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Even with the pandemic, the logistics and transportation industry has remained strong and relevant–making a truck business a great prospect moving forward. This is a highly competitive business idea and is great for people who have actually worked in the same industry, such as professional truck drivers.
The trucking industry is currently dominated by small operators, according to the American Trucking Association–an equivalent of 91% of the companies in the industry work with fleets of six trucks or less. Furthermore, they are projecting a growth of 27% across the following decade, despite the last two years seeing a setback due to the pandemic.
If you’re a prospective owner-operator looking to start your own trucking company, this quick and easy guide will help you get on the road much faster.
1. Prepare your business plan
You probably have the industry know-how from experience and an idea of how to steer your company towards success. Now that you have the vision, it’s time to put it on paper. A business plan summarizes your ideas and strategies for the trucking company and it will be updated as your targets change and your business grows. It will detail and organize your goals, your value proposition for the company, and even identify your roadblocks down the road.If you’re a prospective owner-operator looking to start your own trucking company, this quick and easy guide will help you get on the road much faster.Click To Tweet
As an important strategic tool for any entrepreneur, a business plan serves a lot of purposes aside from simply organizing your thoughts on going about your company. Creating a clearly-defined plan will help you establish a case for a higher valuation if you plan to position the company for an acquisition down the line. It also helps you get approved for a loan or secure investment because both lenders and prospective investors will get a better sense of your business, not to mention showing that you do know what you’re doing.
While it sounds like a tedious process, creating business plans is made a lot easier now with how-to guides, free business plan templates, and even sample business plans on the internet.
2. Formally and legally create your company
Despite being competitive, creating a trucking company still has its risk and as such, you must establish it as a proper corporation or better yet, as a Limited Liability Company. Establishing your company this way separates your personal assets from your business liability. Aside from protecting your assets, formally establishing your company also gives you additional tax options, benefits, and protection under the law. You can form the corporation or the LLC yourself, or you can enlist the help of a professional firm to free up your schedule as you focus on other aspects of the business.
Additionally, you’ll have to appoint a registered agent who will receive correspondences from the government and compliance documents on your behalf. Basically, these are professionals that the government communicates with for your company, and is legally required depending on what state you operate in. Additional requirements for a registered agent are a physical address to receive and sign documents during agreed-upon office hours. In appointing the registered agent for your company, the most important factor is accessibility. Missing out on a delivered document could put your company in trouble.
Also, as you create your company, you’ll need to apply for an employer identification number (EIN). It is the equivalent of your social security number, but for your business. As a separate legal entity, it will serve as a form of identification for your trucking company–being a requirement for a business bank account, filing for loans, and for filing taxes for your business.
3. Start getting your licenses, permits, and certificates
Now that you’ve started establishing your company, you’re getting closer to starting operations. Before you start, make sure that you’re totally compliant with different regulations and requirements pertaining to this line of work. Depending on the county and state you’re in, plus the type of services you will offer, there are various licenses, permits, and certifications required, including the following:
- Commercial Driver’s License (CDL). This is the first requirement for driving a truck for business and commercial purposes. Obtaining a valid commercial driver’s license includes an extensive background check and a training program. Then, the applicant for a CDL must take a written exam followed by a practical driving exam. Also, the CDL applicant must be at least 18 years old, although driving a truck from one state to another requires the driver to be at least 21 years old. The complete requirements for CDL for your location are available at the local office of the Department of Motor Vehicles (DMV).
- USDOT and Motor Carrier Authority numbers. Issued by the US Department of Transportation (DOT), your USDOT number is a unique identifier for your business, especially if you’ll be transporting commerce across states. The Motor Carrier (MC) authority is required for trucking companies operating as for-hire carriers that will be transporting federally regulated commodities or passengers across states. Both the USDOT and this motor carrier authority number are automatically issued when you register your trucking company with the Federal Motor Carrier Safety Administration (FMCSA).
- Form BOC-3. Formally known as the Designation of Process Agents), Form BOC-3 is also filed with the FMCSA. However, this can only be filed by a process agent on your behalf, as well as those applying to be a broker or freight forwarder without a commercial motor vehicle (CMV). Only one copy of this form can be retained by the broker or carrier and must be at the principal place of business.
- International Registration Plan (IRP) documents and International Fuel Tax Agreement (IFTA) decals. The IRP serves as an authorization among US jurisdictions and Canadian provinces where you will be operating, you’ll also have to pay for the correct amount in taxes. Meanwhile, IFTA decals will be required for all vehicles in your fleet to recognize your vehicles. This helps simplify tax reporting for the states where you operate.
4. Start building your fleet
Perhaps the most exciting yet the most draining part of starting a trucking company, you’ll have to start purchasing, leasing, or renting the assets you will need. You’ll have to carefully assess every piece of equipment and asset to ensure that they are suited specifically for your company’s needs and targets. The main equipment you’ll need will be a truck and before you start purchasing, ask yourself if the vehicle can accommodate your intended cargo in terms of size and weight capacity. Additionally, if you’re looking for specialized applications, like perishable goods, then your vehicle must be equipped with a refrigerated compartment. The same goes for land for your business, or if you’ll need a parking space for your fleet.
Another important question regarding these capital expenses is whether you need to buy or lease. Each choice has its own advantages and disadvantages, depending on your plans, preferences, and financial condition. Purchasing a truck, for example, is obviously heavier to your cash flow become it comes with additional administrative and acquisition costs–making leasing a financially viable alternative.
Also, as you start building your fleet for your new trucking company, you’ll have to start investing in protection. A good approach to shopping for insurance plans is to connect with multiple agents and insurance providers so you could check out the best coverage available for you. Insurance for trucking companies includes those for primary liability, cargo, passenger accidents, and physical damages.
5. Take clients and track your finances
Now that you’re ready, you can start running your trucking business. You can advertise your company through the usual channels or start contacting people from your professional network. A piece of advice: don’t start going after the large companies immediately since they’ll be looking at equally large transport companies to work with. Check small companies that might have an unfulfilled business need in terms of transport. You can also check seasonal businesses on top of building a regular clientele to give you a revenue boost you can expect and project for certain times of the year.
As you do business with your clients, cash starts flowing in. Make sure to keep every invoice and every receipt to make sure you have a good record of your income. This will be instrumental in making your budget as well as understanding your financial standing, or if the business is actually turning a profit or is losing money. With a detailed budget, you can start planning for your future plans. You can also set aside funds for emergencies like a vehicle breakdown or driver overtime. Although you have your budget, you can always look to take out quick loans such as those offered by Giggle Finance, which offers fast and convenient plans to lend to those running their small trucking companies.