During the early stages of an economic upswing, customers begin to ship more goods in anticipation of stronger business conditions. Conversely, a decrease in trucking demand may signal the beginning of an economic slump. Generally, the trucking industry is quite competitive. Customers have vast operators to choose from, including privately held carriers and companies outside the industry, such as air transporters.
Owing to that, day-to-day operations tend to be relationship-oriented. Companies work hard to build close ties with customers in order to generate repeat business. Providing excellent service is a necessity since customers can easily find an alternative shipper.
Also note that price competition in this industry is fierce, and the companies in this group generally operate with narrow margins. Howbeit, to adequately serve the needs of its customers, a trucking company needs to have a large collection of tractors and trailers, often numbering in the thousands. In addition, the fleet has to be upgraded often (every five years for tractors). Frequent upgrades ensure that maintenance expense remains in check since older vehicles require more upkeep.
Growing stringent U.S. environmental standards has forced trucking companies to acquire newer, more efficient vehicles. Fleet sizes are also often adjusted in accordance with the prevailing economic situation. During downturns, truckers will decrease the number of vehicles in operation to avoid holding excess capacity.
Have it in mind there are two primary segments within the Trucking Industry: truckload and less-than-truckload (LTL). Truckload carriers are known to fill a trailer with large amounts of cargo from one customer, usually with a single destination in mind. LTL operators, however, fill a trailer with small amounts of cargo from several customers, requiring various delivery destinations.
Note that goods shipped via LTL carriers may stop at various terminals and be transferred between several different vehicles before reaching the final destination. While Truckload freight, on the other hand, remains in the same vehicle along the entire shipping route. Both types of trucking companies maintain a network of terminals and distribution centers across the country.
Also, note that the trucking industry is affected by seasonal factors. Generally, all trucking companies enjoy increased demand in the calendar fourth quarter, when retailers stock their shelves for the major holiday shopping season.
In the middle of the year, LTL companies may enjoy high demand, relative to that of truckload operators, especially since there is less need to transport large amounts of homogenous freight. Within the first quarter, business is more or less slack for both truckload and LTL carriers – a good circumstance, since this period notably involves weather-related disruptions.
How to Start a Trucking Company in the United States
Indeed, the trucking industry plays a crucial role in the everyday usage of goods and products across America. If you’re looking to start a trucking company, the potential rewards and opportunities for expansion are massive. By following the steps below, you’ll be better equipped to start your trucking company.
Research and Plan with Purpose
Just like you’d begin a new job with a fresh perspective and set of goals, you’ll also want to start your new trucking company with an organized plan that stems from adequate research and industry knowledge. Whether that means working in an administrative or distribution role, or if you’ve been a trucking company driver, you can use this knowledge to set a foundation for your business.
Note that the success of your company begins long before you get a truck, sign clients, or start delivering goods. Have it in mind that the more research you do about things like regulations, assets, costs, and industry standards, the better you can serve your customers in the long run. Here are a few critical ideas you should plan out (on paper) before starting your trucking company:
- An anticipated timeline and launch date
- State and federal requirements you have met or will need to meet
- Any assets you acquire and what you may have access to
- Information about local and regional competitors
- Expected goals for business growth and sustainability
Choose a Business Plan and Structure
After you must have done the basic brainstorming, it’s time to move on to the business plan aspect of your trucking business. Note that a good business plan is expected to include:
- Realistic goals for company growth
- The general idea of income and expenses
- Plans for hiring and employment
- List of assets and financial information
- Unique value proposition within the industry
Formalizing a business plan gives you better leverage when working with banks, potential investors, new clients, and even future employees.
Secure Certifications and Licenses
Have it in mind that the trucking industry offers lots of potentials for new entrepreneurs; however, it is also a highly regulated field. As most experienced drivers already know, maintaining the appropriate licenses and legal certifications helps you maintain compliance. Here are some of the top certifications you will need to start operating your business:
- Commercial driver’s license (CDL): A CDL is needed at the federal level for all commercial truck drivers. Since this is a common need, there are various ways to secure this requirement through local classes and other resources. Even if you, as a trucking company owner, aren’t driving a truck, it’s necessary that your CDL stays up-to-date.
- Operating authority and motor carrier (MC) number: Operating authority comes from the Department of Transportation (DOT) and is mandatory for all for-hire carriers moving materials across state lines by truck. You can secure your own motor carrier number directly from the DOT.
