There is a lot of competition in the trucking industry, which can be very profitable. Every year, thousands of truckers attempt to get into the business and fail, hopefully our tips will help make your trucking company a success.
This is usually the result of great truckers who are not good owners of their own businesses. The knowledge of how to drive a truck and choose a route isn’t enough to run and develop your trucking business.
You are on the right path if you follow these seven steps. You will be on your way to becoming a successful business owner if you follow them. You will want to refer to this article frequently as you progress into the future.
How to Run a Successful Trucking Company in 2022
Below you will find tips that will help transform and help you run your trucking business successfully in 2022.
1. Support the right market niche
In order to succeed as an owner-operator, being in the right market niche is the most important step. This also applies to small fleets. Equipment you purchase, rates you charge, and freight lanes you can handle depend on the market you choose.
In general, owner-operators should focus on markets that large carriers avoid. To put it another way, they should focus on transporting specialty loads.
As an owner-operator, it is very challenging to make decent revenues with a dry van. Many owners-operators and large carriers compete for easy loads.
Many markets are available for you to choose from. Reefer trucks are advantageous for hauling fresh produce and meat due to less competition, year-round employment, and recession resistance. This last point is highly important, so take note of it.
Fleets are usually divided by operating categories and load types, such as:
- Package
- General freight
- Household goods
- Tank trucks
- Heavy hauling
- Building Materials
- Motorized vehicles
- Petroleum products
- Bulk
- Refrigerated solids
- Agricultural commodities
2. Charge the right rate (per mile)
You need to know what rate you will charge your clients to haul a load as an owner-operator. If you want to earn a nice profit and pay all your operating costs, your rates have to be high enough.
Before you begin calling shippers and making sales, you need to know your rates. It is important to remember to be competitive when you call shippers.
The following simple steps can be taken to accomplish this:
- Select your freight lane
- Go to a load board
- Find 10 loads going in one direction
- Call the brokers and find out how much they pay
- Get the average
- Add 10% to 15% to get the price brokers charge shippers
- Repeat the process in the opposite direction
That is how much each round trip costs – taking and bringing back loads.
3. Calculate your operating costs
It is important to understand your operating costs in detail. Otherwise, you do not know if your business will be profitable.
Establish your fixed costs. Regardless of how often you drive, these costs remain the same. These include truck payments, owner-operator insurance, permits, etc.
Determining your variable costs is the next step. Those costs vary according to your mileage. One variable cost is fuel. The more you drive, the more fuel you consume.
Calculate your “all-in cost per mile” by adding your fixed and variable costs. Your profit is the amount you keep after subtracting your “all-in cost per mile” from your rates (calculated in step #2).
4. Choose the right fuel-buying strategy
Owner-operators spend the most on fuel. They often buy their fuel incorrectly, regardless of their experience level. Fuel is thought to be cheapest at the pump when the cheapest price is offered. That approach is incorrect. It could cost you hundreds (or thousands) of pounds.
Taxes are the issue. In most states, drivers have to pay fuel taxes when they purchase fuel. Meanwhile, truckers must comply with IFTA. As they travel through states, trucks pay taxes based on the fuel they use, regardless of where they bought the fuel.
As a result of this tax issue, you should always purchase fuel at the cheapest base price, regardless of the pump price. The base price is equal to the price of the fuel minus the tax.
5. Directly communicate with shippers
Load boards and brokers play an important role in your business. Having an empty truck means you can use them to your advantage. These trucks are, however, quite expensive. A broker keeps about 10% to 20% of the load price. It’s fair, because they have to make a living and they provide a service to the shipper (and you).
Utilize load boards and brokers as little as possible. Find direct clients instead. Developing a list of reliable shippers will keep you busy if done correctly. The price you charge them should be competitive with what brokers charge – but keep everything for yourself.
6. Run an efficient back office
Staying profitable and growing requires an efficient back office. As you start to use leased drivers, the importance of the back-office increases. Several options are available to you.
Making the change yourself is one option. A truck can be used as a mobile office. An Internet connection, a printer, and a laptop are all you need. If you want to run your business successfully, you should also have accounting software. You have a variety of options to choose from. Truckbytes is one of the most popular solutions, and it offers a free starter package.
As an alternative, you can hire a dispatcher to run your back office. These individuals can be expensive, though. Interview these individuals thoroughly before hiring them. You don’t want to hire the wrong dispatcher and damage your small business venture.
7. Prevent cash flow problems
Cash flow is crucial in the trucking industry. Paying for fuel, insurance, and truck payments are always part of the job. It can take up to 30 days for shippers and brokers to pay invoices, unless they are quick pays. In some cases, it can take 45 days. Especially in the early stages of a business, this delay can put you in a cash flow bind.
Factoring freight bills can be a solution to this problem. By factoring trucking invoices, you can advance up to 95% of the invoice, often the day it is submitted. When your shipper pays, the remaining 5% is rebated minus a small fee.
Getting customers and delivering your services is the simple part, you may get the payments after many months have passed. This means that you must have enough cash on hand to meet the daily expenses of your company and to pay the salaries of your staff each week or month. You will need cash to meet expenses like truck repairs and fuel.
Fuel advances and cards are also offered by several factoring companies.
8. Track Your Income And Expenses
One question business owners ask themselves is are I running my trucking company correctly? One major implication not to forget about is that as a business owner, you should always take care of the money first. Key factors of any successful business is having a robust and transparent way to track income and expenses.
Regarding transportation companies, this is especially important in terms of logistics, because payments are often delayed by clients and can take weeks or months after delivery, and it can be difficult to track expenditures while you’re on the road.
There are a number of things you can do to help avoid common startup obstacles, its worth keeping 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, and receipts so you can prove your expenses if necessary.
- Maintain separate bank accounts for business and personal use, don’t mix them both together.
Running a successful trucking company also implies that you must ensure a regular flow of cash in the initial phase of your business. Your trucking company will take many months before it starts earning regularly. Do not forget that clients generally take two to three months for making the final payment and clearing all outstanding invoices with you.
Fuel advances and cards are also offered by several factoring companies.
9. Hire The Best Drivers & Keep Them
An important element of starting a trucking company is thinking about where you can recruit and hire the best drivers and how you can make sure they stay with your business.
Successful trucking companies offer benefits to their drivers in order to maintain them from leaving these include:
- Bonuses to accident-free drivers
- Recognition bonuses for signing on and staying
- Private health care insurance
- Flexible scheduling
- Gift cards (restaurants, retail, etc.)
- Holiday, birthday or anniversary cards
- Driver appreciation events
- Gym membership
The above list provides an example of what to consider to when starting a trucking company, as it can help lower your staff turnover rates.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.