The trucking industry continues to make billions of dollars each year and the demand is clearly very strong. This industry is directly related to the consumer market, so as long as the country's GDP is growing the demand for trucking will also continue to do so. But the question remains, who will fill in these new gaps in the market? Will it be existing businesses looking to expand or will it be a newcomer with fresh ideas?
Well whether you’re an old dog or a rookie trying to make it big in this industry. This article is catered for you both. Growth requires stability, planning, and hard work. So let us point you in the right direction with 5 steps that will help you grow your trucking business.
Going with the flow is not the kind of approach that will land you a successful trucking business. You have to plan your growth and set certain targets with means to achieve them ahead of time. Doing so will save you from being overwhelmed in tight situations. Planning ahead of time often gets overlooked when you are managing day-to-day tasks.
Your plans could involve meetings with potential customers, the anticipation of new technologies and how to use them, how one can reduce costs, and more. All of this can be streamlined by creating a trucking business plan. We will give you a sample business plan for a small trucking company at the end of this article.
The first step in organizing your finances is knowing how much you are spending and on what. Then you must categorize them into 3 categories: fixed costs, variable costs, and miscellaneous expenses.
These are the costs that cannot be avoided by a company such as insurance payments, salaries, taxes, and such.
These are the costs that vary from time to time, like fuel costs, electric bills, maintenance costs, and such.
These small expenses do not fit into a particular tax bracket. They can be things like coffee expenses, uniforms, office supplies, entertainment, food, and such.
When you keep track of your expenses, you get a better idea of where you can cut costs and save money. More importantly, you understand the minimum cost of doing business.
I can not stress this enough. When you are part of a logistics business, accidents are bound to happen, and looking at the annual stats in truck-related accidents, getting insurance is an absolute necessity for its survival. Without insurance, you could be one accident away from permanently going out of business.
According to the Federal Motor Carrier Safety Administration (FMCSA), you require a bare minimum of at least $750,000 in liability coverage and this has been the law for the past 30+ years. In that time inflation has drastically increased and one should keep that in mind when choosing an insurance coverage plan.
Your relationship with your customers is the most important part of the business. The first thing to go out the window during difficult times is client connection. So try to make sure that your connections are strong and can survive a few hiccups down the road. Keep special care of the bigger clients, little things like sending a birthday gift, Christmas cards, and dinner invitations can go a long way.
Moreover, it is important to continuously make new connections. Often many small businesses, rely on one big client to keep their lights running. But it is never wise to keep all your eggs in one basket. There are many different ways to network and grow your circle.
The most common way to network in the trucking industry is through load boards, and be sure to subscribe to a few of them. Social media platforms like Twitter, Facebook, and LinkedIn are also great for connecting with potential clients and building a name for yourself.
Traditional methods are also highly effective. Conventions and truck shows are great places to meet industry leaders, professionals, and new customers. Be sure to attend different events and socialize with the people there. You may find some very useful contacts that can help you in the long run.
You can also identify all potential customers within your region. Note their names down, and try to figure out what kind of trucking services they are currently availing. Look for gaps in the supply chain and try to offer a better solution than their current one.
Your drivers are half the business, so it is important to pay attention to them. They can be one of the reasons why your business flourishes or fails. When conducting interviews and hiring drivers, be sure to do a background check to see how their performance was in previous companies. Be sure to ask plenty of questions regarding hypothetical situations in your industry, to see their critical thinking skills. Make sure they have some basic mechanical knowledge.
When your drivers are hired, you should categorize them based on their skills. For example, some drivers may have a great sense of direction in certain areas, some might be good at handling shorter hauls while others may be better at longer hauls. Some drivers may be more skilled in driving larger trucks than others and such. This will allow you to utilize your driver's talents to the fullest.
To retain your drivers, be sure to have an open door policy, so they can discuss whatever is bothering them, provide bonuses for accident-free driving, and bonuses for Christmas, offer enough paid leaves, do not overwork them, always treat them with respect, and offer the right incentives. The downtime of finding new drivers, training them, and managing them can be very hectic. So it is important to retain them for as long as possible.
The first step of starting, retaining, and growing a business requires planning. So like we promised you in the beginning, here is a sample of a trucking business plan.
Your business plan for a transportation company should include:
This part of the business plan gives a brief overview of your company. It is usually written in the end but is usually highlighted the most. An executive summary provides a well-rounded overview of what the business is about, and what its ambitions are. Often companies also include milestones they have covered and the initiatives they take in their business.
The overview part explains the type of trucking business you have. For example:
LTL or Partial Truckload
In this type of trucking business people only pay for the space they occupy within your truck. This way you are transporting multiple products and often delivering to different addresses or warehouses. This type of business gives you less control over delivery time and the routes your trucks are traveling through. But provides more volume of orders.
FTL or Full Truckload
Just like the name suggests this type of trucking business provides a dedicated trailer for a customer's loads. Here there is a maximum weight limit, but no minimum so rates are usually fixed.
Refrigerated Trucks or Reefer Trucks
These are special trucks designed to control the trailer's temperature and humidity. They are most commonly used to transport things like dairy products, pharmaceuticals, and chemicals that can be ruined due to long exposures to heated temperatures.