Satisfy Compliance and Legal Requirements
Coupled with the above certifications, there are numerous standards your company are expected to adhere to from a legal perspective. Aside from changing your ability to operate if you’re in violation, they also show how you pay taxes on the company. When starting your trucking company, these steps should be one of your utmost priorities:
- USDOT number: A USDOT number applies to certain types of drivers and freight carriers, particularly those that carry hazardous materials by truck. If you engage in any type of interstate commerce, check out whether you need to get this number.
- Process agent: In the event of legal charges or federal proceedings, having a process agent on hand is a federal requirement. While the specific guidelines vary by state, the process agent is responsible for receiving and fielding paperwork in the event of litigation.
- Heavy use and fuel tax agreements: If your truck weighs over 55,000 pounds on the road, you may be subject to the heavy vehicle use tax. Additionally, trucking companies are mandated to report the amounts of fuel used in transport.
Although all these may entail more administrative responsibilities up front, adhering to the requirements of the law can help you avoid unnecessary legal costs or headaches.
Acquire the Necessary Funding and Finances
A commercial trucking company needs substantial start-up expenses, and this is something that you have to extensively consider when creating your business plan. If you don’t have the funds in a personal account, you may have to seek investors or pursue business loan options.
In addition, it is a good idea to be proactive about your accounting needs when business begins. A stress-free invoicing system can help with billing clients on time to get the funds you’re due. Leveraging a streamlined accounting system made especially for business owners and truckers can also make your financial life much easier as you manage accounts, expenses, and more.
Acquire Equipment and Suitable Vehicles
Since you will need to make several major purchases, including tractors, trucks, maintenance equipment, and business licenses, it is a smart idea to consider a new line of credit. Note that this lets you meet the varying needs of your new business while protecting cash assets.
In a highly regulated industry like trucking, you can’t afford to cut corners on poor equipment or materials. Safety, customer trust, and business growth depend on having reliable vehicles. Make smart truck purchases, but maintain compliance along the way.
Secure Complete Insurance Coverage
In trucking, insurance is one of the most necessary aspects of your everyday business. Aside from the need to insure the vehicles and rigs you acquire, you also need to get liability insurance for any potential damages incurred while operating a truck. The basic types of insurance to look into include:
- Limited liability insurance
- Cargo insurance
- Passenger accident insurance
The Federal Motor Carrier Safety Administration is a wonderful resource for learning more about specific filing requirements and policy needs for owners and truckers.
Understand and Track Your Income and Expenses
A primary factor in operating a successful business is establishing a system to track income and expenses. In terms of trucking companies, this is indeed necessary when you consider logistics, because payments are often received weeks or months after delivery, and it can be challenging to track expenditures while you’re on the road. To help avoid common start-up obstacles, keep the following best practices in mind:
- Subscribe to bookkeeping software or hire an accountant. Online accounting software like Xero can help you track your income and expenses even while you’re away from home. They can also help you find an accountant or bookkeeper to help keep you on track.
- Understand when and how you’ll be paid for deliveries. Shipping contracts often provide for payment 30 to 90 days after delivery. Such delays can be managed, but only if you are aware of them ahead of time.
- Maintain thorough records of business expenses. Keep a file of invoices, receipts, and check stubs so you can prove your expenses if necessary.
- Keep your personal and business finances separate. Maintain separate bank accounts for business and personal use.
Find Loads and Grow Your Business
Note that when you first start a trucking company, you will have to find freight to transport. One option for new freight companies is to use load boards to find customers. Another option would be to start establishing relationships with potential customers through marketing and networking efforts.
Contact local shippers directly and meet prospective customers where they do business. A good place to begin would be small business trade shows or industry groups or the DAT Load Board for Truckers, available for download on Android and Apple operating systems.
The trucking and freight transportation industries make up a primary portion of the American economy. As perishable, non-perishable, and construction-related goods move across interstates and highways, experienced drivers and well known trucking businesses keep the industries that depend on them going.
Whether it takes decades or merely months to decide that you want to start your business journey in the trucking industry, having the right tools and information can set you up for future success.
Frequently Asked Questions
What Do You Call A Trucking Company?
A trucking company is simply a company that ships goods or possessions by truck.
