Are you interested in starting a transportation business? If YES, here is a complete guide to starting a transportation business with NO money and no experience.
Okay, so we have provided you an in-depth sample transportation business plan template. We also took it further by analyzing and drafting a sample transportation service marketing plan backed up by actionable guerrilla marketing ideas for transportation companies. In this article, we will be considering all the requirements for starting a transportation business. So put on your entrepreneurial hat and let’s proceed.
To start a transportation business in the United States, one needs to know which aspect of the transportation business he or she would want to go into. The transportation business in the United States of America encompasses different types such as limousine or taxi service, courier service, medical transportation, auto transport business, charter/bus Company and trucking.
Each type comes with a lot of hurdles, so it’d be best if you choose one that doesn’t have a lot of competition in the area you wish to start operating from. You would also need to make sure of the fact that there is a need for this type of business around your location by carrying out due diligence.
What Does It Take to Start a Transportation Business Successfully?
Many people get into the transportation business without knowing what it really entails or even carrying out a proper feasibility research. As with any business, there are numerous hurdles that have to be overcome if you want to be successful in the transportation business.
For one, you would need to get finance to finance your business, and this might be difficult as many financial institutions require that you have a long standing contract so as to ensure that you can easily pay back the loan. This is due to the fact that the transport business is considered a high risk as many people fail in the business.
You will need to contact the local public utilities commission so as to find out what will be needed to start this kind of business, which would include getting a permit and license, and registering with the local, state or national transportation department.
Financial projections for instance are a very important part of the business, and any serious entrepreneur would need to be familiar with a spreadsheet. You would need precise facts to be able to calculate your costs as accurately as possible, as you cannot afford to go on presumptions.
Advertise your business to the right target market, as soon as you go operational. You would need to set aside a certain amount or budget for different modes of advertising. After all is set up, you would need to work hard by putting in time and effort to ensure that you build clientele and that your business becomes a success, especially in the first one year of the lifecycle of the business.
Starting a Transportation Business – A Complete Guide
- Transportation Business Industry Overview
Companies in this industry ensure the provision of rail, air, and waterborne transportation; transit and ground passenger, pipeline, postal, courier and messenger transportation services, and warehousing and storage services; other services include scenic and sightseeing transportation. This industry depends heavily on the health of the economy.
- Interesting Statistics About the Transport Industry
A positive economy will affect manufacturing output, commodity trade, consumer and business spending, as well as leisure and business travel activity. Due to the fact that many costs are fixed, the profitability of individual companies is determined by efficient operations and favorable labor and fuel costs.
Large transportation companies enjoy economies of scale as regards purchasing and the ability to provide a more extensive service. Small transportation businesses can compete better in local and regional areas. The industry is largely fragmented with 40% of revenue generated by 50 largest firms.
This is a highly competitive industry that has a highly skilled workforce and relatively low costs and regulatory burdens. As at 2012, spending in this industry which includes logistics totaled $1.33 trillion, and represented 8.5% of the annual Gross Domestic Product (GDP). The investment in this industry however correlates with growth in the United States economy.
Between 2010 and 2015, the demand for public transportation services have increased due to rising fuel costs, as well as more Americans moving from the rural areas to the urban centers, thereby forcing more people to make a switch from commuting with their cars to cheaper public transportation. Also, the higher government funding has allowed for the expansion of energy efficient transportation services.
This shows that the growth in this industry will be fueled by the government and a rise in domestic trip by the U.S residents. The revenue in this industry has been projected at $64 billion, with an annual growth of 1.3%. 384,946 people are said to be employed by 5,224 businesses.
According to the United States Bureau of Labor Statistics, the demand for truck transportation and warehousing services will expand as many manufacturers concentrate on their core competencies, and contract out their transportation and storage functions. Transportation businesses have become effective at maximizing their profit per shipment, which will help insulate the industry during slow economic growth periods.
The increase in demand for qualified drivers has created a shortage, especially since the average age of the truck drivers is moving upward as the baby boomer generation nears retirement. The number of aged Americans at 55 or older will increase by 29.7%, which is the largest segment of the general population. This field has also faced increased competition from other industries especially those that are serviced based, which will further reduce the labor pool.
Transportation businesses especially those in trucking have become efficient at operating on tight profit margins and unpredictable fuel costs. Between 2007 and 2010, there were a large number of bankruptcies; however, the third quarter of 2011 had a low number of failures.
High fuel prices as well as decreased demand contributed to the failures in this industry during the recession, with the main culprit being a lack of credit. As banks tightened their lending policies, fleets were unable to secure the needed cash for daily operations. This means that a steady financial market has a positive effect on the transportation industry.
