Trucking industry trends and experts expect an increase of 75% in the freight revenue in the next nine years. Five years ago, the industry revenue surpassed $726.4 billion, so starting your trucking business today can be profitable. It is the backbone of keeping things going, and as long as people require the products, moving freight will be a necessity in the coming years.
There might be some larger trucking companies with thousands of truck drivers, but don’t let it intimidate you because 90% are small fleets of 6 trucks, which gives others chances to get their own company started even with one truck.
How to start a trucking company
1. Apply for Trucking Authority – Forms
Paperworks and documentation can be tedious, but these are necessary things needed to get your trucking company started through earning trucking authority. First, make sure to register for a US DOT number by signing a DOT number form. Note that the old MCS-150 form is only for updating the existing US DOT number and not getting a new US DOT number application.
As a company owner, in order to get a US DOT number, you will have to use the Unified Registration System, with a processing time of 20-25 business days. If you already have your US DOT number and want to apply for operating authority, you must complete the registration form and pay the required $300 fee.
2. Choosing a Process Agent
In regards to court papers, you have to choose a process agent who can represent you. A process agent is needed for each state where your trucking business will operate. In case of issues, besides the state your company is registered in, the court papers need to be served. You can find the list of agents from the FMCSA. The process agent’s responsibility is to complete your Form BOC-3 on behalf of your company.
3. Truck Insurance
Before you get your trucking company into full operation, make sure that it is adequately insured. One of the trucking companies’ requirements is to get liability insurance to cover possible damages or injuries due to operating a commercial vehicle. You can look around to get different quotes before you make a decision on which insurance provider is the right one for your trucking company.
4. Buying or Leasing a Truck
To start a trucking company, you can purchase or rent trucks, depending on your needs. If you have the capital to fund the cost and operate a small fleet with a few trucks, you can buy several trucks at once, as you may get a discounted price per truck.
You can also look for trucks for lease, which cost less per month, and sometimes they have a lease-to-own option. Bear in mind that restrictions apply to lease, which can vary from dealer to dealer. So take your time to search and compare dealers to find the best option before selecting.
5. Choosing the Right Truck and Trailer Equipment
Choosing the proper equipment in buying the truck freight can be a great factor in your trucking company’s earning potential. Even though freight rates vary every week, the flatbed truckloads pay higher than the average rate. However, the reefer, van, and step deck load pay a reasonable rate as well. At the same time, the location also plays an essential role in determining freight rates.
6. International Registration Plan (IRP)
Proper registration of vehicles through the International Registration Plan (IRP) allows freight to haul interstate loads and freight through Canada without the need for additional registrations. An apportioned license plate and cab-cards will be provided to display all jurisdictions.
The IRP registration fee ranges from $1,500 – $2,000 and will vary depending on the state and vehicle weight.
How to Start Trucking Company With No Money
Trucking is one of the major industries in the U.S. But most people would say that a trucking company to get started operating needs a lot of money. 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 needs 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 use in starting your trucking company. Loans have different rules and terms, so you should consider comparing loans using monthly payment, down payment, and every detail. To qualify for a loan with a food interest rate, you need to have good credit and work history.
Trucks and other equipment can cost much, and to avoid paying for these pricey items, consider renting them instead of buying. Use an equipment lender instead of paying a large sum of money and paying them on installment. Renting equipment can be an easier way than searching for the right financial institution.
Lease To Own
If you don’t want to spend money on a rental, you can consider the lease-to-own option. 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 few 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 to start with. Some loans don’t require down payment and others even allow poor credit. Many companies specifically finance truck loans; all you have to do is a little research. Explore these options and find out what works best for your situation.
Is owning a trucking company profitable?
Owning and knowing how 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’s price can affect the company’s cost of operation. The dump truck service is a $19 billion industry expected to rise by 1.8% every year for the next five years. Hence, operating a dump truck company needs money and several startup costs.
In 2018 data, the necessary startup budget for a dump truck company with one owner operator who is also the driver is around $175,073. The cost per truck depends on finding a decent used truck. Starting with a used truck is a good start, and you can later acquire a new one when you have enough experience and cash flow.
The predicted year-one total income is $200,000, with the estimated driver wage of $44,000 yearly based on the U.S. Bureau of Labor Statistics for dump truck drivers. The shortage of truck drivers has contributed to the increase in the driver’s salaries in the past years. However, the state regulatory fees may vary from one state to another.
Average Marginal Operations Costs
The following is the Average Marginal Operating Cost for the trucking trade from the ATRI data.
- Fuel costs 21%
- Truck Payments or Lease 16%
- Repairs and Maintenance 10%
- Truck Insurance Premiums 5%
- Permits and Licenses 1%
- Tires 2%
- Tolls 2%
- Driver Wages 33%
- Driver Benefits 10%
- Total 100%
Fuel costs are the main expense aside from the wages of your employees.
Going From One Truck to More
Usually, a dump truck service travels less than 150 miles a day, which means that most business contracts are from your state or local areas. If your city has a lot of construction projects going on, you have to make sure that you are able to meet the demands of your locality. Expanding your fleet by acquiring more trucks is a smart decision.
According to the report of ATRI or American Transportation Research Initiative, 2017 Survey says that 26% of all trucking corporations own and run 26-100 trucks with an annual median gross income of $17,797,000. Working with one truck to 10 or 26 may be a considerable risk, but a business plan with specific financial goals and market reach can significantly improve your chances for success.
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 reach out to them and ask if you can be their sub-contractor. 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 operator that you can join.
The trucking business belongs to a highly competitive market, and having the right technology tools such as telematics and dispatching software can give you an advantage over more antiquated business models. Besides that, these tools can make your life easier your operations will be more efficient.
Due to the increasing economic growth, there are high demands for commercial goods and products that need to 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.
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 shown a huge improvement in 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 for as much as 14.9%, and their profit margins expanded to 6% from 2.4% to 4% from the last six years. It is the strongest sales growth recorded since 2014, where sales increased by about 17%.
According to the Census Bureau, the freight trucking companies in the U.S. have less than 20 employees, considering them 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 that you want to get started, including motor carrier, 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 nature of the cargo. After you have acquired your authority, you need to consider the operational costs. Learning how much does it cost to start a trucking company will help you anticipate expenses and set a budget that you needed for your business.
Starting a trucking company is not a small investment and may cost much. 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.