What Does A Trucking Business Do?
Trucking companies are involved in;
- Moving supplies
- On-time pickup and delivery
- Home and office movement
- Local and long distance movement
- Heavy duty equipment movement
- Construction equipment movement
- Agricultural equipment movement
- Movement of oil and gas products
What Is The Business Model Of A Truck Logistics Company?
The business model of a trucking logistics company is logistics-based business model. It requires a supply chain approach to logistics, including internal as well as external coordination of the flow of goods.
Is Owning A Trucking Company Profitable?
Yes. An owner operator may take home around $2000-$5000+ weekly, while an investor can make a profit of $500-$2000+ per truck weekly. However, there are many factors that affect profitability.
How Do You Start A Trucking Company?
Here are simple steps to follow if you want to start a trucking company;
- Research and Plan with Purpose
- Choose a Business Plan and Structure
- Secure Certifications and Licenses
- Satisfy Compliance and Legal Requirements
- Acquire the Necessary Funding and Finances
- Acquire Equipment and Suitable Vehicles
- Secure Complete Insurance Coverage
- Understand and Track Your Income and Expenses
- Find Loads and Grow Your Business
What Is The Difference Between A Trucking Company And A Logistics Company?
While trucking company focuses on the movement of goods from one place to the other, the logistics industry implies a broader spectrum and refers to the whole ‘flow’ management. This includes not only the transportation and delivery of goods but also the storage, handling, inventory, packaging and various other aspects.
Is It Worth Starting A Trucking Company?
Sure, it is worth starting a trucking company because, according to Indeed, an independent truck driver’s gross pay averages $183,000 per year, but expenses can run over 70% percent. Thus, the average owner operator pay drops to around $50,000-$60,000 take-home. Many independent truck drivers sign with a carrier to get consistent work.
How Do Trucking Companies Find Loads?
One option for new freight companies is to use load boards. Another option would be to start establishing relationships with potential customers through marketing and networking efforts.
Contact local shippers directly and meet prospective customers where they do business. A good place to begin would be small business trade shows or industry groups or the DAT Load Board for Truckers, available for download on Android and Apple operating systems.
What Does JV Mean In Trucking?
JV Truck means Medium Duty Trucks and Heavy Duty Trucks. JV Trucks shall not include buses or military or tactical vehicles (including Mine Resistant Ambush Protected vehicles).
What Is The Difference Between A Truck And A Semi Truck?
Truck describes almost any cargo vehicle from a pickup truck to an 18 wheeler, while semi-truck refers to the actual truck or tractor, which contains the engine.
What is a Trucking Contract?
Trucking carriers and their clients often use Trucking Contracts as a means of laying out the scope and payment terms for their business relationship with a manufacturer or distributor of goods. As a result of this agreement, all signers will know what to expect from the trucking services.
What Does A Logistics Company Do?
Logistics companies plan, implement, and control the movement and storage of goods, services, or information within a supply chain and between the points of origin and consumption. A proper supply chain may include transportation, shipping, receiving, storage, and management of all or one of these functions.
How Much Money Do You Need To Start A Trucking Company?
The initial cost you can consider when starting your trucking company is from $6,000 to $15,000 (not including your equipment). This includes registration and formation documentation that, on average, cost from $900 to $1,500.
What Is A Freight Broker?
A freight broker is a middleman between shippers and carriers. Instead of taking possession of the freight, the broker facilitates communication between the shipper and the carrier. They’re the ones making sure the handoff goes smoothly between carriers and shippers, and that freight arrives safely, on time.
What Is A Good Monthly Truck Payment?
As a general rule of thumb, the total monthly cost of your truck payment should not exceed 20% of your total monthly income. This of course assumes a steady income that is unlikely to suffer any setbacks over the next few years.
How Do You Calculate Hauling Costs?
To calculate the “cost per mile,” divide the cost by the number of miles you drove that month. For example, “fixed costs per mile” is calculated by dividing $2515 (fixed costs) by 8,400 (miles), which gives us $0.30 per mile.
What Is The Difference Between A Tractor Truck And A Straight Truck?
Tractor trucks are used to haul trailers back and forth from destinations. A straight truck on the other hand doesn’t have a trailer hooked to the back that is able to be removed, instead it carries a box that is usually attached to the truck
How Does Logistics Company Works?