Starting a Transportation Business – Market Feasibility and Research
- Demographics and Psychographics
When it comes to the demographic and psychographics composition of those that uses transportation, it is obviously everyone. People need to be transported at one time or the other, they also send packages and goods across for either business purposes or pleasure, sometimes people need to be transported medically, or companies need their goods sent to either other companies or end user client.
Those who can afford the services of the transportation industry range from merchants, industrialists, contractors, farmers, private individuals, and a host of other people
List of Niche Ideas Within the Transportation Business Industry
As regards the niches within the transportation industry, it is obvious that there are no clear cut factors that differentiate a transport company from another, they tend to offer uniformed services and some go all the way to offer additional but related services.
Some of the areas of specialization in the transportation industry are;
- Courier services
- air mail services
- freight services
- rail services
- Non-emergency medical transport service
- public transportation services
- for-hire carriers
- food trucks and such other services
One thing about all these areas of specialization mentioned above is that it is easier for small transportation business owners to choose from them and then specialize on it; however it is common to find bigger transportation companies offering all the services listed above due to economies of scale.
The Level of Competition in the Transportation Business Industry
Starting a transportation business can be difficult or an expensive business venture, especially if you haven’t carried out the necessary feasibility study required. Anyone can decide to start this business, but it is vital to know that not everyone can succeed in the business.
The level of competition is quite stiff, which is why those that didn’t carry out a thorough research might have more challenges than those that did. Smaller transportation companies all compete amongst themselves, while also competing against the big brands since the bigger brands have the advantage of offering as many services as they want.
Competition in the transportation business usually take the form of price competition, service introductions, and advertising battles, which in the end is all for the benefit of the customer, as competition keeps businesses on their toes, and ensure that they remain proactive, if they want to continue to exist or grow.
List Of Well – Known Brands in the Transportation Industry
The industry is dominated by strong brands that have become a household name over and over the years. The reason why there are brands in an industry is due to the fact that they have stood the test of time, and have overcome many challenges in the market place or their specific industry. Below are some of the well known brands in the transportation business industry in the United States of America:
- Greyhound (Passenger Bus)
- Amtrak (Rail)
- United Parcel Services (UPS) (Courier)
- C.H Robinson Worldwide (Logistics)
- American Airlines (Plane)
Before starting out this business, entrepreneurs need to carry out a thorough research so as to be certain of certain factors that might hinder their businesses or act as a cog in the wheel. Chief of which is finances, how you intend to finance your transportation business so that you can favorably compete with others in the same line in the industry.
What unique services will you offer apart from your core competencies that will make customers leave the brand they are used to or get new customers? The demand for transportation services have slumped in recent years, due to the global recession, as the business totally depends on the health of the economy.
However, despite the state of the economy, you can still get a place for your business in the industry, if you have niche offerings, and keep your operating costs at a minimum. For example, you can offer excellent customer service to your clients so that they not only stick with you but refer you to other potential customers as well.
Is the Transport Business Worth Starting from Scratch or is Buying a Franchise Better?
Everyone dreams of starting their business from scratch, especially if it is a business they have enough passion about, as well as finances. Starting from the scratch ensures that you are completely your own boss, it also gives you total control over the things that you can handle and change, such as your marketing strategies, and the vision and objectives of the company.
If you are shooting for a small scale business and want to start off in your region first, it will be good for you to start off from the scratch, so as to garner experience for yourself as the business grows.
Buying a franchise also has its advantages, as it means you get guidance from those that you are buying the franchise from, and also get to worry less about other aspects of the business such as getting customers to help start off the business. The ultimate decision of what an entrepreneur wants for his or her business, lies in what vision about the business he or she has, which will lead to either deciding to buy a franchise or not.
Possible Threats and Challenges You Will Face When Starting a Transportation Business
Every business no matter how easy it is to start up will always experience threats and challenges. Some threats might be from other competitors who might lower their prices so much so that you find it hard to meet up even after reducing your operating costs to the barest minimum. Challenges might also come from being cash strapped due to a downturn in the economy which will lead to the demand for transportation services going down.
Starting a Transportation Business – Legal Matter
- Best legal entity to use for this Transportation business
Having a legal entity for your transportation business is so as to ensure that your business is legal on all fronts, as your vehicle or truck could be impounded if you aren’t legal. Legality involves choosing the proper business entity, obtaining licenses and permits, getting adequate insurance, as well as dealing with employees when it gets to that point.
