The trucking niche is extremely competitive but, with the right approach, it can be a highly profitable market. If you’re about to embark on setting up a trucking company, the following are some tips to follow to ensure success.
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Efficiency is Everything
Investing in fleet management software and other technologies from the very beginning is essential. There’s a huge demand for truck drivers within the market so you need to seek out the best talent and run operations efficiently. Ask potential employees whether they have researched a guide on long distance trucking and what’s involved.
Check their previous experience and reach out to past employers for recommendations. Once you have the right team in place, tracking vehicles and storing and recording all data in one central database will make operations run much more efficiently.
Choose Your Market Wisely
This is important whether you’re operating a small or large fleet. The market you choose will determine the rates you can charge, the lines you can service and the equipment you need to invest in. Typically, small operators focus on the markets that larger carriers don’t want to get involved in. Try and get active in these markets, as they usually require the movement of specialized loads. Fresh food produce is also a wise choice as there’s generally less competition and you’ll be guaranteed work all year.
Don’t Undercut Prices
Many small operators charge less per mile in a bid to win more contracts and while you most likely will get more work doing this, you’ll lose out in the long run. When quoting, be sure you can cover all operational costs and ensure there’s a healthy profit left over when all is paid. Determine what freight lane you’ll operate in, find out what the competition is charging and adjust your rate per mile based on those figures.
Be Aware of Operating Costs
To follow on from the point above, it’s essential you know every cost involved in doing a run. What are the fixed costs? Do you have repayments to make on your truck(s)? What about tax and insurance? Are you paying out for different permits? These are all things to consider. Next come the variable costs. What is the cost of fuel? Are you offering incentives to your drivers? What about the upkeep of vehicles? Add these variable costs to the fixed and you’ll be able to calculate the rate per mile you need to charge to make a profit.
Have Enough Cash
Cashflow is king when it comes to operating a successful trucking company. You’ll always need quick access to cash for buying fuel, making truck repayments, and paying for tax and insurance. You cannot depend on clients to pay up quickly as most require a 15-30 day window to pay invoices. This delay could seriously impact operations if you don’t have enough cash to keep things running smoothly.
If you don’t have cash flow, there is always the option of freight bill factoring (this is where a company buys your invoices for freight that you’ve already delivered, making it monies that are advanced on accounts receivable). Other options to look into include fuel advances, fuel cards, government grants, and business loans.
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