If you’ve always wanted to start a trucking business, now could be the perfect time to put your plan into action. In the third quarter of 2017, e-commerce accounted for 9.1% of overall retail sales—almost double the figure from 2010. Online retailing’s popularity is just one reason the amount of goods hauled by truck is projected to grow by more than 3% annually for the next five years, according to the American Trucking Associations (ATA). Demand for trucking will be so great that the ATA predicts the industry will need to recruit almost 100,000 new drivers per year.
With more goods in need of transport, your trucking company could be the solution to manufacturers’ and merchandisers’ needs. Even though the big guys like FedEx, UPS and the U.S. Postal Service are still doing great business, there are still opportunities for the startup trucking entrepreneur.
Read on to learn how to start a trucking business.
Your Business Plan
Start where all businesses start: with a business plan. A detailed business plan is an essential tool for getting financing as well as a useful roadmap for your startup. By writing a business plan, you’re forced to think through every step of getting your business off the ground.
Business plans follow a standard format, and there are many tools online that can help you create one. (Do a simple search and you’ll find several options.) Basically, your business plan explains what your business will do and what makes it unique, defines your target market, introduces your management team, explains your marketing plan, assesses your competition, projects how much money you’ll need and how much you’ll make, and how you will accomplish all of your goals. The most important part of the business plan is the executive summary, which sums up the entire plan in a page or so.
To Drive or Not to Drive
There are a couple of different ways to start a trucking business. One is to run your business using subcontractors as drivers. Subcontracted drivers have their own trucks, so you don’t need to lay out capital for the vehicles. The drivers are also responsible for maintaining and insuring their trucks, all of which saves you time, money and hassle. You won’t have to provide drivers with benefits, either, but you may need to pay them higher wages than in-house truckers to make up for their higher costs. You’ll also have less control over the drivers and may face challenges finding drivers to fulfill contracts during times of high demand.
The other way to run your trucking business is using your own trucks and hiring the drivers as employees. You’ll pay more to start up and operate this type of trucking business, but you’ll have more control since the drivers are employees. You won’t have to worry about finding drivers—instead, your concern will be keeping all of your drivers busy.
You can even start as a one-person business by doing your own driving. “Driving your own truck is the best way to start your own trucking company,” says Marty Burnham, president of Hercules Forwarding Inc., a Vernon, CA-based trucking transportation company. “Many rags-to-riches stories out there—CRST, England Trucking, Werner Enterprises—all started with one truck and are now billion-dollar companies. You’ll need to be certified by the state with a commercial driver’s license, but it is your best option.”
To cut startup costs, Burnham suggests buying a used truck with low mileage to start out. Check with your state’s air resources department for regulations regarding filters and other technology required to reduce vehicle emissions. Another option is to lease your trucks instead of purchasing them; this can reduce your initial cash outlay.
The type of customer you plan to target will affect the types of vehicles you need. Hauling cars, scrap metal, livestock or produce all requires different types of trucks. For instance, if you’ll be working with food manufacturers, you’ll probably need a refrigerated truck.
Incorporating Your Trucking Business
Once you’ve decided how to operate your trucking business, you need to choose a legal form of business. The default form is a sole proprietorship: You alone own the business, and its income and expenses are reported on your personal income tax return. A business that has two or more owners can form a partnership, in which both partners manage the company and are responsible for its debts. The major disadvantage of both partnerships and sole proprietorships is that the owners are personally liable for any debts or claims against the business.
Incorporating your business protects you from personal liability. It also makes it easier to raise capital, because a corporation can sell stock. However, forming a corporation involves both initial and ongoing fees and subjects you to more regulation. An S corporation is a variation of the corporate form that offers greater tax benefits. Finally, a limited liability company (LLC) gives you the same liability protection as a corporation. But unlike a corporation (where both your income and the business’s income are taxed), an LLC is only taxed once. Both earnings and losses are reported on the owners’ personal tax returns.
The form of business you choose will affect all of your future decisions, so get legal and accounting advice before making your decision.
If you’re trying to start your trucking business by registering your commercial business, you’ll need to obtain operating authority (an MC or motor carrier number). However, the Federal Motor Carrier Safety Administration (FMCSA) requires you first get public liability insurance with coverages for both bodily injury and property damage. The FMCSA monitors and ensures compliance with motor carrier safety (all carriers) and commercial (for-hire, non-exempt carriers) regulations. As far as insurance amounts, the government sets minimums, but shipping customers themselves often have higher minimums. “A new trucker might get an unwelcome surprise if Customer XYZ wants $1 million or $5 million coverage, and they have only the government minimums,” says Burnham. To protect your trucking business, check for interstate insurance requirements on the FMCSA website.
Rules and Regulations
You can learn more about trucking regulations on the FMCSA website and begin your registration process by filling out forms online. The FMCSA also administers the Federal Motor Carrier Safety Regulations (FMCSR) and Hazardous Materials Regulations (HMR) that govern interstate, and some intrastate, commercial trucking and bus industries. Starting December 2017, commercial drivers are required to have electronic logging in every vehicle. Called the ELD Mandate, the legislation is used to electronically record a driver’s Record of Duty Status (RODS), which replaces the traditional paper logbook some drivers used to record their compliance with Hours of Service (HOS) requirements. There’s also information on the ATA site.
Your First Client
To get your trucking business on the road with that first customer, you’ll most likely need to start small. Start by reaching out to local businesses that need transportation services. Attend networking meetings and join social networking groups your target customers belong to. Reach out to prospective customers by attending trade shows for their industries.
Once you get your first account, you’ll need to deliver standout service. Be specific as to what you can and cannot do. “It doesn’t do anyone any good to overpromise and under deliver,” Burnham notes. By law, truckers can only drive 10 hours a day, so be careful when promising delivery dates and times. The key is to be reliable and gradually build up a base of clients that can refer you to new prospects and vouch for your abilities.
You may have to bid low for contracts at first to get your foot in the door. However, know your margins and be ready to charge more once you’ve proven your worth.
For those who love the lure of the open road and want to be their own boss, a trucking company can offer the perfect combination of freedom and financial success.