Statistics show that trucks transport 70 percent of all freight in the United States. This translates to approximately $700 billion in shipped goods annually.
With the ongoing driver shortage, rising freight demand, and increased rates, this could be a great time to start your trucking business. To help you, we’ve put together a cheat sheet on how you can start (and grow) a successful trucking business.
1. Planning and preparation
Getting started as a small carrier involves a lot of planning and preparation.
The usual approach is to start as an owner-operator, which means, you should have your own truck as well as participate in the daily activities of your fleet.
Many new owner-operators start out as drivers themselves. If you have no prior industry experience, you must first secure the appropriate type of commercial driver’s license. You may also choose to hire other truck drivers. Regardless of how you want to structure your fleet, planning is essential.
2. Creating a business plan
Creating a business plan is always a good idea. You can use two specific formats for crafting a business plan for your trucking company:
1. Traditional business plan format
A traditional business plan is comprehensive and may include the following:
- Company description
- Market analysis
- Marketing and sales
- Service business analysis
- Sales strategy
- Financial projections
- Personnel plan
- Management and organization
- Executive summary
2. Lean startup format
Companies that anticipate future changes may use the lean startup format. As the name suggests, it requires fewer details than a traditional business plan and is more flexible.
A lean startup plan may include:
- Key activities
- Key partnerships
- Key resources
- Customer segments
- Value propositions
- Cost structures
Visit the U.S. Small Business Administration website to access their downloadable templates for a more in-depth business plan.
3. Legal requirements
In addition to a valid CDL, owner-operators must fulfill a number of different requirements prescribed by the FMCSA. This includes a one-time United States Department of Transportation Number, a Motor Carrier Number, International Fuel Tax Agreement stickers, and an International Registration Plan.
4. Funding your business
In most cases, to start a trucking business, an investment of somewhere between $10,000 and $30,000 should be enough to cover the costs of insurance, vehicle down payments, permits, and a variety of state-specific expenses.
There are many ways to finance a new trucking business, such as using a home equity credit line, acquiring a bank loan, selling properties, and using your savings. To reduce your initial overhead, you may also approach lenders who can provide you with essential assets.
5. Buying your assets
If you have enough funds and decide to purchase your own assets, it’s always better to go for quality over price—especially when it comes to vehicles. Paying a higher price for a brand new truck may mean fewer repairs, maintenance, and downtimes that may hurt your fleet’s profitability.
The same can be said for second-hand units that are well-maintained and are from reputable manufacturers. Here is a short list of things you should inspect before you purchase a used truck:
- Any visible signs of body damage
- Tire tread
- The vehicle’s mileage
- The vehicle’s maintenance and oil change history
6. Insuring your assets
Every carrier needs insurance to protect the business from unexpected financial burdens. This should cover risks such as damages to your vehicles and injuries caused by road accidents. You may consult trucking forums and social media communities for recommendations on which insurance product to purchase based on your needs.
7. Preparing your trucks for the road
Before commercial vehicles are allowed to haul cargo, carriers must prepare for one last set of requirements.
On top of your USDOT number and the company’s registered name decals on your vehicle, you also need your Radio Frequency Identification tags displayed on your windshield. Also, you shouldn’t forget your license plates or International Registration Plates if you operate across multiple states.
8. Hiring and retaining drivers
Recruiting and retaining good drivers is a challenge.
According to the American Trucking Associations, the driver turnover rate for large truckload carriers jumped to 94 percent in 2018 — 20 percent higher than the turnover rate in Q1 2017. For smaller carriers, the driver turnover rate is 73%.
A solid driver retention strategy begins with an effective driver recruitment process. Use a Pre-Employment Screening Program to view a prospective driver’s crash data for the last five years and roadside inspections for the last three years.
For driver retention, also focus on driver happiness and fulfillment instead of just focusing on cash-based incentives. When offering performance-based rewards, leverage ELDs and driver safety scores information to rank drivers according to performance, safety, and efficiency.
9. Growing your client base
Staying loyal to one customer might seem reasonable, but it may not be sustainable in the long-term. What you need to do is to diversify to stay profitable regardless of the individual financial standings of your clients.
A good rule is to make sure a single client never accounts for over 20 percent of your revenue. This means, at the very least, you should have at least five clients sending you a constant supply of loads.
To attract more clients, use online freight boards, build a company website, network, and establish a social media presence.
Bonus: Using ELDs to maximize your fleet’s efficiency
Successfully running a fleet isn’t easy, but it may become more manageable with the right tools. ELDs, for example, have plenty of benefits and fleet management features for aspiring owner-operators and business owners.
Not only will they help you avoid costly violations, but modern ELDs are also packed with fleet management features like vehicle diagnostics, automated IFTA calculation, idle time tracking, and advanced reporting that simplify operations.
Download the ultimate guide to starting your trucking business
If you would like to learn more about the nitty-gritty details of starting a trucking business, download our free 8,000-word guide on starting a trucking business.