A logistics company functions in two directions: Forward Direction – Distribution and delivery of goods to buyers. Reverse Direction – Exchanging or replacement of defective, damaged or wrong shipments.
What Credit Score Do You Need To Buy A Semi Truck?
The majority of lenders want to see a minimum credit score of 600 to buy a semi truck. Better rates and terms are available when you cross the 640 and 660 score thresholds.
How Much Does Truck Maintenance Cost?
Studies show that yearly truck maintenance and repairs are estimated to cost around $15,000 annually. Common issues include air/line hoses, alternators, wiring, and brake repairs. Additionally, annual tire expenses can run around $4,000 a year to replace 16 out of 18 tires on an 18 wheeler.
What Does A Bobtail Truck Look Like?
A bobtail truck is a truck without a trailer attached to it. Some straight trucks that haul propane are also referred to as bobtails because the tank is significantly shorter than the average propane trailer.
How Much Does Bobtail Insurance Cost?
Bobtail insurance could cost you around $400 on average annually and commonly covers up to a limit of $1,000,000. Sometimes this limit can be higher, rarely lower, depending on the rates that your insurance company offers you.
Can You Own A Trucking Company Without A CDL?
Yes, you can. However, you will need to employ CDL drivers rather than operating the business alone. While this may not add much to your start-up costs, it can have an impact on your business over time.
How Do You Operate A Profitable Trucking Company?
In order to operate profitably, trucking companies must first know their “all-in” cost-per-mile (CPM). Knowing this cost is the only way to set a freight rate that will generate enough revenue to pay costs and generate a profit.
What Is New In Trucking And Logistics?
One of the biggest transport industry trends for 2021 is cloud-based systems adoption, since the platforms in the cloud force a software-as-a-service (SaaS) model which opens unlimited opportunities for companies scalability and innovative digital resources usage.
How Difficult Is It To Start A Trucking Company?
Well, I will say it is not difficult to start any business if you have the right information and finance coupled with determination including starting a trucking company.
What Is The Average Profit Margin For A Trucking Company?
Privately held general freight trucking companies watch their sales expand in 2017 on average 14.9%, while profit margins expanded to 6%, compared to the past average of between 2.4% and 4% over the last six years.
Why Do Trucking Companies Fail?
Fixed and variable costs – and an insufficient understanding of them — leads to the failure of trucking companies. The variable costs range from fuel prices and maintenance expenses to changing regulations and indirect driver costs; from routing and planning costs to customer satisfaction and business management costs.
Is The Trucking Industry Dying?
No, the trucking industry is not dying and because of the recent growth in the industry after the major hit from Covid19. Please note that growth in general freight tonnage is pegged at 2.8% per year on average from 2021 through 2031.
Is Becoming A Freight Broker Worth It?
Being a freight broker can be very lucrative. After completing the freight broker training and entering the industry, a competent freight broker can earn commissions ranging from 6 to 7 figures per deal! Some brokers even go all the way to 8 figures!
What Does Straight Truck Mean?
A straight truck is one in which all axles are attached to a single frame. An articulated vehicle is one that consists of two or more separate frames connected by suitable couplings.
Is A Trucking Company A Good Investment?
Sure, a trucking company is a good investment.
What Is A Dead Head In Trucking?
In trucking terminology, if a truck doesn’t have a trailer attached, it’s a deadhead truck. It means that the driver dropped off a load and is on their way to pick up another load.
Are Trucking Companies Shutting Down?
Yes, trucking companies are shutting down in some locations. According to figures from Broughton Capital, more trucking companies have shut down during the first six months of 2019 than in the entire year of 2018. On average, the companies had around 30 drivers, resulting in over 20,000 trucks being removed from the roads. In all of 2018, 310 trucking companies closed down.
What Is The Maximum Length Of A Straight Truck?
There are no minimums or maximums at the federal level and size and weight are governed entirely by each state separately. However, the most common length restriction is a 40′ maximum length for straight trucks, and having a straight truck of this length is the most common.
Is Trucking A Good Career?
Yes, trucking is a good career and as stated by the American Trucking Association, there is a large shortage of good drivers and anyone who gets into truck driving can count on being in demand and having a secure future if they protect their CDL license. Truck Driving is definitely a promising career you can rely on.
