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Trucking businesses operate in one of a few ways. The first type of trucking business hires a workforce of independent contractors to move goods for other companies. This cuts down on the startup costs of running the business. However, it also hurts the company’s ability to retain loyal truckers since they do not work for the trucking company.
Another way to structure this type of business is to hire the truckers directly. When employees are hired as privately-owned employees, each driver is an employee working directly for the trucking company. This model benefits the truckers because it gives them a steady source of pay and some level of certainty about their job. It also benefits the trucking company because it often results in higher profits, happier, and more loyal employees. However, it’s more costly for the trucking company to maintain in the beginning because it adds to the overhead.
Who is this business right for?
This business is perfect for an entrepreneur who is knowledgeable about the shipping industry and enjoys working long hours.
What happens during a typical day at a trucking company?
A transportation manager or owner is responsible for planning and executing transport strategies and operations. As the owner of the company, you’ll find yourself on the front line organizing and optimizing operations all day, every day.
Depending on the nature of the shipping company, your daily responsibilities might include managing domestic vendors and collecting inbound moves. You may also need to manage shipments between distribution and fulfillment centers.
You also oversee the company’s transportation partners and maintain the required service levels for (inbound) new materials and raw materials shipments. Unless you have a robust accounting and finance department, your job will also involve cost control on operations.
What is the target market?
Most shipping clients are commercial clients. Within the business-to-business space, clients tend to be manufacturing and industrial.
How does a trucking company make money?
The business makes money by signing service contracts with clients for shipping services. Some companies charge by weight or dimensions of goods being shipped. Other companies set up flat-fee service contracts for estimated weight or volume shipments.
What is the growth potential for a trucking company?
The easiest way to start a trucking company is to hire subcontractors to ship goods for you. This dramatically lowers the cost because you don’t need to pay for trucks, salary and benefits for drivers, and insurance for the vehicles.
A larger scale operation can be built by hiring drivers directly and making them permanent employees. Using this method, it is possible to expand into many territories, eventually creating a national, or even international, company.
What are some skills and experiences that will help you build a successful trucking company?
To own and run a trucking company, it helps to have experience in this business. If you are starting a one-man company, you’ll also need a commercial driver’s license and experience behind the wheel.
Successful truckers are those who like to work on their own, who can handle long hours behind the wheel, and who enjoy traveling the country.
What are the costs involved in opening a trucking company?
The average cost for starting a small trucking company is $200,000. A medium-sized trucking operation can cost up to $1 million and a large-scale operation can cost up to $5 million to start.
Aside from the basic corporate structure, your costs will vary according to the type of trucking operation you own. In general, expect to pay roughly $2,500 for liability insurance, permits, and licensing. An office facility and grounds for the trucks will cost about $40,000.
Trucks are expensive. A seven year old used semi truck can cost between $30,000 and $40,000. A near-new truck may cost up to $100,000. If you start with a small fleet, it may cost you around $600,000 to $1,000,000.
Costs for equipping the office with computers, printers, and furniture, telephones, filing cabinets, and other electronics will run about $5,000. Costs for accounting software and CRM, payroll software, and vehicle trackers should average $5,000 to $8,000.
Utilities should cost roughly $3,500.
What are the steps to start a trucking company?
Once you're ready to start your trucking company, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your trucking company is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your trucking company keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
What are some insider tips for jump starting a trucking company?
Finding your first load to haul might be as simple as checking forums like NextLOAD.com or other paid forums and job boards. These forums help connect you to clients that need shipping services. They may not be the biggest clients, but it could help you get started. Once you get a few customers under your belt, you can establish relationships and longer-term contracts.
How to promote & market a trucking company
Simple ways to market your business include setting up a website, handing out business cards at networking events, and hiring a business consultant to help you make contacts in the industry.
Recommended: A website is essential for promoting your business and attracting customers. Weebly is a great tool.
How to keep customers coming back
The trucking industry is very competitive, and as such, you will need to find a niche, or other way to bolster your business’ success.
Some of the areas you can specialize in include:
- For-hire carriers
- Courier firms
- Private carriers
- Refrigerated shipping
- Food trucks
How and when to build a team
You can start a trucking company with a minimum of one person. A small company is considered to be roughly 10 people. At minimum, you’ll need:
- Chief Operating Officer (Owner)
- Front Desk Personnel
- HR Manager
- Business Developer
- Logistics Manager
As you grow, you can add more drivers to your team and expand operations.
Federal Business Licensing Requirements
Trucks carrying cargo across state lines must be registered with the Federal Motor Carrier Safety Administration. Depending on the type of business you run, you may need a Federal DOT number and a Motor Carrier Authority Number, as well as other permits for carrying certain kinds of materials.
Your company will also likely need to fill out the Heavy Use Tax Form (2290) and comply with tax regulations regarding the heavy use of the nation’s public roads.
State & Local Business Licensing Requirements
In every state, it is necessary to obtain a commercial driver’s license when operating trucks for commercial purposes. Other state permits and licenses may be needed to operate a trucking business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Trucking businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your trucking business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
- Businesses are required to register vehicles which will travel across state lines for commercial purposes. Attached is a list of state requirements.
How much can you charge customers?
Shipping contracts can vary by a lot which can affect profits and revenue. Yearly DAT Carrier Benchmark Surveys reveal small trucking companies can average between $16,000 and $20,000 per month in revenue. Owner-operated companies may bring in between $10,000 and $15,000 in revenue.
Average contracts may range between several hundred and several thousand dollars.
What are the ongoing expenses for a trucking company?
Ongoing costs include fuel and salaries.
Fuel can vary month-to-month but, on average, it costs roughly $180,000 per year (for long-distance trucks) or $1.38 per mile to operate a truck, according to the annual Truckers Report.
How much profit can a trucking company make?
Average profit for the trucking industry is between 6% and 8% of the annual income per truck. This means each truck brings in $100,000 in revenue per year, your profit after all expenses would be $7,000, on average.
The cost of fuel is the largest variable in the shipping industry. Fuel prices can dramatically shrink profits for a trucking company.
How can you make your business more profitable?
Increasing profits is difficult in the trucking business because so much of the profit is driven by fuel costs and truck maintenance. Developing a niche within the industry (like long-haul deliveries) has been proven to be the best way to increase revenue, however.