So you have been working for over 15 years as a truck driver and every New Year you make a resolution to start your own trucking business, but you never seem to get around it. Now I guess it’s time you get start on it. I know… I know…starting a truck driving business isn’t easy. You need trucks, capital and all those things that come with starting any kind of business. But if you keep looking at all those barriers, you may end up not ever starting your own truck driving business. Life is not about chances, it’s about choices! It’s time to make that choice and stick to it.
Here we will provide you with the easiest ways to start a trucking business and succeed faster than you ever imagined! Before you start your trucking business, here are some things you need to figure out. You will need to first:
Complete the requirements of starting a trucking business?
Every state has laws on how to start and run a truck driving business. There are also different rules on how to transport goods from state to state. Here are the fundamental requirements you will need to meet before you can get your trucking business started.
IFTA Decal (International Fuel Tax Agreement)
Depending on the local laws of your state, you may be provided IFTA Decal for your trucks. Check on the rules of your state and how you can get this registration. The transportation websites in your state will provide you with enough information on this.
Filing for BOC-3
You can file this form through the FMCSA website. This way, your USDT number registration can be processed faster. You will be expected to pay $75 after filing for it.
Motor Carrier Authority Number (MCAN) and Federal USDOT Number
You can your truck online via the FMCSA (Federal Motor Carrier Safety Administration) website. All you will need to know are the prerequisites and then download your form. This way, you will be able to establish the permits required and also get your USDOT number and hazardous safety permit.
Heavy Use Tax Form
You can also download this form online on the IRS website. This will identify the amount of tax that you should pay in relation to the weight of your truck and how often it will be on the road. This form should be sent to the IRS within 120 of filing.
International Registration Plan
You will need this so that you can make the most use of interstate highway. As the business owner, you should fill out the registration form on the IRP website. You will then proceed with registration and payment of any fees requested.
Other Legal Prerequisites
- If your vehicle has two axels, it must have more than 11,797 kilos gross weight
- With a vehicle that has more than two axels, there are no minimal weight demands
- You should have a CDL
As an owner operator, you will need to first establish the objective of your business. What goods do you intend to be transporting? Where will you collect the goods from and where will they be delivered? Some goods will need special equipment to be transported. Different states have unique laws on interstate transportation of goods.
Every trucking business has its own way of operating, but most of them operate in two distinct methods. However, this will depend on the type of contracts the company has. You can decide you will personally drive your trucks and manage the financial aspects of your business or you can hire drivers so that you can focus more on the management of your business.
You may opt to run your business and get drivers to drive the trucks for you. This kind of business arrangement will necessitate you to employ outside drivers. You may hire them on agreements for particular transport jobs. If you are looking to start your truck driving business with minimal capital and less business requirements, then going this way is advisable. The only problem is that you will not have complete control of your trucks and sometimes the drivers may cut off some your profits.
As an owner driver, you will personally drive your trucks. You will be the manager and at the same time the driver. Owner driver usually need to purchase or lease your truck and equipment which will require significant financial commitments. In addition, this type of operation requires you to put yourself ‘in’ the business instead of ‘on’ the business, making it hard to scale your business. On the other hand, you have more control over your business as an owner operator and it’s a good way to start your trucking business and build connections. Once you build a reputable business, you can hire other drivers or even sponsor cdl trainings like these companies.
What is the legal structure of your business?
By now, you should have already come up with a business name and the next important thing you should determine is the legal structure of your trucking business. After filling all the above requirements, you are now an authentic business. Therefore, it’s important to choose a structure before you jump in and start doing any form of work. A lot of owner operators start out with a sole proprietorship as it’s the easiest legal form. But this kind of business entity comes with personal risk asset. In short, legally, there is no difference between your business and you. If your business is sued, you can be sued and your house, trucks or anything you own taken, so you should make sure you are covered against such.
You may want to set your business up as a corporation and these come in varieties. For instance, in the United States, there is a C-corporation. This is what almost everyone thinks of when they hear the word corporate. It’s a complete corporation and really expensive. There is a lot of paperwork required to set your business up as one, but it may be worth it depending on several factors.
A simpler form is the S-Corp which does not require lots of paperwork like the C-corporation. However, you will need to register with your state secretary and even a much simpler one is the LLC (Limited Liability Corporation).
