Operating a trucking company is not for the faint of heart, it takes road experience, an entrepreneurial spirit and a tough hide. Be sure you are prepared for the road ahead — a lack of business skills is one of the leading contributors to failure as a trucking company. This article guides you through basic business principles and practices with helpful tools to assist with your success a business owner in 2021.
First and foremost, your trucking company must be profitable — without profit the business will be short lived. Once the company has surpassed the startup phase, growth then becomes equally as essential to sustain operations and ensure the company’s long-term survival.
Know how to make a profit in trucking
You have to think strategically, be detail oriented and consider cost verses revenues at all times. Driving maximum allowable hours with a trailer full of freight may be the best way for a company driver to earn top dollar, but how do trucking company make good money?. Each load must contribute to the company’s financial benefit, or it is best left on the dock for another carrier to haul. Think of your day-to-day operations in this way:
Revenue per mile – Cost per mile = Gross revenue
Gross revenue – Taxes = Net profit
The key to the above formula is knowing your trucking company’s unique cost-per-mile then determining a freight rate (revenue per mile) that covers all costs and leaves a profit. The worst mistake trucking companies can make is allowing shippers and competition to determine their hauling rates. Every carrier has a different set of circumstances, the only way to set a profitable freight rate is to first identify all variable and fixed costs associated with your business.
It is best to monitor your costs regularly as it is an ever changing world of expenses. Use the following tool at least once a month to easily calculate your trucking company’s all-in costs: Cost Per Mile Calculator
Once you have determined your costs and freight rate, perform a quick calculation on each new load you book in order to confirm profitability. Booking freight from a load board is a great solution to find loads, especially for those difficult backhauls, but these are typically not high paying jobs. Use the following tool to calculate your trucking company’s profit margin on loads before you haul. It’s fast, easy, free to use and can save you from hauling at a loss: Profit & Loss Calculator:
TIP: the easiest way to make more money is not spending what you have.
Always look for new and innovative cost-saving ideas. The greatest return comes from significant discount pricing on your company’s largest operating expense. Select the transportation industry’s top fuel card program featuring easy qualification for any fleet size from one truck to 300 or more.
Keeping your trucks moving with profitable freight is no easy task. Learn more on how to improve your trucking company profit margins.
Know how to grow your trucking business
It is important to plan for growth rather than just waiting for it to happen. A business plan is an important tool for establishing a structured approach to financial, operational and service details. Need convincing? — here are 10 reasons why you need a trucking business plan.
Your plan should include an estimate of your operating expenses, expected cash flow and your plans to expand. Having targets to shoot for are similar to having milestones on your route, they provide information on progression towards your strategic goals. Monitoring key performance indicators (KPIs) is essential to staying on target and accomplishing these goals.
Your plan will include:
- New business acquisition: As a trucking company, that means knowing how to find loads.
- Financing: Without sufficient capital or the financial resources to sustain operations, business failure is imminent. Your financial plan must include being prepared for the lean times, equipment breakdowns and/or replacement, and covering the daily cost of operations while waiting for customers to pay. Learn why freight factoring is the ideal funding solution for trucking companies.
- Managing credit risk: Know your customer’s ability to pay before you haul a load using this cost free credit check tool.
Most common mistakes made by trucking company owners
A common and fatal mistake that too many truck company owners do is to take cash from their business for personal use without proper allocation. This becomes a failure to include all costs in determining their cost-per-mile and ultimately creates a negative impact on their profit margin. As this error compounds over time, the trucking company falls into a deeper hole until; it finds itself under water. Make sure you account for all expenses, every penny, even the coffee you buy along the route.
Another pitfall to avoid is high customer concentration. The old saying “don’t put all your eggs in one basket” applies here. No one customer should represent more than 25% of your total revenue or accounts receivable. Be on the constant hunt for new business.
Even the most hardened and experienced road warriors are discovering new ways to improve their business. Keep learning from experience, from other operators, from mechanics, from accountants and other business people. eCapital’s Truckers’ Hub is a one-stop resource for information and tools to assist with your business. Keep checking back regularly for new ways to grow your trucking company and be successful.