Last Updated on November 22, 2023 by asifa
The trucking company can be quite profitable, but it is also extremely competitive. Every year, a large number of truckers attempt to enter the industry and fail.
This is generally the case for those who are excellent truck drivers but poor business owners. Knowing how to run and build a trucking business entails more than just knowing how to drive a truck or plan a route.The market you select influences the equipment you purchase, the rates you charge, and the freight lines you can service. For example, a interstate freight company while require large trucks than that of a local truck delivery company.
These seven steps will get you started in the right way. They assist you in making the move from a successful business owner to a successful entrepreneur. You should save this article since you will refer to it frequently.
Table of Contents
1. Support the appropriate market niche
The most crucial step in becoming a successful owner-operator is to support the appropriate market segment. This step also impacts small fleet owners. The market you select influences the equipment you purchase, the rates you charge, and the freight lines you can service.
As a general rule, owner-operators should concentrate on markets that large carriers ignore. To put it another way, consider hauling specific loads.
Making a living as an owner-operator with a dry van is quite challenging. There is far too much rivalry from huge carriers and other owner-operators attempting to draw “easier” loads.
There are numerous markets in which you can specialise. However, transporting fresh vegetables and meat in reefers has some advantages, including fewer competition, year-round jobs, and resistance to recessions. The last point is crucial.
2. Charge the appropriate rate (per mile)
As an owner-operator, you must decide how much to charge your clients to haul a load. Your rates must be high enough to generate a handsome profit while covering all of your operating expenses.
Before you start phoning shippers and making sales, you need to know your rates. When calling shippers, keep in mind that you want to be competitive with what brokers charge them.
There is an easy way to achieve this:
- Choose your freight lane.
- Proceed to a load board.
- Find ten loads that are all moving in the same direction.
- Call the brokers and find out how much they are willing to pay.
- Obtain the average
- Add 10% to 15% to the price that brokers charge shippers.
- Rep the procedure in the opposite direction.
- You now understand how much the lane pays for a round trip – taking and returning loads.
3. Calculate your operating expenses.
It is critical to understand your running costs in depth. Otherwise, you have no way of knowing whether or not you will make a profit.
Calculate your fixed costs. These are charges that are constant regardless of how far you drive. Truck payments, insurance, and permits are a few examples.
Determine your variable costs now. The amount you pay is determined on the number of miles you drive. Fuel, for example, is a variable cost. The more you drive, the more gas you consume.
Determine your “all-in-cost per mile” by adding your fixed and variable costs. This value is quite significant. Subtracting your “all-in-cost per mile” from your rates (determined in step #2) yields your profit – the amount of money you retain.
4. Select the best fuel-purchasing strategy.
For owner-operators, fuel is the most expensive expense. However, both novice and seasoned owner-operators frequently purchase their fuel inappropriately. They believe that the cheapest pump price gives the cheapest fuel. This technique is incorrect. You could end up losing hundreds (or thousands) of dollars if you do this.
The issue is one of taxes. Regular drivers must pay gasoline taxes in the state where the fuel was purchased. Truck drivers, on the other hand, are subject to IFTA. Truckers are taxed based on the amount of fuel they use as they travel across states, regardless of where the fuel was purchased.
Because of the tax issue, you should purchase fuel at the lowest base price possible, regardless of the pump price. The base price is equal to the fuel price minus the tax. In this post, we explain this in further detail and offer a way to “find and compute the least fuel price.”
5. Collaborate directly with shippers
Load boards and brokers have a role in your company. When you have an empty truck, they can be really beneficial. They are, nevertheless, exceedingly pricey. Brokers typically retain 10% to 20% of the load price. That’s reasonable because they have to make a living and provide a service to the shipper (and you).
Reduce your reliance on brokers and load boards. Create a client list of direct shippers instead. If done correctly, you may build a list of dependable shippers that will keep you occupied. Charge them a price comparable to what brokers charge – but keep everything for yourself. We’ve created the following resources to assist you in expanding your shipper list:
- How to Locate Reefer Loads
- Where Can I Find Trucking Contracts?
- Where Can I Find High-Paying Freight Loads?
6. Maintain an effective back office.
If you want to stay profitable and grow, you must have an effective back office. As you begin to add leased drivers to your operation, the relevance of the back office grows. You have several alternatives.
One possibility is to do it yourself. You can conduct business from the cab of your vehicle. You only need a laptop, an Internet connection, and a printer to get started. Accounting software is also required to run your business. There are numerous alternatives available on the market. trucking companies San Diego is a well-known solution that provides a free entry-level product.
You can also outsource your back office to a dispatcher. They can, however, be costly. If you choose this route, conduct a comprehensive interview with them. The improper dispatcher might put your company out of business.
7. Avoid cash flow issues.
Trucking is a cash-intensive industry. You are constantly purchasing fuel, paying insurance payments, vehicle payments, and so on. Shippers and brokers might pay invoices in 15 to 30 days, unless you acquire quick-pays. They can take up to 45 days. This delay can cause cash flow issues for you, especially in the early stages of your organisation.
Freight bill factoring is one solution to this problem. Factoring solves your cash flow problem by advancing up to 95% of the invoice amount, frequently on the same day it is submitted. The remaining 5%, less a modest fee, is refunded once your shipper has paid. Many factoring organisations also offer fuel advances, credit cards, and other services. Metromax Dispatch offers trustworthy and reliable flatbed truck service.