According to statistics from the American Trucking Association, the trucking business generates over 600 billion in profit, over 70% of all freight in the United states is transported by the trucking industry, the industry will most likely grow about 30% in the next decade and the industry is dominated by small businesses as more than 90% carriers own less than 6 trucks. This statistics goes to show that the trucking business is a thriving one and there is a great opportunity for success in the industry. That being said, we ought to lay down the fact that not everyone has and will succeed in the business. But what separates those who succeed from those who do not?
According to Colin Powell, there are no secrets to success. It is the result of preparation, hardwork and learning from failure. In starting a trucking business, preparation is key. Preparation begins with getting the necessary knowledge. In this article we are expounding on everything you need to know to start a Trucking company.
First things first, you will need to decide the type of trucking business you want to venture into. If you want to own a truck or contract someone that owns trucks.
Types of trucking businesses
Whether you choose to buy your own truck or not will depend on you. But you have to know what comes with either option.
One way to run your trucking business is to use owner operators or contract drivers. Owner operators have and drive their own trucks, so you don’t need to buy a truck. Also they are responsible for maintaining the vehicles. With this option, you save money, time and all the hassle that comes with running a truck. These owner operators function under your company name and insurance, although some of them prefer to provide their own insurance.
Some owner operators do not own trailers, so as a company you will have to get trailers for them. It could be a dry van, reefer, flatbed, etc, depending on the kind of load you wish to haul.
Your job is to provide them with load, dispatch for them, negotiate loads with shippers and make sure you get the best possible rate, make sure the load is picked up and gets to its destination.
For each load, you get a percentage, which must have been agreed between you and the owner operator. Also, the owner operator does not have to deal with any paperwork, this will be your responsibility as a company. So it is advisable to get administrative help for this purpose to work at the back office and deal with all the paperwork involved. In this option, you have less control over the drivers and they also decide the type of load they would accept. Also, during seasons of high demand, it may be hard to find drivers ready to fulfil their contracts.
The other way to run a trucking business is to buy or lease a truck and hire drivers as employees. So you have to set up a compensation plan for them. Usually, drivers that drive regionally are paid by the hour, while those that drive over the road are paid per mile. You would have to provide the tools for the driver to work – the truck and the trailer. Also, it’s your job to make sure the driver is always loaded and busy. In this type of trucking business you will spend more money but you will have complete control over your drivers and over the business. You are responsible for the truck payment, the insurance, all the repairs and also for fuel expenses.
Now that you have decided the type of trucking business you want to venture into, it’s time to decide your range of business.
Do you want to be an over-the-road (OTR), regional or local trucker?
It is pertinent to know how wide you want to take your business, as this will help you in hiring the right driver for your company or contract the right owner operator. You don’t want to hire a driver who is not willing to spend days out of home for your OTR trucking business or contract an owner operator who wants to be back home every night for your regional trucking business.
Over the road trucking refers to national and international freight hauling. Here you get to haul loads across the country, and even to neighbouring countries. That is across the United states and even to Canada. OTR drivers spend up to 3-4 weeks at a time on the road.OTR truckers deal with a variety of goods.
In this case your business is focused on a particular area or region, say midwest, north-east, south-west, and so on. So if you choose to be based solely in the midwest region, you will only haul freight within that region usually up to 1000 mile radius. Regional truck drivers also usually spend days on the road at a time.
The distance is usually within a 200 mile radius and the driver works usually 9-5, 9 – 10 hours and gets to go home every night. The routes are localized and the driver should be able to navigate smaller roads. He should be well experienced in driving.
Now that you know where you want to belong, it’s time to start up your company.
9 Steps to starting your trucking company
Write a business plan:
A business plan is like a blueprint for running your business. It helps to guide you in each stage of structuring and growing your business, like a map.
The business plan will include the description of your company, what it has to offer in terms of goods and services, people or organizations your company is out to serve, marketing plans and strategies, financial forecast, etc.