For your transportation business, you could decide to operate your business as a sole proprietor or enter into partnership with someone, but it is best if you consider using a legal form that protects you from personal liability, such as a limited liability company (LLC) or a corporation especially as you would be responsible for people, as well as all the cargoes under your care till it gets to its destination. If you use an LLC instead of a sole proprietorship, the liability will fall on your business and not on you personally.
The decision on choosing a legal entity depends entirely on what the long term goal and vision for your company is, because in getting a legal entity, not only must you think of what’s best for your business. However, even if you decide to go for a sole proprietorship first, and you choose to expand later, you can always change your legal entity to whatever suits the business.
Catchy Business Name ideas Suitable for a Transportation Business
- Trans Track
- Shirley Trans
- Smooth Passage Transport Services
- Perfect Carriage Services
- Air Drop Services
The Best Insurance Needed for a Transportation Business
Every business no matter the scale it operates on would need insurance. Whether your business is busing, towing or trucking, you would need to protect your vehicles, drivers and goods. An insurance cover protects the business owner or entrepreneur from damages that would have personally been incurred by him or her. Before picking an insurance coverage, ensure that you speak with a broker or an agent, so that you would be properly guided on what best suits your business.
Below are some of the basic insurance covers that you should consider purchasing if you are looking to start your transportation business in the United States of America:
- Auto Insurance
- Employee Benefits
- Equipment Breakdown Insurance
- General Liability Insurance
- Workers’ Compensation Insurance
- Property Insurance
- Trailer Interchange Insurance
- Non-trucking Liability
- Inland Marine Insurance
- Broadened Pollution Coverage
Does a Transport Business Need Intellectual Property Protection?
If you are venturing into this business, you probably would not need to be concerned with the hassles of intellectual property protection, except you have a unique logo or slogan and intend to intellectually protect the logo of your business or a distinctive business statement. The truth is that most that have been in the courier business do not see getting an intellectual property protection as a necessity, as they tend to focus more on their core competencies.
Is Professional Certification Needed to Start a Transport Business?
If you decide to start a transportation business in the United States, you would not need to have a professional certificate, especially as you are basically just providing service – transportation of passengers, and/or cargoes. You might be required though to get certification for handling cargoes and packages, especially if you are going into a niche like medical equipment, or for medically transporting people either by road or air.
It is however, essential for an entrepreneur going into this field or any other in the United States of America to check what will be required of him or her in the state or municipality where they want to operate their business from.
List of Legal Documents You Need to Run a Transportation Business
Below are some of the basic legal documents that you would need to successfully run a transportation business in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non Disclosure Agreement
- Transportation Contract Documents
- Insurance Policies
- Accounting Contract
- Administrative Services Contract
- Retailer Agreement
Writing a Business Plan for Your Transportation Business
Having a business plan protects you from throwing your money into a venture that might not be profitable in the short or long run. The transportation business is one that would require a comprehensive or technical business plan however, if you cannot write out a comprehensive plan, you might just draft a business document, that would contain the essentials a typical business plan does.
A business plan is usually a guideline that shows the entrepreneur’s intention of how the proposed business is intended to run. The document presents the main focus of the business, its goals, and mission and a clear plan for how the business intends to operate. It also helps in influencing all business actions and decisions.
Writing a business plan isn’t an easy affair, especially as the strategies that will help you to successfully run the transportation business have to be crafted and drafted with competitors in mind. The strategies could range from generating capital for the transportation business to competing against competitors, from expanding the services of the business to attracting and retaining customers. Every business plan needs some key components.
The key components that a business plan is supposed to have are:
The Executive summary which states in clear terms what your transportation business is about, the strategies you intend to use in getting clients as well as marketing to prospective clients, your business goals, your target segment, and your niches. The segment also covers the vision statement for your company, the goals and objectives you intend to achieve, as well as your mission statement.
Other components that are vital in a business plan are the publicity, promotion and advertising strategy, operations cost and financial projections, the strength and weaknesses of your business, and how you intend to source for capital and pay back if need be. This might seem too much for a transportation business, but it is necessary especially when your intention is to be become a known brand.
If you are intimidated by the task of writing a business plan, you could employ the services of consultants, while supplying them with information that can be used to create the precise picture for investors or you could also decide to download a template online that would guide you on how to write the business plan.
Detailed Cost Analysis for Starting a Transportation Business
According to a detailed research, the transportation business can be started with very little funds, depending on the type you choose to go into, as some can be very expensive to start up. This means that those that go into the business have varying operating costs depending on the state or country they are operating from and their priorities.
Most new entrepreneurs might be wary of going into this industry due to the fact that it seems the industry is dominated by a few big names, but in this business you can start off in your area, and still make as much as you should.
