A new trucking business can find it difficult to exist and grow with big competitors owning the majority of the market space. Though it is a lucrative industry, new truckers try to enter the market every year and a good chunk of them fail to survive. The issue does not lie with the ability of trucker,s but their lack of knowledge in business management. New truckers need a truck factoring company. Honestly, it is much more than driving a truck on a selected route. Let us discuss on the prerequisites and the necessary component required to make a trucking business successful.
The first step in becoming a successful trucking company is identifying the perfect market niche. The market niche will be solely responsible for the type of equipment to be acquired, the fees to be charged and finally the number of freight lanes that can be serviced. Since there are big competitors in the market focusing on the mainstream loads, it is advisable for new businesses to focus on a special segment of loads which is of no interest to the well-established firms.
An example of hauling a different segment of load can be transporting meat in refrigerated trucks which has its own advantages, such as less competition and its feature of sustainability during recessions.
The next step is to charge the optimum fees per mile. It is important to set a rate that would compensate for the costs incurred for operations, along with a good profit margin for the growth of the business. This should be done prior to making contact with shippers.
Now that we have mentioned the cost of operations, it is important to have a detailed estimate beforehand for ensuring real profits as projected on paper. There are two parts in operation costs, one is a variable and the other is fixed. The fixed costs include insurance, permits, and payments of trucks which remain the same irrespective of the current economic situation. The variable costs depend on the miles driven and the ever-fluctuating price of fuel. Combining both the parts, the management should come up with the “all in cost per mile” which is the most important parameters and decides the course of business.
A component of the variable cost is fuel. Starting from newbies in the business to experienced professionals, they all make a mistake at some point in efficiently acquiring fuel. Believing in buying fuel with the cheapest pump price is a myth and can cause serious losses due to tax issues. So it is suggested to buy the cheapest fuel irrespective of the pump price.
Brokers somehow manage to creep in the business. Though being useful during the initial days, they turn out to be very expensive. Though their commission is well justified, one should aim to minimize the cost on brokers by directly working with shippers that eradicate the requirement of a broker.
Maintaining a smooth cash flow is an important aspect of the business. Invoices from shippers take two …