
You need to have a well thought out back office to have a successful company. The back office that you’ll need depends upon the size of your operation. A small fleet will need more back office than an owner-operator business needs.
Determine how you want your office to operate. Examine the processes to make sure they make sense. The trucking industry runs on efficiency. Those who are most efficient are normally able to grow the fastest.
You need to develop a strong business owner mentality whether or not your operation has a large fleet.
Maintain A Healthy Cash Flow
Cash flow problems also seem to occur at the worst possible times, and most trucking companies experience them at some time or another.
Often the cause is that a lot of shippers don’t offer quick payment. Instead they pay with net-40 to net-60 terms. This means that you’ll have to wait up to two months for payment on a delivery that you make today.
On the other hand, expenses like repairs and fuel occur regularly. If your company grows more quickly than your cash flow, you could have difficulty meeting your expenses. In that scenario, you’ll run out of cash and won’t be able to pull any additional loads until you’ve received payment. Meanwhile, you become vulnerable to losing your clients to your competitors.
One way to develop a healthy cash flow while preventing problems is to use freight factoring. This is a type of financing that provides an advance for your slow-paying invoices. Instead of waiting up to 60 days for payment, the factoring company pays you immediate funds. This allows you to have cash flow to cover your expenses and the ability to accept new loads.
Following these five guidelines will help your business to remain viable in a highly competitive industry, thereby increasing your chances of building a successful company. You’ll have the leg up on your less-prepared competition and be more likely to be able to sustain future growth.