Many industries rely heavily on trucking to transport goods to various destinations on almost all continents. Regardless of the market stability, the trucking industry will be around for a long time. This presents a great business opportunity for you.
Starting a trucking business can be very lucrative once the company is running. However, not everyone has enough money to start it.
How much does it cost to start a trucking company?
Here’s everything you need to know.
How Much Does It Cost To Start A Trucking Company?
Trucking is one of the major industries in the U.S. But most people would say that a trucking company needs a lot of money to start operating.
However, the reality is you can start your company even though you are short of funds.
As long as you know the ropes, you can be on your way to making a good income. Below are the options you can choose to start your trucking company, even if you are short of money.
Of course, aside from learning how much does it cost to start a trucking company, you also need to prepare a lot of money, but if you cannot provide it, someone else can help you. Although some people may have thousands of dollars to spend, most don’t. Fortunately, there are different funding options that one can choose from.
Commercial Truck Loans
A loan is one of the best resorts you can choose if you don’t have thousands of dollars set aside to start your trucking company. Loans have different rules and terms, so you should consider comparing loans using monthly payments, down payments, and every detail. To qualify for a loan with a food interest rate, you must have good credit and work history.
Trucks and other equipment can cost much, so to avoid paying for these expensive items, consider renting them instead of buying them. Use an equipment lender instead of paying a large sum; instead, you can pay in installments. Renting equipment can be easier than searching for the right financial institution.
Lease To Own
You can consider the lease-to-own option if you don’t want to spend money on a rental. Any money you pay for rent will later turn toward you buying it. Once you are done paying for the lease, the truck will be yours.
If you have a little money set aside, you can consider buying one that is used. A used vehicle that was well taken care of is a great option. Used trucks cost less than buying new ones.
You can consider these options if you don’t have any cash. Some loans don’t require a down payment, and others even allow poor credit. Many companies specifically finance truck loans; you only have to do a little research. Explore these options and find out what works best for your situation.
Read more: How Much Do Truck Drivers Make?
Is Owning a Trucking Company Profitable?
Owning and knowing how to start a trucking company can be challenging. The cost of operation can vary with the price of fuel. Dump trucks usually consume 5 to 6 miles per gallon of fuel, so any change in the fuel price can affect the company’s cost of operation. The dump truck service is a $19 billion industry expected to rise by 1.8% yearly for the next five years. Hence, operating a dump truck company needs money and several startup costs.
Trucking Company Startup Costs
Typically, starting a trucking company will cost you around $50,000. Depending on the number of drivers and trucks you choose to begin with, you can create a trucking company for as little as $25,000 and go to $1 million.
There are different types of costs you need to have in mind when starting a trucking business. There are variable costs such as fuel, tires, repair, labor, and maintenance, and fixed costs such as equipment costs, taxes, licenses, insurance, and management.
When starting a trucking business, you need to have at least one truck. On average, a used rig will cost you $25,000 – $100,000, while a new rig will cost $300,000. Remember that you need a reliable rig because you don’t want to make daily repairs.
Of course, if you haven’t driven a truck before, you will need some training. Getting a basic CDL license can cost you $2,500 – $10,000.
Finding Office Space
Depending on the technology and space you need, setting up a basic home office can cost $300 – $2000. However, as you take on employees, you may need an office outside of your home that will typically cost you $700 – $2000 per month.
Usually, first-year truck drivers make anywhere from $35,000 – $45,000, depending on their experience. Also, you can expect to have additional costs such as employee compensation. Employee compensation can cost between $50,000 – $75,000 a year per employee.
It’s always a good idea to insure your trucking company if you have many clients. Insurance brokers can help you get the best deals on the specific type of policy you need. There are, however, certain costs such as premiums, licenses, and other payments you need to fit into your budget. Depending on the type of policy, the average cost of insurance for trucking companies is around $3000 – $7500 per year.
Your trucking business will also need to pay for regular maintenance, including:
- Tires: $300 – $700
- Fuel: around $1.20 – $2 per mile
- Oil Change: $100 – $300
Registration and formation documentation cost from $900 to $1,500. International Registration Plan or IRP plates cost between $500 to $3,000 per truck. You may also need additional licenses depending on the type of cargo you are carrying and your location, including:
- Business Registration
- Commercial Driver’s License
- Unified Carrier Registration (UCR)
- International Registration Plan (IRP) Tag
- Federal DOT and Motor Carrier Authority Numbers
- BOC-3 Form
- International Fuel Tax Agreement Decal
- Standard Carrier Alpha Code (SCAC)
Truck and Trailer
Make sure you also count the cost of the truck itself. The cost of commercial trucks can vary, depending on whether you choose to buy a new or a used one. Used trucks usually cost from $15,000 to $100,000 (depending on the size and age), while new trucks cost between $80,000 and $150,000.
Fixed and Variable Costs
Generally speaking, starting a trucking company can be divided into fixed and variable costs.
Fixed costs include:
- The cost of the truck unit
- Regular maintenance
- Yearly permits
- Insurance costs
Variable costs of starting a trucking company include:
- Fuel costs
- Repair costs
In most cases, the operating costs of starting a trucking business come from variable costs.
Commercial Driver’s License
You must obtain a commercial driver’s license (CDL) to drive a commercial vehicle. The cost of CDL varies from state to state. For example, a CDL in Florida costs $75.
