The trucking industry is one of the most profitable sectors nationwide that largely contributes to the United States’ economy. One of the main reasons is because the country boasts a robust infrastructure of major roads and highways, making trucking the best freight transportation.
Statistics show that truckers haul 71% of all the United States’ freight, roughly translating to over $700 billion in shipped products and goods per year. However, there’s still an ongoing driver shortage and rising freight demand. So, what better time to start a trucking company than now?
To help you establish your own trucking business, here’s everything you need to know about how to start an owner operator trucking business, ensuring long-term cash flow.
How to Start a Trucking Company
The trucking industry is heavily regulated, so before you can start your operations, there are several things you need to consider to ensure optimal success. But, before we go into the nitty-gritty, let’s take a better look at the profitability aspect and whether it’s even worth it to start a trucking business.
How Profitable is a Trucking Business?
The trucking industry in the United States is a multi-billion dollar sector that offers lucrative opportunities for aspiring business owners. A clear profit exists for trucking businesses as they can gain over 4.8 cents per operating dollar they spend.
However, it’s incredibly competitive, and usually, the truckers that get into the business fail in their first year of operations. So, before you dive into the industry, make sure you have a backup plan with the essentials on board to establish a successful long-term business.
Is Starting a Trucking Business Worth It?
The trucking industry is ever-expanding, with the sector eclipsing over $700 billion in revenue starting from 2015 to 2020, and if you’re considering starting a trucking business, now’s the time. That’s because the demand for truckers is still increasing. They serve as the pillar in keeping things going, and as long as consumers need goods, hauling cargo will be essential.
That said, here’s a detailed guide on how to start trucking companies.
What Do You Need to Start a Trucking Business?
1. Develop a Business Plan
Like most businesses, starting a commercial trucking company requires a lot of planning and preparation to ensure smooth operations and success. Even if it’s a small business, the trucking industry usually involves many ‘moving’ elements, including managing truck drivers, deadlines, vehicles, goods or products, and other logistical challenges.
That’s why having a business plan is crucial for owner-operators or an individual owner or operator, helping you make an operational strategy, ensuring seamless business operations when your trucking business is up and running.
When starting a trucking company business plan, it should include the following elements:
- Executive Summary – This consists of a brief explanation or overview of why you’re forming the trucking business and what your plans for it are.
- Mission Statement – This will articulate what your business does, its operations, and its goals.
- Trucking Company Goals and Objectives – This should include your business’s specific metrics, including the annual revenue target and the number of clients that you can use to measure your business’s progress and success over time.
- Marketing Strategy – Your business plan should define who your target demographic is and give a clear picture of what your competitors are doing.
- Financial Plan – Every great business plan contains a current balance sheet, break-even analysis, and budget for the year.
2. Name Your Truck Business
Whether you’re an owner-operator or a sole owner, it’s wise if you come up with a catchy business name for your company.
Once you’ve chosen the name, make sure you do the following legal measures:
- Secure the domain name.
- Trademark it.
It’s wise to take the necessary legal measures to avoid any conflicts regarding your company’s brand name, ensuring you get all rights reserved.
3. Secure Funding
Generally, starting a trucking company, you can expect to invest around $10,000 to $30,000, covering the costs of down payments for the trucks, permits, licenses, insurance, salary for the truck drivers, and state-specific fees.
If you’re worried about how to start a trucking company without funds, there are many ways you can secure funding for your new trucking business, including:
- Finding investors – Depending on the business framework you pick, consider selling equity in your company through investors. Funding your company through venture capitalists free you from having to pay the money back, like with loans. However, it involves joint ownership, meaning you need to consult with investors before making any business decisions.
- Applying for a Reasonable Loan – There are plenty of loan products you can choose from, but make sure you compare quotes from different lenders to see which one suits your business the best.
Besides the options mentioned, you can also use a home equity credit line, sell properties, or use your savings to finance your new trucking company.
4. Choose a Legal Entity
Like with any new business, you must determine what type of legal or tax structure you want your trucking business to have. The four options you can choose from are:
- Sole proprietorship – It means you will be the sole owner and operator of the business with full responsibility concerning funds, debts, assets, and liabilities.
- Corporation – It creates a business entity that provides protection against possible lawsuits against personal assets.
- Limited Liability Company (LLC) – As the name suggests, it limits liability by setting a boundary between personal assets and the company as well as offering numerous legal advantages.
- Partnership – It is a legal structure between two or more individuals who join together to carry on the trucking business.
Although the final decision will be up to you, most startup trucking companies choose to start under an LLC structure because it shifts liabilities to your company and offers a more reasonable tax structure.