Below is the basic checklist that you would need to launch your own transportation business in the United States of America and most likely in other parts of the world;
- The total fee for incorporation – name check and filing – would cost $500
- Liability insurance, permit and business license would cost $1,000
- Business cards, fliers and handbills would cost $100
- Purchasing the first set of vehicles would cost at least $200,000
- Launching of website would cost $300
- Having an office facility would cost at least $10,000
- Equipping the office with computer, phone, and file cabinet would cost $1,500
- Other operating expenses would cost $1,500
- Phone and utilities would cost $2,000
- Operational cost for the first 6 months would cost $30,000
The report from the above checklist shows that on a small scale, one would need at least $250,000 to be able to start a transportation business.
If one intends starting a medium scale transportation business in the United States, one would need at least $500,000. And if one intends to start a large scale transportation business in the United States, one would need at least $1,000,000 and above.
- Financing Your Transportation Business
Financing any business from scratch is not easy for an entrepreneur, and the hassles in this process have led to the dearth of many business ideas and start-ups especially when you haven’t carried out enough research into the field you are going into, or do not have the required finances necessary to start or keep the business afloat.
When it comes to raising finance, every business person is faced with different available options, the decision on which finance options to use for the benefit of the business will come after weighing the pros and cons attached to each option, and also depending on the business scale you want to start from, small, medium or large.
Most times, your personal savings might not cover a quarter of the financial requirements for a start-up, and it is then your business plan can be used to get funds from other places. This is why it is always insisted that your business plan is clear, providing concise strategies on how you intend to run and grow your business. Without a business plan, no serious investor would take you seriously, and might feel you are wasting their time.
There are several financing options available if you intend to raise money to start your transportation business, and some of the options are:
- Raising money from personal savings and sale of personal stock and properties
- Raising money from family and friends
- Getting a business partner
- Approaching an investor
Choosing a Suitable Location for your Transportation Business
One of the hurdles faced by any startup business is in getting a suitable location – that will offer a convenient access for both customers and employees – for the business. Where you locate your business is important as it can either lead to the growth of your business as well as further expand it, or to the death of your business. Your location has to be close to the industry you intend to service, which is your target market.
To go into this business, one must be prepared for the location challenge and must look into issues that might possibly crop up. Leasing a small facility is okay, especially if you are looking to start off on a small scale. Thankfully, you can start off small, and as soon as you are progressing can look out for a bigger appropriate location.
Another factor to consider is in locating your transportation business especially if you are into trucking close to industrial and commercial hubs, or even close to the highway. This is so as to give you enough space to park as well as service your vehicles, without causing a huge inconvenience to others.
This business can be started by any focused entrepreneur; it isn’t a business that can be tied to one location, except you want to start a medium or large scale courier business.
Starting a Transportation Business – Technical & Manpower Details
Starting a transportation business means that the main part of your business – vehicles would need to be in good condition and can either be fairly used or brand new. If your finances afford you the opportunity of staggering payments for a period of time, then there might be a need for you to consider getting brand new vehicles instead. However, you should consider getting fairly used that will be thoroughly checked by a reliable mechanic, if you do not have the finances to purchase a new one.
Some of the equipment that you would need to fully launch your own transportation business includes:
- Basic Mechanic tools such as wrenches
If you intend to start out on a medium scale, then you should also consider contracting the maintenance of your vehicles, as it is more cost effective to do so. However if you are starting on a large scale, having an in-house maintenance team would be your best bet.
Regarding the number of people that would be needed to run a transportation business, it varies depending on the scale of the business. However, the business cannot be effectively run by one person, as more hands will be needed for other parts of the business. You would need an admin manager, accountant, drivers, and front desk person. This is an average of 5 to 6 people including yourself.
- The production Process in a Transportation Business
Since the transportation business is a service oriented business, there is no production process involved.
The processes involved in this business usually range from ensuring that the right packages get to the right location, people get to where they intended going to, as well as any other requirements that will be needed while performing your duties as a courier.
The other process is being able to read, so as to be able to know what your contract documents and other document stipulates.
Starting a Transportation Business – The Marketing Plan
- Marketing ideas and strategies for a transport business
The aim of having marketing ideas and strategies is so that you could define and direct the marketing activities that are intended to build customer base, while also increasing revenue for your transportation business. It is something that encourages an organization to look both inwardly and outwardly, so as understand the impact of marketing decisions and the target market. A marketing strategy will create goals, whilst encouraging a business to expand.
Before carrying out your marketing strategies, you would need to determine your marketing budget. Starting a new business, you might be required to use more money than an already existing business would need, due to that fact that potential clients aren’t yet aware of your services. When your transportation business has become known, your marketing budget can then fall to a negligible part of your revenue.