How Do You Start Logistic Business?
- Conduct your Market research and Feasibility Studies
- Choose a name and register the business
- Draft a detailed Business Plan and market strategy
- Secure the needed licenses and permits
- Apply for an EIN (Employer Identification Number) / Federal Tax ID Number.
- Open a corporate bank account
- Lease and equip an Operational Base
- Hire employees
- Promote and Market your logistic business
What Is The Best State To Start A Trucking Company?
Oklahoma is the best state to start a trucking company as an owner-operator. Oklahoma is in the center of the United States, which allows you to work both east and west coast jobs.
How Much Should I Budget For Maintenance For My Equipment?
You should budget approximately 2% to 5% of your total replacement asset value (RAV). This metric, known as %RAV, is calculated as a proportion of your facility’s value and spending.
How Do Trucking Companies Make Money?
- Support the right market niche.
- Charge the right rate (per mile)
- Determine your operating costs.
- Use the right fuel-buying strategy.
- Work directly with shippers.
- Run an efficient back office.
- Avoid cash flow problems.
What Is The Most Profitable Trucking Business?
- Ice road trucking.
- Hazmat hauling.
- Tanker hauling.
- Oversized load hauling.
- Luxury car hauling.
- Team driving.
- Owner-operator jobs.
- Private fleets.
Can A Truck Driver Become A Millionaire?
Sure, anyone can become a millionaire in almost any industry, including trucking.
How Much Do Owner Operators Charge Per Mile?
The average owner-operator revenue per mile was $1.35 in 2017, according to ATBS, which was up 7 cents per mile over 2016’s average.
How Does The Split Sleeper Berth Rule Work?
The split sleeper berth rule allows a truck driver to extend a shift by splitting the required 10 consecutive hours of off-duty time into two shifts. This means that drivers can adjust their schedules for longer hauls or warehouse hours by “dropping in” a rest break to comply with driving hour limitations.
How Can I Get High Paying Freight Loads?
Look for an association of retail store chain owners. If you can, try to bag government contracts. The government is a great client that offers high-paying loads and pays reliably. Government agencies like the Postal Service and the Military are some examples of possible clients.
Where Do Freight Brokers Find Loads?
They look at load boards, which oftentimes they have a subscription to, and they choose loads they may be able to cover, those within their purview and available lanes, and bid on them. If they can offer better terms that other brokers or carriers who want the load, the shipper may accept their offer.
How Much Does Insurance Cost For A Trucking Company?
The average semi truck insurance costs between $3,000 and $5,000 a year for owner operators that lease on to a motor carrier. For an owner operator with their own authority, the average cost is $9,000-$12,000 per truck.
Who Has The Cheapest Truck Insurance?
With a list price of $19,090 and an annual cost to insure at $1,142, the Nissan Frontier is the least expensive truck to buy and has a midrange cost to insure compared to other pickups. On a monthly basis, insuring this pickup will set you back $95, with USAA and Nationwide being the cheapest options.
Are Older Trucks Cheaper To Insure?
An older vehicle is cheaper to insure mainly because older cars are less valuable, so an insurer won’t have to pay out as much in the event of a total loss.
How Much Money Do Logistics Companies Make?
According to Salary.com, the average transportation logistics specialist salary falls somewhere between $37,000 and $46,000; PayScale reports $47,000.
Do Truck Drivers Pay Taxes In Every State?
As an OTR trucker, your income is subject to state income tax only in your home state (your state of residence). It is not subject to income tax in states you pass through on the road. The only exception might be if you physically worked at a location in a non-resident state.
How Much Do Owner Operators Get Back In Taxes?
Owner operators get Per Diem. Per Diem (per day) is one of the largest tax deductions for an owner-operator. It is a deduction for meals and incidental expenses on the days you are working away from home. The current rate is 80% of $66 per full day, and ¾ of this amount for partial days.
Who Is The Richest Trucker?
Tom Love and his wife Judy ranked No. 209 on Forbes new list of the world’s billionaires, which makes them the richest couple in trucking. With holdings estimated at over $7 billion, the founders of Love’s Travel Stops & Country Stores lead the trucking industry in personal wealth.
How Much Should I Charge Per Mile For Hauling?
The latest data from the American Transportation Research Institute (ATRI) says the average trucking cost per mile in the U.S. is $1.82.