Before beginning the time-consuming process of launching a new trucking company, you need to put a plan in place for how your company is going to succeed. Having a solid business plan can spell the difference between success and failure in the highly competitive trucking industry. In 2013 more than 970 carriers went bankrupt, according to research firm Avondale Partners. Several of those fleets shut down after only a year or two in business. In many cases, their founders underestimated the importance of strategic planning. To formulate a plan that will give your trucking company an edge in the marketplace, you need to answer the following questions:
How Will You Operate?
If you plan on building a fleet, you need to decide how you are going to acquire drivers to serve your customers. You can sub-contract drivers, which means they work for you but are not your employees. This option cuts down on costs such as insurance and required equipment. However, you have less control over sub-contracted drivers and you must share more of your company’s profits with them. If you choose to employ your drivers, you have more control over operations. Your company will own all of the trucks and equipment. This option promises the greatest return on profits, but also involves more start-up capital, insurance and operating costs. To decide which model works best for your company—and to address other operating concerns like whether to lease or own your equipment—you need to understand your market. Which leads to the next question...
What Trucks Haul
- Furniture/manufactured products – 15%
- Metal and machinery – 13%
- Wood and textiles –13%
- Rock and stones—11%
- Used office furniture and supplies—9%
- Grains, alcohol and tobacco—7%
- Coal and petroleum—6%
Source: U.S. Bureau of Labor Statistics
Where Do You Fit in the Marketplace?
The trucking industry is vast, with thousands of competing fleets of all sizes. What part of the market will your company serve? What trucking modes will you specialize in and what kinds of shippers will you serve? How large a geographic footprint will you serve and who are the key competitors in those regions? Success in trucking hinges on identifying opportunities and risks in the market. Doing a simple market analysis will help you better understand industry trends, customer needs and how your company is going to capitalize on them.
How Will You Grow Your Business?
Many trucking companies pin their fortunes on working for just one or two brokers or shipping customers. This approach can limit a carrier’s growth and also spell disaster if a shipper or a broker goes out of business. Before launching your trucking company, compile a list of shippers and brokers you want to serve. Identify key industries you want your company to target. Having a diverse customer base might not be realistic when you first start your company, but set a goal that, eventually, no single source will make up more than 20% of your business. Serving a larger, diversified customer base not only ensures faster growth for your fleet, it protects you from a market downturn or a broker bankruptcy.
How Will You Handle Adversity?
One thing you can always expect in trucking is the unexpected. Breakdowns on the highway, damaged deliveries, accidents, poor safety scores and driver turnover happen to all trucking companies. To operate a successful fleet, you need to anticipate incidental expenses along with your fixed costs. That means having plenty of cash on hand for emergencies. Many trucking companies choose to build up their cash flow through factoring, which advances cash on their invoices within a day. Factoring offers faster funding and lower pricing than Quick Pay, and is more flexible than traditional bank loans. When planning your trucking company’s launch, consider Murphy’s Law (“Anything that can go wrong will go wrong.”) and choose a financing approach that will help you handle unexpected adversity.
Where Will You Be in Five Years?
Many business owners have grand designs for their companies, but never put them down on paper. To ensure that your trucking fleet will grow and prosper, you need to document some measured, achievable goals over a period of time. What will success look like for your company when it hits the five-year mark? Will it have 10 trucks or 100 trucks? Do you plan to grow the business organically, or will you need financing to help meet your goals? What will sales look like, and what kind of headcount will you need to support that volume? A growth plan—and a clear roadmap for achieving your goals—can go a long way in fueling your company’s future success. Putting the plan down on paper for future reference can help you surge ahead of most entrepreneurs who start their own trucking companies.