Congratulations! You’ve decided to start a new trucking company and be your own boss. Trucking is one of the best ways to become a business owner. To succeed you will need industry experience, good business practices and the ability to work hard to meet customer demand. For those who love the industry, there’s no better way to make a living.
You have a lot at stake and many decisions ahead of you, so let’s get started:
What are the basic steps to starting a trucking company?
Here’s what you need to get your trucking company started:
- Choose a business name – How to name a trucking company
- Choose a business structure – Register as an LLC
- Register your business – Register your business
- Get business insurance – Get business insurance
- Get federal and state tax ID numbers – Get tax ID numbers
- Apply for operating authority, licenses and permits – What you need to know
Just a note, applying for your operating authority can be confusing and time consuming. It is recommended to seek help from a registered FMCSA filer to avoid mountains of paperwork and weeks or months to complete. Use a cost-effective and reputable service such as our partner at eTruck Permits to save you time, aggravation and the possibility of costly mistakes.
Frequently asked questions about starting a trucking company
While you wait for your authorities to be processed, there is still much to do before you’re ready to haul freight. Here are the eight most frequently asked questions to assist your efforts:
1. What is the best bank for trucking companies?
Setting up a business banking account is essential to separate personal transactions from business dealings. For tax purposes, credit history and financial liability issues, it’s critical to separate your personal life from your business enterprise. The best bank for truckers is one that provides the financial support, flexibility and service features that support transportation companies. For you this may mean picking a bank close to a truck stop on your route, or a convenient online banking service that’s easily accessible no matter where you are.
Do some research before you choose a bank because not all of them service the trucking industry well. Many banks limit their services to just the business basics and will not extend credit to transportation companies. The best bank for trucking companies are those willing to provide the credit you need to grow your business without imposing restrictive loan covenants that protect the bank at your expense. For this reason, a growing number of trucking companies use a bank to manage their transactional needs only, but turn to alternative funding options such as freight factoring to support their growth plans.
2. Is a business plan necessary?
If you plan to succeed, then a business plan is absolutely necessary! It is an important tool to help guide your decisions and provide greater clarity on all aspects from financial to operational and service details. Here are 10 reasons why you need a trucking business plan.
Getting a new truck or trailer is often top of mind for owner operators in their first few years in business. There are several options, from leasing to buying new or used. There are also several options for funding these purchases, from traditional lending to alternative financial strategies. If you decide to finance a purchase with a commercial loan, the bank will expect to see a viable business plan as part of the qualifying process. Be sure your plan includes an estimate of your operating expenses, expected cash flow and your plans to expand. You’ll be ahead of the game with a well-written plan, especially when you demonstrate industry knowledge and experience.
3. Do I need a budget for the first 30, 60, 90 days?
Let’s cut to the chase: YES! You definitely need a budget, but it doesn’t have to be complicated. You will want to consider your fixed costs like a truck or lease payment, your insurance down payment and monthly fee. Then you have variable costs like fuel, and semi-variable costs such as salaries. Plus, do not forget the unexpected expenses such as a blown tire or mechanical failures.
It takes time to get your business set up and start hauling freight, invoicing customers and collecting on that well-deserved revenue. Don’t get discouraged. For start-up businesses, it can be several months before regular cash flow covers the expense of running your new business. Be sure your budget includes upfront capital that will carry your business during this initial stage.
A budget will help you track cash going in and out of your business and project how much revenue you need to keep your business going. At the end of the month, will you have anything left to pay yourself? Think about it… a budget is your financial roadmap to where you want to go.
Finance Tip: New companies face great difficulty qualifying for a commercial line of credit or to secure enough cash reserve to cover start-up costs. A majority of these trucking companies consider working with a freight factoring company to access the working capital they need. Freight factoring is the ideal funding solution to enable new trucking businesses to operate while they build their way toward regular, sustainable cash flow.
4. Brokers won’t look at me because I’m just starting out, what do I do?
It is a well-known fact that freight brokers don’t often take on clients who are just starting out. Fortunately you’re not out of luck, there are many options out there to find loads. Load boards are easily accessible providing an open market for hunting down freight. If you were a salaried driver and are now becoming an owner operator, try reaching out to places you have previously worked for or call companies that may need freight shipped. Talk to other truckers, word-of-mouth referrals are one of the most reliable sources for new business. Also, building relationships with direct shippers may help you get in the door sooner rather than later. You will certainly earn more revenue by bypassing brokers and working one-on-one with shippers. It’s a win-win!
5. What should I know about taxes for my trucking company?
Nothing can be more confusing or frustrating than figuring out the abundance of federal and state tax regulations. Be sure to keep up with your business’ tax requirements, otherwise you may face penalties from the IRS such as a lien on your accounts receivable. Besides income tax, there are employment, road and fuel taxes, and vehicle and state use taxes that you need to be aware of. Select a trusted tax advisor who can give you sound advice and help you stay on top of your tax obligations.
6 How do I finance my start-up trucking company?
You have the experience, skill and motivation to succeed, but how do you fund your new company in one of the most capital-intense industries on the planet? For smart entrepreneurs, the answer is freight factoring.
Over-the-road freight transportation is a highly irregular industry with wild swings in volume, capacity, rates and costs. To make matters worse, the industry is known for having slow-paying customers that often take 30, 60 or even 90 days to pay their invoices. This creates an extremely difficult environment to manage your new company’s cash flow. Even large, established trucking companies experience periods of cash shortages that negatively impact operations. For these reasons banks are reluctant to extend credit to trucking companies, especially if they have little to no credit history.
A reputable factoring company that specializes in invoice factoring for trucking provides fast, cost effective funding to pay your invoices within 24 hours. With immediate access to working capital, your new trucking company has the ability to react quickly to customer demand without limitation due to lack of funds. Take on new customers as fast as you can and grow your company with positive cash flow to support expanding operational needs.
7. How can I manage collections from slow-paying customers?
You need to concentrate on serving your customers, not chasing them for payment. Yet, with so many customers taking extended periods of time to pay their invoices, how do you manage collections efficiently? Another benefit of factoring invoices is that the freight factoring company will manage your invoicing and accounts receivable collections cost free. In addition, a reputable freight factoring company will help manage credit risk and avoid bad debt from delinquent customers with advice and a free online credit search tool. With this support you can monitor potential customers’ ability to pay before you haul a load.
8. How can I save on the cost of fuel?
Fuel will be your largest operating expense, representing over 30% of running costs. Any savings of this expense will have a significant impact on your bottom line. Driver habit and fuel saving technologies are well worth investing in, but the easiest and fastest way to achieve savings is to participate in a fuel saving program. eCapital provides fuel cards with significant discount pricing at thousands of service stations nationwide. With easy qualification for any fleet size, these convenient to use fuel cards provide the added benefit of credit terms on all fuel purchases made within our extensive network of over 16,000 major truck stops.
Get the support you need
Being in business for yourself requires a keen understanding of the industry. You need to know what customers want and how to take care of them better than your competitors. It’s knowing the difference between revenue and profit, that you need to subtract all your expenses before putting money in your jeans. That you have to set funds aside for a rainy day. This is what separates the owner-operator from the company driver.
With so much to think about and manage, its important to have experienced business connections that can support you through the process. eCapital are experts in the trucking industry and have served thousands of clients with fast funding, discount fuel programs and back office support.