Important Factors That Can Make or Break Your Trucking Startup

The trucking industry sustains the economy as it enables movement of raw materials from their source to the production site and finished goods from the production area to the market, thus satisfying human needs. While the industry is quite lucrative, for you to succeed in it, you will need some knowledge of the industry, business building and running skills, and most importantly, access to capital. There is still a huge demand for trucking services in America and other countries and it is expected to increase. Thus, there are encouraging prospects of impressive profits and revenue.

So, what are some of the vital factors that can make or break your trucking start-up?

Choice of the market niche to support

Among the top factors that will make or break your trucking start-up, one is the market niche that you choose to serve. As an owner-operator, you need to make a wise and informed choice because it will determine the equipment that you will need to have, the rates that you will charge per mile, and even the freight lanes that you can support, among other things. Small operators should target those markets that the large carriers shun, which means considering ferrying specialized loads. For example, it is better to go into hauling fresh produce, meat, and such other things than to go for dry produce which many haulers, especially large ones, dominate. The fresh produce niche and other special niches have many merits including less competition, availability of work around the year, and withstanding recessions.

Determining operating costs

How can you tell if you will make a profit if you do cannot determine your operating costs in detail? You need to determine your fixed costs, which are those that remain constant no matter how many miles the trucks cover, and they include insurance, truck payments, and others. Variable costs are the next thing you should determine, and they vary with the number of miles the truck is driven. Fuel cost is a variable cost. With the two cost elements, you can determine your “all-in-cost per mile,” which helps you to work out your profit when you deduct it from your rate per mile. You can employ technology such as GPS and others which you can get from reliable vendors like the Eyeride company to monitor your trucks to minimize costs, especially variable ones like fuel, thus making more profit.

The rate to charge per mile

The pricing aspect is critical, and for the trucking business, it is no less. You need to calculate the rate you will charge your clients to haul their load and ensure that the rate per mile will cover your operating costs and give you a decent profit. Your rate must also be competitive in the market, so you need to consider the price that brokers and competitors charge as you fix your rate per mile.

Cash flow management

The trucking business is cash-flow intensive, so you need to be on top of your finances. The business will frequently require you to buy fuel and pay truck acquisition instalments, insurance, the drivers’ salaries, and so on. With some brokers, shippers, and various clients paying their invoices in 15 to 30 days and even up to 45 days, you need a plan to keep operations going or else you will run into financial crisis in your early days. You may use freight bill factoring or any other viable option to take care of this issue. Factoring works by cashing your invoices up to 95% on the day you submit them while the remaining 5% net of the factor’s commission is rebated when the shippers pay. Many companies also provide advances for fuel, cards, and other critical assistance.

Conclusion

Besides the above factors, your trucking start-up could succeed or fail due to other factors like the strategies of buying fuel, maintenance of back office to manage leased drivers, and the method of obtaining business. You should endeavour to work directly with shippers and avoid brokers.

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