Most small businesses use the Limited Liability Corporation structure now. It’s in between a corporation and a proprietorship. It combines the advantages of both. You may have to file more paperwork than sole proprietorship but in the long run, it’s worth it. An LLC can be helpful. However, if you sign a personal indemnification clause, it nullifies the cover that LLC offers. Therefore, you should know that an LLC isn’t a cover on anything that can go wrong in your business. For example, if your business wants to access a loan, the bank will always want a personal guarantee.
You need the right equipment
For your company to succeed, you will need proper equipment. Getting the right equipment such as trailers and trucks is a vital part of your business and perhaps the most expensive part of starting your trucking business. Do you intend to buy the equipment or lease it?
There are several owner operating financing alternatives and they can be overwhelming for any new business owner. You need to know exactly what you need and how much cash flow you are expecting to have. Then you can shop around for the best deal. The process is somewhat similar to getting a mortgage for your house. There are big banks such as wells fargo, GE capatical, and large trucking companies like JB hunt and freight liner trucks that offer trucking financing. Or you can find a broker that can help you make a deal. If you really have no idea where to start, then talk to other truckers that have gone through the same process and see what they recommend.
If you decide to buy the equipment, you will usually have the choice to pay a down payment and get a loan for the other remaining amount. After the last payment, the equipment is fully yours. This is typically called ‘lease-to-purchase’ and you can learn more here. However, if you default on any payments, you risk losing the equipment.
On the other hand, leasing can be a bit tricky. Some leases are like rentals where you will be paying a monthly fee for use of the equipment. Others are structured in such a way that you will become the owner of the equipment after paying the last installment.
Should I lease or buy? There is no simple answer to that. The choice is all yours. Do your research and where possible, pay a professional CPA to guide you.
Insure your business
Every state has its own policies on business insurance requirements. Ensure you comply with all the requirements to protect your business should anything happen.
Choose the type of insurance policy that matches the needs of your company. Read all the details about the policy so that you safeguard your business and equipment.
Manage your back office effectively
If you want to run a successful trucking business, you will need to plan your management duties properly. How do you want your back office to run? Will you be the one to manage the finances, the trucks and all other aspects of a trucking business? Think about that and remember that only those businesses with well managed back offices grow.
Lastly, get the right clients
This is the part that can make or break your business. The truck driving industry is extremely competitive. As the business owner, you should be on the lookout for clients. You can start off on load boards, but that shouldn’t be your long term goal of finding long term clients. The bidder with the lowest bid is often given the job, and it may not sustain your business in the long run.
You can start by advertising your business on newspaper, radio, trucking organizations, bulletin board, internet, and anywhere your potential business exists. But with so many advertising channels, you have to focus and narrow down your potential customers and try to target you customers as specific as possible. For a more sustainable business, it’s best to go for long term clients. Typically you can start with industry associations that your preferred clients are in. For instance, if you want to be transporting cars, you can go to organizations such as the American International Automobile Dealers. There are also truck industry magazines that you can read through to identify clients.
Do not be afraid to contact seemingly big businesses or organizations. Take transporting freight for the US government for example. Getting government contracts is not easy, but the government can be a great client that offers consistent work. When you do get a client, deal with them professionally and honestly. You want to think long term and put yourself in the customers’ shoes so they will come back. Your reputation is vital here as satisfied clients will recommend you to other clients which open opportunities for more business. If you give your customers great services, they will come back. This way you will be able to build a list of long term clients.
To get even more referrals, you can talk to your friends, retired truckers, other professionals (i.e. customer support, freight coordinators, etc.) in the trucking industry who may give you business. Do not be afraid to talk about your business, and for those who are tech savvy, you should utilize the power of social media. You can make tons of connections on twitter, facebook, Linkedin, and many others. It will certain take time to build real relationship with clients and figure out the best way to use social media. But once you do, they can send you lots of business. Remember if you don’t market your business nobody else will.
Now, are you ready to get your trucking business up and running? Is there anything you feel is holding you back? You are only a decision away from being the proud owner of a successful trucking business. And to quote Mark Zuckerberg “the biggest risk is not taking any risk… In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”