Trucking Out on Your Own: Accounting for the Costs of Starting a Trucking Company
With more than 350,000 independent owner-operator truck drivers in the US, it’s clear that this is a burgeoning industry, and one to consider if you want to become a small business owner in the trucking industry. You can set your own hours and travel schedule, and choose between local and national routes. What’s not to love?
The Big Picture
Whether you have a single truck that you drive yourself or a fleet of them that your employees drive, entering into the trucking industry isn’t cheap. You’ll have your upfront costs, like the trucks themselves, as well as licenses and permits to get started. Then you’ll have your ongoing expenses, like gas and truck maintenance. It’s important to price your services so that you’ll cover these expenses and make a profit. It costs about $180,000 a year to operate a commercial truck.
Getting Set Up
Before you even buy your first truck, there’s a lot that needs to happen. First, you need to check with the US Department of Transportation to find out what sort of insurance policies you are required to purchase. The cost will depend on how big your fleet is and what you’ll be carrying.
Then, check with the Federal Motor Carrier Safety Administration to see what forms and licenses you’ll need. Each driver will need a Commercial Driver’s License.
It’s also a good idea to incorporate your business so that you create legal protection around your personal assets. Trucking is a highly volatile industry with lots of lawsuits, and unless you want your assets to be at risk, incorporating is the safest route.
Every business, trucking or otherwise, needs certain business licenses, so check with your city, state and county to find out what’s required. You’ll likely need a general business license, sales tax license and maybe one for conducting business across state lines
The Big Expenses
Once you take care of the administrative aspects, start looking for real estate. You need docking and parking for your fleet when it’s not in use, as well as office space for administrative tasks.
As far as your fleet goes, start small and add to it as you grow. This frees up your cash flow and lets you scale as your business attracts new customers. You can buy used trucks, but make sure they’ve been well-maintained and have accurate maintenance records. What you save in buying used can sometimes come back to bite you when you have costly repairs. Typically, used trucks between five and 10 years old can be good deals while still being reliable.
Now it’s time to hire employees. You can hire subcontractor drivers or employees, depending on your preference. Keep in mind: employees will eat up about 26 percent of your overall expenses, so make sure you hire qualified and experienced drivers.
The Little (but Necessary) Expenses
The rest may be small in terms of overall cost, but they’re ongoing and essential for the success of your business.
Tolls: If your team will be driving on highways, they’ll likely encounter toll roads. If they’ll be driving on the same roads over and over, invest in an automated account that will deduct funds each time they pass that toll booth. Usually, you can save a bit from what you’d pay in cash when you do this.
Gas: There’s no getting around your need for gas! Fortunately, at the moment, gas prices seem to be steady. It may be worth it to have your employees download an app, such as Gas Buddy, to find the best priced gas in your vicinity. Saving even 5 cents a gallon makes a difference when you’re purchasing hundreds of gallons each week.
Tires: Tires can easily cost $4,000 a year, depending on the size of your fleet. Be smart and look at retreading when possible, rather than purchasing completely new tires.
Repairs & Maintenance: Keeping your fleet well-maintained is essential to the trucks lasting a long time. That means getting oil changes and other standard maintenance on time and not putting it off to save a little money. This category can cost 10 percent of your overall expenses, but it can easily creep up beyond that if you let problems get bigger and costlier.
Building These Costs into Your Business Plan
Now that you’re aware of the expenses of running a trucking business, you can use them to build a financial budget in your business plan. It’s important that you have enough for your first year of expenses rather than assume you’ll quickly turn a profit that can cover those little, ongoing expenses. The last thing you want is to run out of money and have employees to pay.
Consider financing your trucking business. If your credit is good, you should have no problem securing either a larger small business loan or a smaller working capital loan.
Do the costs of starting a trucking company surprise you? Share your thoughts in the comments below.