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The trucking business isn’t exactly the cheapest route to entrepreneurship. But there is great demand for freight services, offering a unique opportunity to create a lucrative business. You can also start as a one-person show and scale the business as you grow.
Why Starting a Trucking Business Is Worth It
There are certainly more accessible businesses to set up than a trucking business. However, freight has some unique advantages, and there are several reasons why starting a trucking business is worth it.
For one, there is a high demand for trucking. According to Markets Insider, trucks move more than 70% of all goods transported in the United States. This means plenty of business to go around, even if you are just starting.
Additionally, there is a nationwide shortage of truck drivers. Some experts estimate that the industry needs at least 900,000 more drivers. So if you are looking for an industry in need of your services, it is hard to think of a better option than trucking.
Furthermore, you don’t need to start big to compete in the industry. There is plenty of room for newcomers and startups. For example, the trucking industry is dominated by small businesses. A recent survey revealed that more than 90% of trucking companies have six or fewer vehicles. This means you can start small, turn a profit relatively quickly, and scale your business long-term.
Lastly, the trucking business is virtually recession-proof. That is more than can be said for most companies. Trucks are the lifeblood of the country’s economy and infrastructure. Hospitals, schools, restaurants, or gas stations, virtually all institutions rely on trucks for supplies.
Some experts estimate that grocery stores would run out of supplies in just three days if long-haul trucks stopped delivering goods.
The Investment Needed to Start a Trucking Business
A trucking business has the potential to be lucrative. But it is not the most straightforward business to start. There are many hurdles along the way, so it’s not the kind of business you can set up overnight. However, it is possible to set up your business if you are up for the challenge.
The first significant investment is the trucks. The precise cost varies widely depending on the number, type, size, and condition of the trucks you want to start with. One big rig can cost you anywhere between $30,000 and $150,000.
Although not immediately apparent, you’ll also need to factor in the cost of real estate. You’ll need somewhere safe to dock and park your tucks. Additionally, you’ll also need an office space for handling administrative tasks.
Again, the cost of real estate will vary widely depending on your location. But it is likely to cost a pretty penny since you’d want a location close to major highways and interstates. The site should also be easily accessible for large trucks.
You’ll also need equipment to allow you to do business. For example, you may need specific beds and ties if you transport logs or temperature-controlled storage if you transport frozen goods. The cost of equipment is even higher for specialized industries. For example, specialized equipment for transporting hazardous materials doesn’t come cheap.
Fuel is yet another significant expense. On average, fuel accounts for 22% of truck operating costs. This figure could easily hit $70,000 worth of diesel annually. There are also repairs and maintenance to think about. So keeping your trucks on the road could take up another 10% of your total operating cost, or about $15,000 annually.
Finally, other significant expenses to consider include licenses and permits, insurance and taxes, marketing, and tolls. In short, starting a trucking business is expensive and time-consuming. But your efforts and investment can pay off majorly if you are patient, work hard, and are savvy.
Once you’re ready to invest, incorporate.com is an exceptional business formation service to help you navigate all the technical details of starting your business. The service offers a free business name check, creates your LLC or corporation, researches the trucking business licenses you’ll need, obtains an Employer Identification Number (EIN) on your behalf, and generally fulfills all your business filing needs.
Incorporate.com offers custom pricing depending on the combination, number, and type of business filing services you need.
7 Steps to Start Your Trucking Business
Here are the steps you need to take to start a trucking business:
Step 1 – Create a Business Plan
A well-articulated business plan will provide the roadmap to success in your business. The business plan will also help you identify goals, get organized, pre-empt potential roadblocks, and outline your unique value proposition.
Some of the details to cover in your business plan include:
- Reasons for starting your business
- Capital requirements
- Financial projections
- Market analysis
- Specific trucking services you’ll offer
- Marketing strategy
Not only will it serve as a way to plan your business and anticipate potential risks and pitfalls, but you also need a well-written business plan if you want to look for funding and investors.
Step 2 – Create a Business Entity
As noted, I highly recommend going with incorporate.com if you’re starting your trucking business from scratch. This filing service will help with most of the upcoming steps you need to start your business. You’ll be able to get many of the headaches associated with filing paperwork and forming your business. Then, you’ll be able to focus on the more hands-on and exciting parts of starting your business.
Incorporate.com makes it makes the process of forming your business entity straightforward. First, simply select your state and the business entity you’d like to create. Then, the formation service offers you three packages to choose from. These include The Starter, The Essentials, and The Works.
The more expensive packages offer additional services that you might need when creating your business. For example, the Essentials package comes with an Employer Identification Number (EIN) and annual report preparation and filing, which you don’t get with the Starter plan. Likewise, The Works plan comes with an operating agreement and business license research package, which isn’t available with the Starter or Essential plans.
Pick the most attractive plan based on the services you need and your budget. Finally, you’ll be prompted to enter your contact information and company information before checking out.