5. Meet Legal Requirements
Here are the legal requirements the trucking industry requires:
Commercial Driver’s License (CDL)
If you run an owner-operator business and plan on operating a heavy truck or hire drivers to drive the vehicle, everyone will need a valid commercial driver’s license. If you want to get this license, you or your drivers will need to undergo an extensive background check, training, take written exams, and a final driving test. For truck drivers to be eligible for a commercial driver’s license, they need to be at least 18 years old for local routes and at least 21 to operate a truck from multiple states.
However, all states have different requirements for this, and the best you can find out what you need to get to obtain the license is by picking up a manual at your local DMV office.
U.S. DOT and Motor Carrier Authority Numbers
Both the U.S. Department of Transportation (DOT) and MC numbers are required for a trucking company to transport cargo throughout the United States. The USDOT number keeps track of your business’s safety records and compliance with the legal requirements.
Meanwhile, your Motor Carrier number or ‘operating authority’ indicates what type of trucking company you’re operating and what kind of products you’re legally permitted to haul.
You can get both the USDOT and MC numbers by registering your truck business with the FMCSA. For owner-operators, you’ll need to complete an MCS-150 and Safety Certification application to get these numbers. The same goes for hired truck operators or drivers. Although you’ll get the numbers after filing your application, your request will still need to be reviewed by the FMCSA.
2290 Tax Forms for Heavy Vehicle Use Tax Regulation
If your truck weighs over 55,000 pounds, you’ll need to pay heavy-highway vehicle use taxes under the heavy use tax regulation. You can pay for these fees by completing and filing a 2290 tax form with the IRS every year.
International Fuel Tax Agreement
Governments have established the IFTA agreement to make the reporting of truck fuel consumption easier across the United States. This agreement allows any legal company in the trucking industry to have a single fuel license that owners need to file quarterly fuel use tax returns in their location. Moreover, your trucks must have an IFTA decal on them, which should be renewed every year.
If you want your truck company to work for hire across states or the national borders, you’ll need to get an interstate operating authority. You can achieve this by registering a current BOC-3 form with the FMCSA, allowing you to designate an individual in each state where your business operates, acting as a legally permitted ‘process agent.’
Standard Carrier Alpha Code
If you plan on letting your truck operators or drivers haul high-profile goods such as those classified as military, government, international, and intermodal, you’ll need a SCAC code. You can get this privately controlled code from the NMFTA.
Unified Carrier Registration
The trucking industry created the UCR system to verify active insurance coverage in the states where a motor carrier may operate. For you to register for the UCR, you’ll need to have your USDOT and MC numbers, so make sure you take care of that first with the Federal Motor Carrier Safety Administration (FMCSA). However, if you want to learn more about the system, it’s wise to consult with the nearest DOT.
International Registration Plan
If you want your drivers to operate in all states, you’ll need to get an International Registration Plan (IRP) plate. You can get this plate at your local DOT, and it usually requires you to pay registration fees which vary depending on the distance made within the state lines and Canadian provinces.
6. Purchase Your Assets
A single truck can cost you around $15,000 to $175,000. If you have tucked away funds and decide to buy personal assets, it’s always better to settle for quality than quantity — especially when it comes to massive commercial vehicles. Purchasing used trucks might seem more economical at first, but soon your startup costs will increase due to needs for repair, maintenance fees, and downtimes.
If you do not have the means to purchase a truck, leasing might be another option. However, its costs will be more later on compared to owning the trucks you operate with.
7. Insure Your Assets
Having trucking insurance protects your trucking business from an unexpected financial crisis and covers risks like vehicular damages or injuries due to accidents.
Different trucking companies typically buy various insurance coverage options, but the most common ones include:
- Auto insurance
- Primary liability insurance
- Cargo insurance
- Passenger personal accident insurance
- Collision insurance
8. Hire Employees
Unless you want to run your trucking business following the owner-operator structure, you’re going to have to hire some employees. Positions that you should consider adding to your business include:
- Payroll Managers
- Logistics Coordinators
- Dispatch Operators
9. Market Your Business
Here are some different marketing strategies that will ensure steady income flow:
- Create a professional website with detailed information about your trucking business and services.
- Make marketing materials such as a memorable logo and brochures outlining the services you offer.
- Use online load boards where truck owner-operators, brokers, shippers, and carriers can post and search for loads.
- Develop business relationships by attending events and trade shows.
The trucking industry is a $700 billion sector in America alone, and the demands are still increasing. Don’t be intimidated by the bigger trucking businesses, and start your company today.
However, you should know that to establish a successful trucking firm, you’ll need to develop a solid business plan, research and meet the many legal requirements the industry mandates, and purchase and insure your assets as rigorously as possible.
We hope this checklist helped you understand the industry and has encouraged you to start a trucking business even more. Take advantage of the ample and profitable opportunities the trucking industry offers for a more prosperous, lucrative, and rewarding career.
Interested in finding more information about the trucking business? Here’s what you need to know about the average cost of commercial truck insurance.