Below are some of the marketing strategies and ideas that can be adopted for your courier business:
- Build an easy website that is user friendly and interactive, and one that will promote your business. Also include online contact forms on your website to make it more convenient for your customers.
- Ensure you have a brochure that can be helpful in discussing your business to people in your target areas.
- Hand out business cards to individuals and businesses, or leave them on local bulletin boards.
- List your business in local directories as well as in yellow pages ads.
- Create a promotional calendar that will help to connect your marketing strategies to sales objectives.
- List your business on local directories and online directories as well.
- Use direct marketing or referral (word of mouth) marketing
Factors That Will Help You Get the Right Product Pricing for your Transportation business
The factors that will enable you get the right price quotation for your services; prices that will be pocket friendly to household is to ensure that you cut your operational cost to the barest minimum. This goes back to the vehicle decision, picking the right vehicle will save you expenses overtime, ensuring that you do not pass the bulk on to the customers and that you remain profitable as well, which is a win-win situation.
Possible Competitive Strategies for Winning Your Competitors
The transportation business no longer just consists on moving people or goods from one place to the other at the lowest cost possible, but there are now several other factors that is needed to ensure that businesses not only make profit but stay ahead of competitors as well. If you run a transportation business of whatever kind, then you must ensure that your business is packaged very well to give you an advantage over your competitors.
If you run a cargo transportation business, part of your competitive strategy would be in adopting a package that would cater favorably to your highly and lowly placed clients, without sacrificing on your profit. Your prices need not be too low; they just have to be affordable to a budget that can be easily afforded by your customers.
Another competitive strategy that you would need to employ is in ensuring that you remain proactive in handling your business affairs.
Possible Ways to Increase Customer Retention for your Transportation Business
In order to grow, transportation businesses need strategies as well as a marketing plan to attract new clients and also keep their current clients happy. No organization can grow if it does not retain its customers more than it attracts new ones, for it is far easier to retain customers than to attract new customers for your business; especially as retained customers help bring in new customers as well, ensuring that it is a win-win situation for your company.
One of the surest ways of customer retention isn’t only in offering excellent services but by also keeping in touch with customers, before, during, and after you must have completed your services to them. You could also ensure that your current customers are happy by giving them incentives once they refer and recommend other customers.
Strategies to Boost your Brand Awareness and Create a Corporate identity for your Transportation Business
If you want your transportation business to be seen, then you would need strategies that will help boost and create a corporate identity for your business. It is all about targeting the right audience and capturing their attention. However, it is important to note that creating strategies are not just for the sake of having one, but ensuring that they are converted into sales.
Below are the platforms that can be used as leverage to improve your branding awareness for your transportation business:
- Optimize your website by ensuring it has the necessary keywords that will drive traffic to your page.
- Use the same logo, color and fonts for all your marketing media, this will allow your bran be embedded into the consciousness of your audience.
- Send newsletters with helpful information to your clients.
- Make use of social media outlets, especially those that have your target audience.
- Use multiple content platforms such as videos to distribute your branding.
- Let your brand be seen by sponsoring an event, which will ensure that all those in your database as well as other sponsors will see your logo.
- Distribute fliers and handbills in your target areas.
- Promote your business via offline and online directories.
Creating a Suppliers/Distribution Network for your Transport Business
If you run a transportation business, then the industry regards you as a distributor especially if you transport cargoes. If you run a passenger inclined transportation service, you provide a service as well that can be regarded a bit as distribution, since you drop off people at different destinations.
If you are in a good business relationship with your suppliers and clients, you are likely to have a budding business, as your suppliers and distributors can always refer you to others which will help your business boom. They could also offer advice on how you might be able to get more clients for your transportation business.
Tips for Running a Transportation Business Successfully
The transportation business is a very profitable one but also incredibly competitive, as many people who start this business usually fail due to varying number of reasons. This happens especially to those who aren’t good business owners. Knowing how to run a transportation business successfully is more than knowing how to drive or which routes to use but it takes having great business acumen.
First off, your business cannot run if you do not have the right equipment. Getting the right equipment is often the most expensive and difficult decision to make, especially if you have not decided if you want to buy or lease the equipment, as each comes with advantages and disadvantages.
Also in this kind of business, you must learn how to bid well, which is low enough to stay competitive and high enough to remain profitable as a business. The only way this can be done is if you know your expenses, which includes maintenance, repairs, fuel costs, labor costs, and other miscellaneous.
Lastly, no transportation business runs successfully without a well-thought-out back office. The type of back office will depend entirely on the size of your business. Determine how you want the office to be run and ensure that you avoid cash flow problems as much as you can.