When you running a trucking company, your operating costs and profitability are determined by the number of miles you spend on the road. The average cost per mile in 2015 was $1.59, according to the American Transportation Research Institute (ATRI). When the entire prices were added together with the average miles travelled, the total cost was $128,580.12. When there are a certain amount of expenditures connected with running a trucking firm and future returns are unknown, the question of whether the trucking business is profitable arises.
How to Make a Successful Trucking Company with 7 Steps
- Support the Best Niche Industry for Owner-Operators
To be a successful owner-operator, the most important stage is to support the correct market segment. This move also has an impact on small fleet owners. The equipment you acquire, the rates you charge, and the freight lanes you can service are all determined by the market you chose.
As an owner-operator, the most important choice you will make is choosing the correct market niche. Your days as a business owner might be numbered if you choose the incorrect market.
This post, prepared with the assistance of our partners at Learn to Truck, will assist you in choosing the appropriate market. As a result, you’ll be able to devise a strategy for expanding your trucking business.
- Charge the right rate (per mile)
Before you start phoning shippers and generating sales, you need to know your rates. When calling shippers, keep in mind that you want to be competitive with the fees that brokers demand.
There’s an easy method to accomplish it:
- Choose a freight channel.
- Go to a load board
- Find ten loads that are all moving in the same direction.
- Call the brokers and find out how much they pay
- Calculate the average.
- To calculate the price that brokers charge shippers, add 10% to 15%.
- Rep the procedure in the other way.
- Determine your operating costs
It’s critical to have a thorough understanding of your operating costs. Otherwise, you have no way of knowing whether or not you will benefit.
Determine your fixed costs. These are costs that remain constant no matter how many kilometres you drive. Truck payments, insurance, permits, and other expenses are examples.
Determine on your variable costs now. The cost of these costs is determined by the amount of miles you travel. Fuel is an example of a variable cost. The more you drive, the more gasoline you fuel.
Determine your “all-in cost per mile” by combining your fixed and variable costs. This is a critical figure. You derive your profit – the amount of money you keep – by subtracting your “all-in-cost per mile” from your rates (determined in step #2).
In this post, “Calculate your cost per mile,” we go over the costs in depth and give a spreadsheet.
- Select the best fuel-purchasing strategy
For owner-operators, the most expensive item is fuel. New and experienced owner-operators, on the other hand, frequently purchase fuel inappropriately. They believe that the cheapest fuel is available at the cheapest pump price. This strategy is ineffective. This might cost you hundreds (or thousands) of dollars.
Taxes are the issue. Regular motorists must pay fuel taxes in the state where the fuel was purchased. IFTA, on the other hand, affects truck drivers. Truckers must pay taxes on the fuel they use as they travel across states, regardless of where the fuel was purchased.
Because of the tax problem, regardless of the pump price, you should buy fuel at the cheapest base price. Fuel price less tax equals the base price. In this post, we go through this in further depth and offer a strategy: “Find and compute the cheapest fuel price.”
- Work with shippers directly
Load boards and brokers have a purpose in your company. When you have an empty vehicle, they may be incredibly beneficial. They are, however, quite costly. Brokers retain between 10% to 20% of the load price. That’s reasonable, given they need to make a livelihood and offer a service to the shipper (and you).
Reduce your reliance on brokers and load boards. Create a client list of direct shippers instead. If done correctly, you may build a list of dependable shippers that will keep you occupied for a long time. Charge them a price that is comparable to that of brokers, but retain everything for yourself. To assist you in expanding your shipper list, we’ve created the following resources:
- Where to Look for Reefer Loads
- Where to Look for Trucking Contracts
- Where Can I Look for High-Paying Freight Loads?
- Maintain a well-functioning back office
If you want to stay successful and grow, you need a well-run back office. When you start adding leased drivers to your organisation, the back office becomes even more critical. There are a few alternatives available to you.
One alternative is to complete the task yourself. You may operate your company from the cab of your vehicle. A laptop, an Internet connection, and a printer are all you’ll need. To operate your firm, you’ll also require accounting software. On the market, there are various possibilities. Truckbytes is a well-known service that offers a free entry-level bundle.
Alternatively, you might hire a dispatcher to handle your back office. They can, however, be costly. If you choose this route, make sure you interview them extensively. The improper dispatcher might put your company out of business.
- Prevent cash flow issues
Trucking is a cash-flow-heavy industry. You’re always buying fuel, paying your insurance, paying for your truck, and so on. Shippers and brokers might pay bills in 15 to 30 days unless you acquire quick-pays. They can take up to 45 days in some cases. This delay might cause a cash flow problem for you, especially if you’re just starting off.
Freight bill factoring is one solution to this problem. Factoring solves your cash flow problem by advancing up to 95% of the invoice amount, usually on the same day it is submitted. Once your shipper pays, the remaining 5% is refunded, less a modest charge. Fuel advances, cards, and other services are offered by several factoring firms. We are, by the way, a factoring firm. If you require factoring, please complete this form and a credit manager will contact you as soon as possible.
We’ll be looking at transportation management software to see how it works. We’ll also go over why you should utilise TMS software for your transportation company. We’ll also look at a particular TMS that I think is incredibly inventive and would suggest to any transportation management company, regardless of size. Trucking Software is the most user friendly product in the trucking market business, where you can easily to get familiar with the entire digital trucking invoicing process.