USDOT Number and Motor Carrier Number
USDOT Number, or a United States Department of Transportation Number, is a unique identifier for companies that work with commercial vehicles to transport passengers or cargo in interstate commerce. A Motor Carrier Number or MC identifies trucks that transport regulated commodities for hire in interstate commerce. As a truck operator, you can get USDOT Number and MC Number for $300 per operating authority.
As an owner of a trucking business, you need to set up your trucking company as a Limited Liability Company or LLC to keep your business liabilities and personal assets separate. Setting up an LLC also gives you many tax and legal advantages. The filing fee for an LLC is between $50 and $800, depending on your location.
BOC – 3 Form
The BOC – 3 form establishes that you are allowed to operate in each state you drive. The cost of filing this form ranges from $20 to $40.
IRP Credential and IFTA Decal
You will need to cover two other costs to work across state lines. Based on the percentage of miles you operate in each state, the average cost of the IRP credential is about $1,700 per year, while the IFTA decal costs about $10 per year.
HVUT, or the heavy highway vehicle use tax, is a fee paid annually on heavy vehicles that operate on public highways and weigh or exceed 55,000 pounds. The maximum HVUT is $550 per year.
A load board is an online system that matches truck drivers and shippers and allows freight to be claimed and shipped. If you choose to pay for a load board, it will cost you between $35 and $150 per month.
Is It Worth Starting a Trucking Company?
The trucking industry is very important for the US economy. Without trucking companies, the economy would come to a standstill. That said, starting a trucking company is a profitable business with the potential to make a lot of money.
How Do I Get Loads for My Trucking Business?
One of the most important parts of setting up a trucking business is learning how to find loads. Here are some of the best ways to do it:
- Find a freight broker
- Negotiate directly with the shipper
- Become a government contractor
- Use a truckload board
How Much Can You Make Owning a Semi-Truck?
On average, an owner-operator takes home around $2000 – $5000 per week, while investors can make a profit of $500 – $2000 per truck weekly.
How To Add Trucks To Your Fleet?
Usually, a dump truck service travels less than 150 miles daily, meaning that most business contracts are from your state or local areas. If your city has a lot of construction projects, you have to make sure that you can meet the demands of your locality. Expanding your fleet by acquiring more trucks is a smart decision.
Experienced and reliable operators are difficult to find, so advertising your company as a good operator would attract and likely get the contract signed. Big companies are expert advertisers and deliver more jobs. You can contact them and ask if you can be their subcontractor. It may not pay as much as a direct contract, but every little helps for a company that is just starting.
Some of the contracts’ resources are the Department of Transportation for your state, local government officials, and local business owners who need trucking services. Distribute business cards to potential customers or find an association of dump truck owner operators that you can join.
The trucking business belongs to a highly competitive market. Having the right technology tools, such as telematics and dispatching software, can give you an advantage over more antiquated business models. Besides, these tools can make your life easier your operations will be more efficient.
Due to the increasing economic growth, high demand for commercial goods and products must be transported from one location to another. The trucking industry relies on the orders of residential and commercial construction and vice-versa. Infrastructure improvement is positive evidence that there will be high demands for the dump truck business. The market size of the trucking industry is expected to reach $20.64 billion in 2025.
Read more: Workers Comp for Trucking Companies
Profit Margins for Trucking Companies on the Rise
Before the pandemic, profit margins in 2017 nearly doubled and were anticipated to climb higher. The U.S. trucking companies have greatly improved their sales growth and profitability. The net profit margin excludes use tax and includes owner/operator compensation over their market-rate wages. The adjustments made are common to private companies to accurately perceive the company’s operational performance.
The private freight trucking companies expanded their sales in 2017, and their profit margins expanded to 6% from 2.4% to 4% over the last six years. It is the strongest sales growth recorded since 2014 when sales increased by about 17%.
According to the Census Bureau, the freight trucking companies in the U.S. have less than 20 employees, considering their small businesses. Although there might be positive and negative impacts on small businesses, the business size can be a good advantage for quickly adjusting to market needs.
The cost of starting a trucking company differs from company to company and state to state. Startup costs also vary based on the nature of the trucking company you want to start, including the motor carrier, the cargo you want to haul, the operation you will run, insurance coverage, and more.
Whether your company operates with only one truck, semi trucking, a motor carrier, or a big company, ensuring your vehicles and all business-related resources is recommended. Starting your company can be expensive, including authority insurance.
The type of trucking authority you want to purchase will depend not only on the number of trucks you are operating but also on the kind of truck, a motor carrier, the quantity, and the nature of the cargo.
After you have acquired your authority, you need to consider the operational costs. Learning how much it costs to start a trucking business will help you anticipate expenses and set a budget that you need for your business.
Starting a trucking company is not a small investment and may be costly. It is essential to find the key factors that can influence your profitability. Managing a million-dollar investment is not for everyone, but, if you have the right knowledge and tools, you will realize that starting a trucking business is a good idea after all.
Is It Hard to Start a Trucking Company?
Starting a trucking company in the US isn’t difficult, but it can be expensive. There are a lot of costs you will need to pay before you actually start driving, including the license, plates, insurance, and permit fees.
If you liked learning how to start a trucking company, you might want to know more about tax deductions for truck drivers.