The trucking business can be very profitable, but as you know, it’s competitive. Knowing how to run and grow your trucking business takes more knowledge than driving a truck or choosing a route.
Below are tips to help you steer in the right direction and pave the foundation for being a successful business owner.
- Support the right market niche:
The most important step of an owner-operator or small fleet owner is to pick the right market niche. The market you choose determines the equipment you buy, the rates you charge, and the freight lanes you can service.
As a rule, owner-operators should focus on markets that the large carriers avoid. In other words, consider hauling specialized loads. Hauling fresh produce and meat in reefers has many advantages, including less competition, year-round work, and it’s resistant to recession.
- Charge the right rate (per mile):
You need to know your rates before you start calling shippers and making sales. Remember, when you call shippers, you want to be competitive with what brokers charge them.
There is a simple way to do this:
- Select your freight lane
- Go to a load board (list of free load boards at the bottom of this article)
- Find 10 loads going in one direction
- Call the brokers and find out how much they pay
- Get the average
- Add 10% to 15% to get the price brokers charge shippers
- Repeat the process for the opposite direction
- Determine your operating costs:
Start with your fixed costs. These are costs that stay the same regardless of how many miles you drive. Examples are truck payments, insurance, permits, and so on.
Determine your variable costs. These costs depend on the number of miles you drive. For example, fuel is a variable cost. The more you drive, the more you fuel you use.
Use your fixed and variable costs to determine your ‘all-in-cost per mile’. If you subtract your ‘all-in-cost per mile’ from your rates (calculated in step #2), you get your profit.
- Use the right fuel-buying strategy:
Fuel will likely be your largest expense. New and experienced owner-operators often buy their fuel incorrectly, thinking the cheapest pump price equals the cheapest fuel cost. This approach will put you in a position to potentially lose hundreds or thousands of dollars.
Why? The issue is fuel tax. Regular drivers pay them in the state where they purchase fuel. Truck drivers, on the other hand, must deal with the International Fuel Tax Agreement, or IFTA. Truckers pay taxes based on fuel used as they drive through states, regardless of where they bought the fuel originally.
Because of this, you should buy your fuel at the cheapest base price regardless of the pump price. Base price = fuel price – tax.
- Work directly with shippers:
Load boards and brokers have their place in your business and can be very useful when you have an empty truck. However, they are also expensive. Brokers will keep around 10% to 20% of the load price.
Minimize your use of brokers and load boards by developing a client list of direct shippers. Done right, you can develop a list of reliable shippers that will keep you busy. Charge them a price that is competitive to what brokers charge – but keep everything for yourself instead.
- Run an efficient back office:
An efficient back office is key if you want to stay profitable and grow. The importance of the back office becomes more critical as you add leased drivers to your operation.
If you’re going to do it yourself out of the cab of your truck, you’ll need a laptop, internet connection, printer and accounting software.
- Avoid cash flow problems:
Maintaining cash flow is crucial to your operation. You’re always buying fuel, making insurance payments, making truck payments, and so on. Shippers and brokers can pay invoices in 15 to 30, but sometimes they stretch payment to 45 days. This delay can create a cash flow problem, especially in the early days of the business.
One way around this problem is to use freight bill factoring. Factoring solves your cash flow problem by advancing up to 95% of the invoice, often the day you submit it. The remaining 5%, less a small fee, is rebated once your shipper pays.
The Bottom Line:
Now that you have a solid business plan in place, the next step is to determine whether it makes financial sense to purchase equipment. We make it quick and easy for you by simply going to our budget builder page on our website, link below, and answering 6 questions to calculate your monthly and yearly profit on a purchased truck or piece of equipment. This will help make sure you’ll make money before you proceed.
At Commercial Fleet Financing, our pros have given careful advice to business owners in the transportation, moving, towing or construction industries for more than two decades. Finding the right financing option is easy and most borrowers can secure commercial vehicle financing. To talk directly with one of our financing pros and get started with a credit approval in as little as 2 hours, CFF’s main phone number is (972) 247-8447.
Related Resources:
10 Tips Everyone In Transportation Needs To Know Now! https://commercialfleetfinancing.com/10-tips-ebook
Budget Builder: https://commercialfleetfinancing.com/budget-builder/
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About Commercial Fleet Financing, Inc.:
Founded in Dallas, TX in 1995, Commercial Fleet Financing, Inc. has become a valuable partner in equipment financing for the semi truck, box truck, tow truck, construction equipment, and moving truck industries. CFF is committed to helping customers grow and has funded more than a billion dollars to over 10,000 businesses. A four-time winner of Inc. Magazine’s 500/5000 fastest growing companies in America, at CFF, We Finance AMERICA, One Truck At A Time™. (469)-281-2962
