It's a profitable time to start a trucking business. The trucking industry exceeded $700 billion in annual revenue in 2017, according to American Trucking Associations' American Trucking Trends 2018 report. The construction industry is not far behind at nearly $2 billion. But, how exactly do you start a trucking business? To help understand the neccessary steps, we talked to trucking companies that started out with just a single truck to their name and have grown to become successful businesses.
1. Create a business plan
No matter what type of business you're starting, it's important to have a business plan before you get to work.
JMC Valley Construction, Inc owner Juan Chavez started his own construction company that serves the Napa, California area in 2014. He recalls those first years as the toughest, but also the most critical to get right. "The first couple years are crucial when you start from zero," Chavez said. "Seventy percent of companies will fall apart within the first four years."
One way to avoid this is to get started on a business plan, or roadmap for growth, that can help turn your vision into a reality. Your plan should include things like measurable goals, potential pitfalls, financial details, and a clearly articulated value proposition. This plan will be revisited time and time again as your business evolves, so it's important to put in the work early on.
For a trucking business, make sure to include information on your common types of service offerings and the rate at which you'll charge customers. There are benefits to both a flat rate or per mile charge, but the most important thing is to determine these details before you start.
2. Acquire the right licenses
The first thing any new business owner needs to consider is securing all the correct licenses to legally begin operating and pay any affiliated registration fees. There are several major forms the Department of Transportation (DOT) requires in order to get your new business up and running.
- Commercial Driver's License (CDL) for all company drivers
- Federal Motor Carrier Safety Administration (FMCSA) Number registration (To register, the sole proprietor owner-operator must submit personal information to the FMCSA to receive a US DOT number or operating authority.)
- IRS Form 2290
- International Registration Plan (IRP) Tag
- International Fuel Tax Agreement (IFTA) Decal
- LLC Status (Each state has different regulations.)
- BOC-3 Form
Most construction or contracting businesses need other, specific licenses to operate. For example, a tradesman license is required for certain construction trades like electrical, plumbing, or gas fitting. Check with your state business license office for information about what you’ll need.
Finally, you'll need to make sure you create the right legal framework. There are several ways you can register your business.
- Sole proprietorship
- Limited liability company or corporation (LLC)
- Corporation (C-corp, S-corp, etc.)
3. Establish a vehicle purchase plan
Whether you're starting a small business with just a single truck or aiming to rapidly build out a larger fleet, it's important to create a long-term vehicle purchase strategy . Beyond the vehicle's price tag, consider what the vehicles will be used for. It's critical to pick the best vehicle for your fleet, and that won't always mean the cheapest one.
Consider what your trucking company or construction business will haul, what types of roads your vehicles will drive on, and how many people will operate the trucks. This will help you think about important factors like load capacity or fuel costs.
Most importantly, remain flexible. The business's priorities are guaranteed to shift over time so it's important to adapt with changing needs.
Eran Blitzblau is the owner-operator of San Diego, California-based Blue Lightning Logistics. He's been in the business for decades, beginning his career as a truck driver before starting his own trucking business that operates in 48 states with over 150 pieces of equipment. Eran admits his vehicle purchase strategy evolved over time.
“I bought used equipment at the beginning because I couldn’t afford anything new," Blitzblau said. "My strategy was to go with the non-brand because there were always parts available that would have a decent retail value.”
But as Blue Lightning Logistics grew, Blitzblau was forced to reroute. “In 2010 I decided to go into the refrigerator business and that’s when we started seeing more significant growth and learning the business a little bit better," Blitzblau said. "I understood I’m not going to afford used equipment with company drivers because the maintenance costs were killing me. I sold all the tractors and I just bought trailers and hired on operators that had their own trucks.”
4. Build a customer base
Beyond acquiring licenses and equipment, your new business will need customers to get it running. Trucking company owners claim this can sometimes be the most difficult part.
"The biggest challenge is the human element,” Blitzblau said. "You have to learn how to work with people and manage challenges as they come.”
If you have a small fleet or you're just getting started, it might be beneficial to join a load board to help alleviate some of the initial challenges–like how to find loads to move–of growing a construction or trucking business. A load board or freight load board is an online marketplace that acts as a central location for shippers and freight brokers to post loads. Certain load boards require a subscription fee, but there are a number of others that construction and trucking companies can join for free.
A load board can be a great jumping off point, but down the line, it will be helpful to secure a steadier customer base. Marketing can be a powerful tool to help you pull in your target client base. Head to industry events to meet potential customers in person, create a digital or social media campaign to reach out to customers online, or consider building a website so customers can learn more about you from the comfort of their own office.
When you do finally secure that foundational customer base, pour your energy into building those relationships. This is something Chavez cannot emphasize enough. "Most of my growth is with new customers–what they call word of mouth," Chavez said.
Chavez took the time and effort to develop these relationships. "You have to be professional with the client. You have to put yourself in their position," Chavez said. "Those little items–believe it or not–are very, very crucial. They're going to keep you alive."
5. Decrease expenses
The average cost to start your own trucking company or construction business can cost you at least $10,000, according to 2018 data from Progressive Reporting Agency. Additional expenses like purchasing commercial vehicles and staffing quickly bring up that price.
Chavez invested $50,000 before he opened up shop. Five years later, he's raked in $1.7 million in profit, but that didn't come easy. Chavez had to find ways to decrease excess expenses and increase cash flow to help his business thrive. One way he did this was to install Samsara asset trackers on his equipment. "It's an affordable device and it will save me a lot in the long run," Chavez said.
Another way to lessen operating costs and keep your business compliant and safe is to use a fleet management solution like Samsara. Samsara's fleet management system decreases fuel costs by reducing idling time, improves safety to reduce instances of costly accidents, and automates time-consuming back-office processes.
Looking for a fleet management software solution? Samsara can help you stay compliant and improve fleet efficiency. Reach out for a free demo or trial.