The transportation sector is highly competitive and requires a clear understanding of the systems and processes for anyone willing to step into the business of commercial trucking transport. Many professional truck operators venture into the trucking business because it has a good potential for growth and profitability. The increasing demand for freight carriers and the absence of large companies in the trucking business generate scope for many owner-operators to start a trucking company.
We will provide a step-by-step process to guide you thoroughly on starting a trucking business.
Table of Contents
Step-1: Make a Business Plan
An organized plan with a set of targets is required to start a business. You need to build a roadmap for your business, consider your resources, and plan how you will utilize them to achieve the goals.
Step-2: Establishment of a Company
Your company needs acknowledgment as an adequately structured corporation or Limited Liability Company (LLC) with some legal formalities regarding assets and liabilities. You need to follow a few steps to establish your company as a corporation or LLC, which are as follows:
- Appoint a registered agent: It is necessary to appoint a registered agent who will coordinate between the government and business entity and will be the official point of contact with the state available for receiving legal notices, mandates, circulars, and tax documents.
- Obtain your EIN: As a business owner, you must possess an Employer Identification Number (EIN), which is like social security for your business. This number is required to open a bank account for your business and tax filing purposes.
Step-3: Obtain Business Licenses And Permits
You need to obtain the necessary license and permits from the government to run your business in the state. The type and number of licenses and permits will depend on your service and area of operation. The owner-operator of every trucking business must obtain the following items to run a trucking company.
- Commercial Driving License (CDL): All commercial truck drivers must possess a CDL.
- USDOT number: The Federal Motor Carrier Safety Administration (FMCSA) issues a unique USDOT number for each trucking company to identify it during inspections, audits, and investigations.
- Motor Carrier Operating Authority number: You may require one or more MC numbers according to your business operations.
- BOC-3 filing: A process agent is required to file the Form BOC-3 (Blanket of coverage) on behalf of the business owner to the FMCSA and includes details of designated areas of operation.
- International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA): Trucking companies operating across different states must obtain IRP credentials and IFTA declaration.
Step-4: Buy or Lease The Proper Equipment
The quality of equipment decides the efficiency and success of the business. The business owners must consider the following before selecting the equipment:
- How far does the vehicle meet the requirements of your cargo?
- Which one is a better option-buying or leasing?
The above decisions require additional research and the use of your network connections. The professional truck drivers that have started trucking businesses can guide you to compare options and make the correct decision.
Step-5: Proper Insurance Coverage
As a business owner of a new trucking company, you need insurance for your business assets. Different types of insurances are available with varying premiums. Insurance will cover the cargo on transit, any damage to vehicles, and accident coverage of passengers. You have to decide on the correct option from the following:
- Cargo insurance
- Primary liability insurance
- Physical damage insurance
- Passenger accident insurance
Step-6: Track income and expenses
Business profitability depends on the proper tracking of income and expenses. In a trucking business, keeping track of income is not easy as the payment is often delayed. The expenses also vary depending on the range of operations. You need to follow some best practices to streamline the process given as follows:
- Use accounting software or hire an accountant: You can use online accounting software to track your income and expenses. You can also take the help of an accountant who can keep records of income and expenses.
- Decide on payment schedule: You should be aware of the payment schedule, which generally varies between 30 to 90 days. You can manage your expenses accordingly.
- Maintain records of business expenses: Keep a proper record of all the business expenses with related documents like invoices and receipts.
- Keep separate files for personal and business finances: It is advisable to maintain bank accounts separate for business and personal use.
Step-7: Find Deliverables To Grow Your Business
It is necessary to find customers as you start a new trucking business. You should coordinate with potential customers through marketing and networking strategies before you launch the business formally. You can interact with local shippers to create a database of prospective customers and participate in trade shows and industry groups. These initiatives will help you to reach new customers who may be interested in availing of your services.
Step-8: Stay In Compliance
Successful business operations also require remaining compliant with regulations and legal formalities. Any failure to meet the requirements will lead to heavy penalties, which also affect your reputation and reliability as a service provider. You should ensure adherence to rules and regulations as defined by FMCSA regarding safety norms, reporting requirements, and driver’s hours of service. Third-party outsourcing or delegating administrative work can enable you to focus more on business efficiency and productivity.
The trucking business can deliver profitable results if you can handle it with professionalism and systematic approaches while maintaining all legal, regulatory, and compliance formalities. You need to start with a structured plan and drive your resources to achieve the goals. Any business needs to maintain efficiency in operations through quality equipment and optimum resource utilization.
The latest technological developments have provided ample opportunities to utilize advanced tools and techniques in your business operations to streamline the process, improve efficiency, control cost, and remain compliant. Various platforms are available to build and expand your customer base, ensuring the profitability of your business.
Also read: Proving Liability in A Trucking Accident