Thinking about starting a trucking business? Here are five key things you need to know before starting!
1. Cash Flow Management is Critical
One of the biggest challenges new trucking businesses face is managing cash flow. In the trucking industry, it's common for shippers to take an average of 30 days or more to pay invoices. This delay can strain your finances, especially when you have immediate costs like fuel, wages, and maintenance.
To combat this, consider working with a factoring company that can advance your invoice upfront (for a fee). We recommend a non-recourse factoring company like OTR Solutions.
Alternatively, maintaining a healthy reserve of working capital will help cover expenses while you wait for payments to come in.
2. Your MC Number Needs to Age
One important aspect that many new trucking business owners overlook is the fact that most freight brokers prefer to work with carriers that have established credibility. Typically, a Motor Carrier (MC) number needs to be active for 60-90 days before brokers will even consider offering you loads.
This period can be challenging for startups, as you’ll need to find alternative freight sources or directly secure loads from shippers (who may also have MC # age requirements) to stay afloat. While you wait for your MC number to age, networking and building relationships within the industry can help you find work.
3. Prepare for High Insurance, Maintenance, and Unexpected Costs
Trucking Insurance is a significant expense for trucking businesses. On top of liability and cargo insurance, you'll need to consider additional coverage for potential claims that may arise. Insurance premiums can be steep, especially if you don’t have a proven safety record.
In addition, maintenance and repairs are ongoing costs, with unexpected breakdowns adding to the burden. Having a reserve for unexpected expenses, or setting up a maintenance fund, will help you deal with these surprises without disrupting your business.
4. Most Trucking Businesses Fail in the First 5 Years
Statistics show that most new businesses fail within the first five years, and trucking is no exception. The reasons vary, but many failures come down to poor financial planning, insufficient cash flow, or an inability to handle unforeseen challenges like market fluctuations or rising fuel costs.
To avoid becoming part of this statistic, take the time to thoroughly research the industry and develop a solid business strategy. Proper planning can help you withstand the ups and downs of the trucking business and set a firm foundation for growth.
5. A Business Plan is Key to Success
Without a well-thought-out business plan, your company could quickly fail. A business plan is not just a roadmap; it's a tool to help you define your goals, identify your target market, and set realistic financial projections.
A solid business plan can also help you secure financing if needed. Whether through a loan or by attracting investors, lenders want to see that you have a clear plan for how you’ll operate and grow your business. Luckily, we’ve created a Trucking Business Plan Starter Bundle available for download here!
The Starter Bundle includes seven essential documents, featuring The Business Plan Guide (including four guiding documents), the SWOT Analysis Template, the SMART Goals Template, and the Business Structure Guide. Enjoy two BONUS items: a 160+ Word Glossary for the Trucking Industry and the Trucking Business Budget Template with Estimated Startup Costs. This comprehensive bundle serves as your roadmap, offering the tools needed to secure financing with a detailed business plan, define and accomplish business goals, make informed decisions on your business structure, become fluent in trucking industry lingo, and establish an effective budget.
Start your trucking business off the right way! Learn more about our new book, How to Start, Drive, and Accelerate a Trucking Business.
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.
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