Are you thinking about starting your own trucking business? With a continually increasing driver shortage, demand for trucking services has never been higher. If done correctly, there is a great opportunity to grow and prosper as an owner-operator.
But where do you begin? Whether you’re already working as an owner-operator and looking to grow your fleet, or you’re ready to venture out on your own for the first time, it’s never easy to launch your own business. Think of yourself as an entrepreneur—and follow the same procedure that all other small business owners adhere to when starting their businesses. Create a business plan. Learning how to make a successful trucking company starts off with the fundamental points, then check out this step-by-step guide to help you navigate through the requirements of starting a trucking company.
Five Basic Steps to Establishing a New Trucking Business
- Register for the proper forms, licensing and insurance policies for trucking company owners.
- Buy or lease a truck (depending on what’s right for you)
- Find loads to haul and establish a clientele.
- Create a budget and plan for extra costs.
- Expand and hire new drivers.
Starting a new business, in any industry, is overwhelming at first. Just remember, owner-operators typically earn more than company drivers so a little effort now can lead to a bigger payoff later.
Forms, Licensing and Insurance for Trucking Companies
We won’t sugarcoat it, there are A LOT of forms and licensing that new trucking companies must apply for—here is a list of the major ones:
FMCSA Number & Registration
before you can get started with your company, you must first be sure that you are registered with the Federal Motor Carrier Safety Administration and the Department of Transportation.
IRS Form 2290
otherwise called the “Heavy Use Tax Form,” this is the sheet that all trucking company owners must fill out in compliance with IRS policies.
IRP Tag and IFTA Decal
each state has a different policy for obtaining International Registration Plan Tags and International Fuel Tax Agreement Decals. Find out what your state requires.
naturally, you and the rest of your drivers will all need to obtain a Commercial Driver’s License from whichever state you are based.
you will have to register your trucking company as a Limited Liability Company.
if you plan on doing a lot of interstate business, you’ll need a BOC-3 form. This form essentially establishes that you have a legal conduit within each state that you operate.
As far as insurance is concerned, policies vary depending on your company and location. For specifics on different policy plans and instructions on how to apply, check out what the FMCSA has to say on the matter and decide which insurance plan you are best suited for.
To buy or to lease? New or used? Now those are the questions…
Equipment comprises a substantial percentage of a startup trucking company’s cost sheet. As an up-and-coming business owner, you have two options—you can lease your truck, or you can buy it.
Purchasing a truck may be the most sensible and simple option if you have the capital. The majority of owner-operators choose to purchase. Do you have the upfront funds for a down payment? Going for a used semi truck might be a safer option in the beginning. The cost of a new truck is estimated to range between $110,000 to $125,000. Don’t forget you’ll also need a new trailer which can run $30,000 or more. Keep in mind that your maintenance costs will be higher with a used truck, but it might be a better option if you don’t have lots of cash upfront. Used heavy-duty semi trucks sell in the $30,000 to $80,000 range. Don’t let the costs discourage you from buying a commercial truck, financing options are available, even if you don’t have perfect credit.
Leasing is another option. It tends to be more costly than buying, but it also has a few benefits. Low or no down payments and no long-term commitments are two appealing factors of leasing a truck. Semi truck leasing frees up some of your startup cash flow, leaving you with more a financial cushion to get your company off and running. Some leasing agreements will even place the burden of maintenance fees on the leaser, removing one more worry from your plate.
It may not be a bad idea to consult a financial advisor or a CPA that works with startup companies before you invest your money one way or the other.
Finding Loads to Haul and Establishing a Customer Base
When you have the proper licensing, insurance and equipment, you are ready to roll—you can start taking on clients and hauling freight.
One of the first places to start finding customers is by signing up for an online load board service. Many load boards available require a monthly fee, but there are some sites that can find you business free of charge (for more on that, check out our ultimate load board guide for truckers).
Once online load boards have helped you put your foot in the door, it’s best to find steady customers to haul for on your own. Marketing is important for a successful business and it’s no different for the transportation industry. Identify your target customer and meet them where they are, either in-person or online. This could be done by joining trade associations and attending industry events. Take advantage of social media groups and online forums to help establish yourself. Set up a small website for your business to make it easy for customers to reach you. We’ve got more marketing ideas for truckers here.
How Much Does it Really Cost to Start a Trucking Company?
Owning a trucking company isn’t cheap since there are lots of upfront costs to cover including down payments on a tractor-trailer, insurance, license plates, and your license and permit fees. In addition to those startup costs, trucking companies spend a great deal of money on fuel, technological upgrades, repairs, parking, misc. supplies, taxes, etc. Those fees and costs can be a lot to handle. In addition to startup costs, expect average maintenance costs to exceed $10,000 per year.
What can you do to make the startup costs manageable?
- Be patient as your salary grows. Expect a net income of $50,000/year from the get-go, and look to grow from there.
- Keep a cost sheet! This one is hugely important—if you track your costs, you can find a way to maximize your spending efficiency.
- Never turn down a reasonable load as you are just getting started in the industry. You have a reputation to build—accept jobs available to you and show others in the transportation industry that yours is the best work ethic around.
We recommend checking out OOIDA.com’s Cost Per Mile spreadsheet to get a better idea of what you can expect with owner-operator startup costs.
Expanding Your Fleet and Hiring New Drivers
The last step in starting a trucking company is simply growth. The foremost decision that you must make is whether to hire sub-contracted drivers or employ full-time drivers. Each option comes with its ups and downs.
Choosing to hire sub-contracted drivers is an attractive option for those who do not have a substantial amount of capital to invest in their business venture; contracting drivers, rather than employing them full-time, saves you a great deal of cash when it comes to insurance and equipment.
Nonetheless, it is the less profitable option—you get lower returns off of your earnings. If your company owns a fleet and employs full-time drivers itself, you’ll get higher returns off of your work. Once you establish a strong foothold in within the industry, it will be time to up the ante and hire new drivers and add more trucks to your fleet.
But when is it time for expansion, exactly? The answer to that question is different for every business. However, the simplest answer is “whenever your finances allow you to.”
As you are starting off in the industry, the lion’s share of your earnings will be poured into startup costs. But as your customer list solidifies and you have made a name for yourself, you will have a bit of freedom with your money. When such a time comes, and there is a great demand for your services, take on new clients, hire new drives and expand your fleet. Just be sure that you don’t make the leap before you are ready.
Have a Cash Flow Backup Plan – Learn About Freight Factoring
Costs are a big challenge for startup trucking companies. When you’re starting a trucking company, your new business might not qualify for a bank loan and you may want to avoid getting locked into the repayment terms that accompany unsecured loans or cash advances. In this case, many truckers turn to factoring. Freight factoring offers the cash flow cushion you need to avoid running low on funds when customers take awhile to pay.
Factor Finders matches owner-operators with the right trucking factoring program to you hit the ground running. Freight factoring can supply you with an instant, robust cash flow that you will need in order to combat the costs of fuel, parking, etc.
Ready to start factoring and ensure that you’re successful as you start your trucking company? Talk to one of our freight factoring experts and get started today.