Legally establish your business:
There are many ways you can do this, you could either establish it as a sole proprietorship, a partnership, a limited liability company or a corporation. It is advisable to register your company as an LLC because this makes it an entity on its own separate from you and your personal asset. Therefore if for any reason your company is faced with a lawsuit, your personal assets will not be affected.
Since you will be hiring employees, you will need to get an EIN, Employer Identification Number. You will also need an EIN to open a business bank account. EIN number is a unique 9-digit number used by the Internal Revenue Services (IRS) to identify taxpayers. You would need it for all tax filings related to your business.
Obtain the necessary authority and licensing
- US DOT: The United States department of Transportation uses this number to identify carrier companies when collecting and monitoring the company’s safety information for auditing, inspection, etc.
- Motor Carrier Operating Authority: MC number (motor carrier number) is a permit that allows you to transport freight interstate. FMCSA requires you to show proof of liability insurance before you can obtain an MC number.
- Heavy vehicle use tax: If your truck weighs more than 55000lbs, you are expected to pay this tax.
- Form BOC-3: You will need a process agent that can represent you in legal matters. Your process agent should be always accessible and must be situated at a physical location. The process agent is required for receiving court papers that may be served to your trucking company. They are also responsible for completing and filing the Form BOC-3, which means Blanket of Coverage, on behalf of your company. The process agent is to represent you in every state where you transport freight.
- International Registration Plan (IRP): registering your truck with an IRP license enables you to operate in multiple states. You should register in the state in which you are based.
- International Fuel Tax Agreement (IFTA) and decals: This registration enables you to pay for taxes on fuel consumption used across various US states and Canada jurisdiction, in one jurisdiction.
Obtain Insurance coverage
One compulsory insurance you must obtain, which is required by the FMCSA, is the public liability insurance which covers injury caused to a person by your vehicle, property damage or environmental damage. For freight transportation, the insurance coverage ranges from $750,000 to $5,000,000. Some shippers and brokers may require you to provide an insurance coverage of $1,000,000.
Other types of insurance that may be necessary include cargo insurance, physical damage insurance and passenger accident insurance.
Get your tools ready
Of course, you will need to get a truck and a trailer. You could either buy or lease depending on what works best for you. If you are going to be contracting an owner operator, then you don’t have to buy a truck. But you might need to buy/lease a trailer, as some owner operators do not usually own one.
When buying/leasing a trailer, you need to ensure that you get the right equipment depending on the type of freight you intend to move. If you are going to be dealing with perishable items, you will need to get a reefer.
Get a source of cash
Usually in the trucking business, shippers and brokers do not pay invoices until about 15, 30 or 45days depending on the agreement you both have. But you need to pay some bills in the meantime, buy fuel, pay your driver or owner operator, etc. These are not expenses that can wait 15, 30 days. This is where factoring comes in. A factoring company is a third party financial company that helps to solve your cash flow problem. They do this by paying on behalf of the shipper within 24hrs after load is delivered. In return, they get 1-2% of the cost of shipping once the shipper pays. You will be required to send the rate confirmation and the proof of delivery to your factoring company, before they can release cash to you.
Get back office help
To be able to properly manage your business and all the paperwork that comes with it, you will need some office help. Someone to answer the phone, keep the records, maintain and keep the books, etc. You will need to subscribe to an accounting software or hire an accountant. Online accounting software helps you track your income and expenses.
Delegating administrative tasks will help you focus on what you need to do to grow your business successfully.
At this point your business is ready to take off, but you will need to find loads that will put your trucks on the road. One way to do that is by using load boards to find customers.
A second option is to create relationships with brokers and shippers. Locate shippers within the routes you will be driving.You can also locate them in their various places of business or contact them online.
Always stay in compliance
In order for your company to remain in good standing with the law and with the state, it is essential that you remain in compliance with laid down rules. Such as tax payment, vehicle maintenance rules, safety rules, number of hours drivers should be on the road, which should not exceed 10hrs/day, etc. Failure to do so, might result in lawsuit and the state might revoke your LLC’s existence.
If you are an owner operator in need of a carrier company to work with, contact us today at 2193001666 or send an email to email@example.com.