The trucking industry is struggling to meet the demand of an improving economy, and an explosive increase in online sales. The American Trucking Associations just released its, U.S. Freight Transportation Forecast to 2027. They forecast that, between 2016 and 2027, the amount of freight trucks will help ship will increase by almost 27%. ATA President and CEO Chris Spear reports that, “As our economy continues to grow, trucks will continue to move the vast majority of America’s goods.”
Thankfully, the increased demand has created a need for new truck drivers. It’s a growth opportunity for anyone interested in breaking into the business, and is quickly becoming a preferred career path for post-graduates who are actively looking for a second career that requires very little schooling or technical training.
Here’s what you need to know about getting into the industry:
If you’re brand new to the industry you may want to start out driving for an established company before starting your own fleet. It’s a great way to see firsthand what’s involved in buying a truck, licensing, registration, and insurance. You’ll get a sense for clients, different routes, and the loads most commonly shipped in your region.
Once you’re ready to start your own independent trucking operation here’s a few things you need to consider.
Starting your Own Business
Before starting your new company, it’s important to create a realistic budget for your first year of operation. Your budget should detail your expected operating costs, and might include:
- Vehicle financing payments
- Fuel costs
- Unforeseen breakdowns and repairs
- Equipment costs (computer/IT, safety equipment, cell phones, etc.)
Cash Flow and Financing
Before opening your business it’s also important to consider cash flow. As a business owner, you won’t collect a paycheck every week. You’ll be invoicing clients, and that can often mean you may not get paid for 30-90 days after sending your bill.
So how do you deal with this lag between receiving cash from what you invoice and the real-world costs you have to pay out of pocket every day as you run your business? You may need as much as $20,000-30,000 in capital as a bridge between receivables. High interest credit cards are not the answer, and banks are likely not going to approve a loan for a start-up with no track record, possibly poor credit, and very little business history.
Many truck drivers take advantage of merchant cash advances to even out their cash flow. These cash advances are not like traditional bank loans; instead, a business funding provider purchases your future sales in exchange for lending you capital. Because of how these vendors operate, they aren’t regulated in the same ways as traditional lenders, and thus they have much less stringent requirements. For one, the application process is much easier, and approval rates are both quicker, and much higher than traditional bank loans. Repayment is made based on your daily (or weekly/monthly) revenue, and thus on slower days your payments will be lower. Funds are wired to your account the same day the loan is approved.
Defining your rate is always a challenge. You need to charge enough to cover your operating costs, and pay yourself an adequate wage, but you want your prices to be competitive enough to win business.
Here’s some things to consider when setting your rates:
Not all routes are created equal. Rather than charging a flat per mile fee, quote each run separately. Consider the length of travel, but also destination. Not all destinations are suitable for booking return loads. Not being able to land a job that ensures you’re creating revenue on your way back to your operating region could dramatically affect profitability.
Try to build in a 20% profit margin on each load. That way you’ll make enough to cover costs and have enough left over to pay yourself a salary. Anything left over can be saved to finance the future growth of your company.
Talk to other small companies to get a rough idea of what they charge. And, try not to underprice yourself because it’s hard to increase rates later. Instead, focus on delivering value and providing great service to justify your rate, rather than discounting your rate just to win business.
Steady growth in the trucking industry is a great opportunity for those looking to get into the business. But, before jumping in, take some time to learn the ropes and plan how you will start your company. Set the right rates, create a realistic budget and have a plan for dealing with unforeseen costs and cash flow volatility. Go into the business with your eyes open and a good plan and you’ll give yourself a great chance to succeed.