If you’re considering starting your own trucking business, you’re not alone. In fact, in 2020 almost 60,000 new trucking companies were established. Don’t let that number scare you off from pursuing your dream. Despite the large number of new entrants, there is still a significant driver shortage in the industry.
To help make starting your trucking business a bit easier, EZ Freight Factoring has developed this ten step plan. Follow the steps outlined and you’ll be on your way as a business owner. When you’re ready to get paid on that first invoice, give us a call or fill out this form to get your cash in a hurry!
Ten Steps to Starting a Trucking Business
1. Write a business plan
You would never hook up a load and drive off without a clear idea of where your destination is, right? Why should starting your business be any different? A well thought out business plan is a must to get started on the right foot.
Writing a business plan is nothing to fear. Yes, you could go into fine detail of every aspect of your business, but that’s not always necessary. In fact, some business plans are less than a page long. Be sure to include the basics:
- Describe your business
- Analyze the market
- Detail your product/service
- Lay out a basic marketing plan
- Come up with financial projections
When you’re done, be sure to summarize the plan with an executive summary. Put some thought into this, especially if you’re going to be using the business plan to try and acquire loans to start. The executive summary will be the first thing a lender reads, so make it count!
2. Start saving for start-up expenses
Running your own business can get costly, especially when it’s not bringing in any money yet. It’s always a good idea to save up money before you get going to cover start-up expenses. Yes, there are alternatives like taking out loans, but starting debt free and not having to pay interest is usually the better route.
Saving money isn’t the easiest thing for many, and it can be easy to give up. Follow the saying “out of sight, out of mind” and start with small deposit amounts and making deposits to your savings account automatic. Also, look to eliminate debt so you avoid paying interest that could be going into your savings. Lastly, try to cut back on unnecessary expenses. Simply ask yourself “is this something I need?” before making a purchase. Every bit helps to make starting your business smoother.
3. Cover all your legal business requirements
Deciding how you would like to structure your business is something all businesses must decide. This structure will set legal boundaries between your personal assets and your business. Some common structures include:
- Sole proprietorship
- Limited liability corporation (LLC)
Each structure has advantages and disadvantages regarding liability and taxes. Take the time to research which works best for your situation.
4. Cover all your licensing requirements
Trucking has additional legal requirements regarding licensing. This licensing can vary by location and the type of trucking you’re doing. Spend some time ensuring you’ve met all the licensing requirements for your state and trucking type. Some common requirements include:
- Commercial Driver’s License (CDL)- In most instances, driving a commercial vehicle requires a commercial driver’s license. Additional endorsements may be required as well, depending on what freight you are hauling.
- USDOT Number- The US Department of Transportation and the Federal Motor Carrier Safety Administration (FMCSA) require trucking companies to obtain a USDOT number. This is used to identify the company regarding safety information, inspections and audits.
- Motor Carrier Operating Authority (MC number)- An MC number is required by the FMCSA for most trucking operations that operate across state lines. The commodities you haul and where you haul them will determine if you need an MC number.
- International Registration Plan (IRP)- For trucking companies working across state lines, the IRP distributes registration fees across the states you travel through. The fees are distributed based on the distance traveled in each state.
- International Fuel Tax Agreement (IFTA)- Similarly, the IFTA distributes fuel tax to the states you’ve traveled through, calculated by the distance traveled in each state.
- BOC-3 Filing- Trucking businesses are required to designate a process agent in each state they have contracts. There are companies that offer blanket coverage in every state.
5. Lease or purchase a truck and/or trailer
A trucking business isn’t a trucking business without a truck. It’s now time to get out there and get one! The lease vs. buy debate is a timeless one, with each having its own pros and cons. The correct path for your company will depend on your business goals and financial situation.
Leasing a truck may be less expensive in the short run because monthly payments can be lower. Buying a truck can mean higher monthly payments, but when the payments are done you own the vehicle. Review your future business plans to determine which is the right option for you.
6. Plan the logistics of your business
Now you’ve got your business established, your licenses and registrations in place and your first truck-what’s next? You’ll have to set up the logistics for your business. Where will the truck be parked when not on the road? Who is doing the maintenance? Who will be doing the invoicing and accounting for the business? Where are they working from?
These are just a handful of the questions you’ll need to answer when getting the business up and running.
7. Purchase insurance
Insurance for a trucking company is one of the largest expenses and shouldn’t be overlooked. Because of the high price, be sure to get several estimates before choosing a policy. There are several types of insurance. Those include:
- Primary Liability- This covers damages and injuries for accidents in which you are at fault. $750,000 in coverage is standard, with some shippers and brokers requiring $1 million in coverage.
- Cargo- Cargo insurance covers the damage or theft of the freight you’re hauling. The amount of your coverage depends on what you’re hauling, but $100,000 in coverage is the average.
- Physical Damage- This insurance covers damage to the truck in accidents that weren’t your fault.
- Passenger Accident- Covers authorized passengers of the truck while the vehicle is performing its occupational duties.
8. Find loads to haul
There are a few ways to find loads to haul for your newly established business. Established relationships with businesses can serve as a great way to find your first loads. If you don’t have those relationships, load boards can be very useful.
Load boards are online locations where shippers post loads they’re looking to get hauled. Trucking companies can then browse the posted loads and offer to haul the ones that best fit their business. There are many load boards out there ranging from free to $100 per month. Choose the boards that best meets your business needs.
9. Keep accounting records
Business owners never want to run afoul of the taxman, so keeping accurate accounting records is a must. Hopefully you’ve already determined who is doing the accounting for your business as mentioned in step six. Your accountant, or you if you’ve decided to fill that role yourself, will create and track invoices, expenses, manage payroll and take care of taxes. Keeping up with accounting can be tedious but it is essential for a smooth-running business.
10. Factor your freight invoices
One of the most tedious parts of starting a trucking business is collecting on outstanding invoices. Shippers often take 30, 60 or even 90 days to pay after delivery. For a newly established business, waiting on payments means waiting to refill fuel tanks, and therefore waiting to take on new loads.
A great way to avoid the waiting game is to factor your freight invoices. EZ Freight Factoring can help get the money you’ve earned into your pocket in hours instead of months. If you thing freight factoring can help your business, give us a call or fill out this form and we’ll get you started today!