This type of trucking usually involves transporting furniture and similar goods. It is not necessary that this type of mover has to haul household goods. Offices and store owners regularly utilize them to haul their goods.
This section of your business plan also needs to explain the background of your business. So it needs to answer the following:
Firstly when you do an industry analysis you get to learn more about the trucking business and the market it serves. Second, it helps you finetune your business strategy especially if you have picked a particular niche from this industry like short haulers or household movers. Thirdly it shows your customers that you are an expert in your industry and know how to handle different situations.
Your industry analysis should answer the following questions:
This is the section where you identify who your potential customers are and what kind of problems they face in the industry. For example, you may be looking to serve people looking to move, people looking to sell goods, or people looking to haul long-distance loads.
The type of customers you choose to cater to highly impacts the type of business you are trying to operate. You need to break down your customers into segments like age, gender, location, income, and jobs. If you are B2B then you must note down types of businesses, size of business, location, and how you can cater to them.
Once you have identified your customers, you can now figure out better ways to attract them to avail of your services. It also helps you later on, when you are placing adverts online or offline.
This is the section where you identify all of your competitors. To do this, you first need to identify all the trucking businesses offering services that are similar to yours. Then gather as much information about them as you can which should include:
Being an outsider to their business, it will be difficult for you to get an exact estimate and completely accurate information. But by looking at online reviews and talking to their customers you can get a better idea of their business.
Once you have all the information, it's time to see where you stand in all of this and how can you gain an edge over the competition. For example:
The best outcome you can expect from conducting a competitive analysis is analyzing where your competitors are lacking and then filling in those gaps to get a piece of the pie.
Your marketing plan needs to focus on the services you are offering and how you are going to provide people more value than the competition. You should be sure to mention the 4 P’s of marketing: Place, price, product, and promotion.
The location of your business is crucial as it will determine the cost of doing business. If you are located near manufacturers and producers, you naturally gain a logistical advantage in establishing a business relationship with them.
Your price is a determining factor for many, as your potential customers will be comparing the quality of service with the price of service against what your competitors are offering. Hence, if your prices are higher, you need to be able to justify the reason why.
Promotions are basically ways of deriving traffic toward your business. You can do this by doing SEO for your website, using PPC marketing, email marketing, partnerships, handing out flyers during events, and more.
Your marketing needs to have direction and goals. Be sure to keep checking off major milestones and always look for unique ways to market your business.
Everyone can talk about a big game, but it is all about execution. Your operation plans, determine the process of how you are going to conduct your day-to-day tasks with efficiency to ensure a seamless business.
Here you need to clearly define your employee's tasks and ways in which you will be able to measure their productivity. You need to successfully plan and document your routes. In case an issue arises, you need to be able to manage it with minimal negative impact.
A logistics business is never an easy one and the way you manage your operations is the determining factor in its survival.
Your operational plan is forever evolving, as you are constantly learning from your mistakes and because technology is also constantly evolving.
Consider getting a TMS, to help you manage data better and automate most of your operational tasks. Those without a TMS are at a significant disadvantage from the go. Unless of course, your business is very small.
A solid management team is crucial for the success of your trucking business. Emphasize your background and/or the backgrounds of your key individuals, focusing on the knowledge and expertise that demonstrates their capacity to expand a business.
It would be ideal if you and/or your team members had firsthand experience in the trucking industry. If so, emphasize your experience and knowledge. Highlight any experience you believe will assist your firm in succeeding, but do so as well.
Consider forming an advisory board if your team is lacking. An advisory board would be made up of 2 to 8 people who would serve as business mentors. They would assist with clarification and offer strategic direction. It is best that you find people who are experienced in the trucking industry.
This section of your business plan needs to highlight your cost of operations and the revenue you generate from the business. Your financial plans need to include a balance sheet, income statement, and cash flow statements.
A balance sheet shows your liabilities and assets. An asset is something that will make you money over time like your office building, trucks, and equipment. Whereas, a liability is something you will need to spend money on like accidents, a bank loan to be paid later in time, property damage, and more. The more assets you have the better your business will be valued and the more liabilities you have the less it will be valued.
Your income statement is the amount of money you have or doesn't have after you subtract your costs from the generated revenue. When starting a business you have to assume these costs, to get an idea of what you need to do in order to break even or come up with a profit. You should try to keep an accurate record of your financials.
Your cash flow statement determines the money required to start and run your business. A business can be profitable and still become bankrupt if the cash flow statement is not properly managed. For example, you get an order and the cost of fulfillment is $30,000 and you are getting $120,000 to deliver that load. But here is the catch, you will receive the money in 90 days or more. Now during that period, you can run out of cash while paying bills, salaries, and things as such.
Many businesses face issues regarding their cash flow and to avoid this, it is better to define your cost of operations. Then you must have a source of obtaining cash in case you are running short of it. Be sure to include taxes, insurance costs, permit costs, salaries, maintenance costs, and all such unavoidable expenses in your cash flow statement.
After creating your business plan and gathering all the required information. You are better prepared to face the challenges of the trucking industry. The reason is that you have created plans for the most common issues already, you have defined the financial capital required to keep it running, and you have a sense of direction of where to take your business.
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