Step 3 – Obtain the Necessary Licenses and Permits
The licensing and permits requirements vary depending on where you plan to operate. You’ll need to acquire all the necessary licenses and permits before you can run your trucking business. It is worth checking with your state’s transportation website, just to make sure you don’t miss anything.
Some of the most common licenses and permits required for a trucking business include:
- Commercial driver’s license (CDL) – You’ll need a commercial driver’s license if you plan to drive the truck.
- Motor Carrier Operating Authority (MC number) – You’ll need this unique number to haul cargo across state lines.
- U.S. Department of Transportation (USDOT) number – This is a unique identifier that the Department of Transportation uses to collect, track, and monitor crash investigations, inspections, and safety information.
- International Fuel Tax Agreement (IFTA) decal – You’ll be required to file quarterly fuel tax reports when driving in multiple states.
- International Registration Plan (IRP) credentials – These are required to offer your services in multiple states.
- BOC-3 Filing – You’ll need to designate a process agent. The process agent will be responsible for receiving legal documents on your behalf. You’ll also need a process agent in each state where you do business. Alternatively, you can choose a company that offers blanket coverage for all states.
- Heavy Vehicle Use Tax – This is an annual tax imposed on trucks weighing more than 55,000 pounds. The money collected is used to fund highway programs.
There are also state-specific regulations that you might have to comply with. For example, many states have air quality regulations, safety rules, and truck size and weight standards. In addition, you can refer to the U.S. Small Business Administration website for more information on trucking businesses’ regulations.
Step 4 – Purchase Trucks for Your Business
The trucking business is forgiving enough that you still have a good chance of success with only one truck. And many small businesses start with one truck. Explore your options before committing to the purchase. Take time to think through this hefty investment to avoid costly mistakes down the road.
Start with the kind of freight you plan to transport. This will guide you with the specific type of vehicle you should get. Next, you have the option to either purchase your truck outright or lease one. The latter option is less expensive and a more accessible and quicker route to starting your business. Leasing a truck can also help to keep monthly costs down.
On the other hand, purchasing a new truck lets you save money long-term. In many cases, this is the best option if you have the capital. Then, of course, there’s also the option of purchasing a used truck. Just make sure that it is in good condition to avoid expensive repairs and downtime. Some of the things to inspect before buying a used truck include:
- Visible signs of body damage
- Truck mileage
- Tire tread condition
- Vehicle maintenance history
There are also lease-to-own programs available. These programs are a great compromise between leasing and purchasing your first truck.
Step 5 – Insure Your Trucking Company
You will need various types of insurance for your company. While most insurance is legally mandated, it is still essential to obtain insurance for your business. It will help protect your business assets and your customers in the event of damage, loss, or theft.
Some of the most common types of insurance you’ll need for a trucking business include:
- Cargo insurance
- Primary liability insurance
- Physical damage insurance
- Passenger accident insurance
- Bobtail insurance
You can get more information about trucking insurance from the Owner-Operator Independent Drivers Association website.
Step 6 – Figure Out Your Income and Expenses
You are almost ready to start hauling freight. But first, you’ll need a strong understanding of your income and expenses. This information will help to guide you when pricing your services. Additionally, you’ll most likely be getting paid weeks or months after delivery. This delay can cause cash flow issues for a startup if you’re not careful.
The first obvious step is separating your business from your personal finances. You’ll need to open a business bank account. This case also applies if you are funding your business with your personal capital. Additionally, you’ll need to keep a thorough record of your income and expenses. Bookkeeping software like Xero and QuickBooks are great for this purpose. You’ll be able to keep an eye on your finances even while on the road.
Finally, decide how and when you’ll be paid for your services. For example, most shipping contracts pay anywhere from 30 to 90 days. Specify this duration so you can anticipate cash flow for your business.
Step 7- Find Loads To Transport
The final step is to get your vehicle ready to transport freight. Make sure that you have met all the licensing and permit requirements, and display your Radio Frequency Identification tags on your windshield. Also, install decals with your company name on the vehicle. Finally, don’t forget your International Registration Plates or license plates.
Finding your first client may take a bit of time. Start with your local load boards for leads. You can also speak to your networks, such as friends and family, to source potential customers.
The main thing you’ll need to do after starting your trucking business is to stay compliant. You’ll need to renew your CDL at least every four years and file IFTA quarterly tax returns. In addition, you’ll need to keep an accurate record of your hours of service every 24 hours. Additional requirements include completing a daily Driver Vehicle Inspection Report (DVIR), participate in the DOT Drug and Alcohol testing program, and keep a Driver Qualification File (DQF) for the last three years.
You’ll also need to establish a fleet management process as you scale your business and hire drivers. This process should include critical operations tasks such as maintaining vehicles, ensuring fleet safety, supervising driver behavior, and managing fuel.
We also have a few more guides to help you with the process of setting up your trucking business.