With over 10.23 billion tons of freight hauled by trucks in 2020, generating $732.3 billion in revenue, the trucking industry is more in demand than ever. In fact, trucking represents 72.5% of total domestic tonnage shipped. As the total number of drivers is on the decline, down 6.8% from 2019, now is a great time to start a hauling business. Here, we will outline everything you need to start a trucking business.
Benefits of Starting Your Own Truck Business
There are several benefits to starting a small trucking fleet. For starters, perhaps the greatest benefit is independence. As an owner-operator, you will have unlimited freedom to make decisions. You decide what to haul and when you want to work.
Along with independence, you have the potential to make significantly more money when you create a trucking company. You will pocket a larger share of profit with each load and can negotiate contracts on your own. Last, but not least, on the list of benefits is flexibility. As a fleet owner, you can manage your time as you see fit and work on your own terms.
How to Start a Trucking Business
Now that you understand the benefits of starting a small trucking business, let’s walk through how to get started. As with any new entity, the best plans are fully laid out plans.. The first step is to start strategizing through competitive research and analysis.
Who is your main competition? What services are they providing? How will you compete? These are the types of questions you will want to answer as you move forward with more concrete plans. Once you have finished brainstorming, it’s time to get those ideas down on paper.
1. Create a Trucking Company Business Plan
Once you have finished mulling over your ideas, it’s time to draft your trucking business plan. Your business plan will serve as the foundation for your business and will be important if you’re looking to raise capital down the road. Here are the most vital sections you will need as part of your trucking company business plan:
a. Executive Summary
This introductory section is meant to briefly identify what your trucking company is and why you think it will be successful. You should also include your mission statement, your service offerings, and a general synopsis of the business.
b. Company Description
This is where you will go more in-depth about your company and how it will differentiate itself from other trucking competitors. You will want to explain what problem you plan to solve and the market you plan to serve. This is also a great place to list your competitive advantages. This could include things such as years in the industry and other strengths. Sell yourself.
c. Market Analysis
What does the current industry look like? What are competitors doing and how will you improve upon their offerings? These are the types of questions you will want to answer to show you have a good understanding of the industry and where it is going.
d. Organizational Structure
Here you will decide on a business structure. The options include sole proprietorship, partnership, limited liability company (LLC), or corporation. Each has various advantages and disadvantages. Most new owner-operators initially opt for sole proprietorship given the ease in filing taxes, but this may not be the best option. Speaking with a tax accountant can help you navigate the ideal option for your specific needs.
e. Service Offering
This section is meant to describe your service offerings in greater detail. Here you will describe things such as locations you plan to serve and types of trucking you will offer. For instance, will you provide refrigerated hauling? The types of trucking you offer will determine the assets needed as well as specific Commercial Driver’s License (CDL) classifications and legal requirements. More on that later.
f. Funding Requirements
How do you plan to fund your business? Will your new trucking company be self-funded, or are you looking to raise capital investment? If so, from where? This is your opportunity to ask for money, if needed, and how much you think you will require.
g. Financial Projections
Lastly, it’s time to talk about finances. How do you intend to be profitable and by how much? For instance, how much revenue do you anticipate in the first year? What is your financial outlook over the next five? Answering these questions is vital to attract potential investors and to be realistic about financial expectations.
2. Understand the Requirements to Start a Trucking Company
The trucking and transportation industries are highly regulated. This means there are quite a few legal requirements one must meet and maintain as an owner-operator. In addition, there are many mandates, laws, and rules that must be followed by not only fleet owners, but by the drivers themselves.
It is imperative to familiarize yourself with all the requirements to start a trucking company. Here we will outline the most basic steps to start a trucking company from a legal standpoint.
What Do You Need to Start a Trucking Business?
- Pick a company name
- Register the business
- Open a bank account
- Get the required business licenses from your city and state
- Get an Employment Identification Number (EIN) with the Internal Revenue Service (IRS)
- File a BOC-3 form to designate a process agent
- Get Insured (liability and cargo)
- Obtain a Commercial Driver’s License (CDL)
- Apply for a U.S. Department of Transportation (DOT) number
- Apply for Motor Carrier (MC) Authority Numbers
- Obtain an International Fuel Tax Agreement permit and stickers
- Register for a Unified Carrier Registration (UCR) permit
- Apply for an International Registration Plan (IRP) license plate
- Get apportioned license plates
- Acquire a Standard Carrier Alpha Code (SCAC) if you plan to carry military, international, or government products
- File IRSForm 2290 if you’re trucks will be heavier than 55,00 pounds on the highway
- Purchase and/or lease vehicles
- Affix safety equipment, including a fire extinguisher and red emergency reflectors, to all vehicles
- Ensure all mechanical vehicle equipment including lights, windshields, and reflectors are maintained and compliant with Federal Motor Carrier Safety Administration regulations
- Acquire proper and necessary equipment for load securement
- Attach license or IRP plates and relevant stickers
- Display Radio Frequency Identification tags on your windshields
- Install FMCSA compliant electronic logging devices (ELDs) in all vehicles
NOTE: As listed above, in some cases you are required (there are some exemptions depending upon various factors) by law to install FMCSA compliant ELDs to record drivers' hours of service to ensure all requirements related to them are met. ELDs are the minimum; however, there is opportunity to maximize fleet efficiency and safety with a more comprehensive all-in-one solution for fleet management utilizing fleet dashcams to protect all assets, both physical and human. More on that below.
3. Hire and Retain Truck Drivers
Unfortunately, driver turnover rates are a huge problem in the trucking industry and something you’ll have to work through when starting your own truck business. According to the American Trucking Associations, the driver turnover rate for smaller carriers is 73%. Fortunately for you, there are tools to help you implement and maintain an effective driver retention strategy.
For instance, compiling driver safety scores through a comprehensive fleet driver safety program will allow you to reward driver performance, safety, and efficiency to increase driver fulfillment and retention. In addition, coaching modules included as part of a video telematics and fleet safety solution can help you improve driver skills for increased satisfaction.
4. Prepare for Managing a Trucking Company
In addition to hiring and retaining drivers, managing a fleet comes with a host of additional demands. Fleet management can be a big undertaking as it includes several essential processes. These include, but are not limited to: fleet tracking, vehicle maintenance, driver management, vehicle utilization, dispatch, DOT compliance, cost management, fleet safety, and more.
Fortunately, using a best-in-class, all-in-one fleet management solution can empower you with all the tools you need to manage and improve fleet safety, efficiency, and your bottom line, giving you the greatest opportunity for growth.
5. Grow Your Trucking Business
Once you’ve gotten your trucking company up and running, the work doesn’t stop there. This is indeed a business and will need to grow in order to succeed. The challenge is, the more you grow, the more help you will need in order to maintain a safe and efficient enterprise.
The right fleet management system can make all the difference. An ideal solution will offer location insights for better route optimization, GPS fleet tracking to locate and track vehicles in real time, offer reminders for preventative fleet maintenance to preserve the health of your fleet, provide top-of-the-line DOT compliance solutions, and more.