How to Start a Blooming Transportation Company

26 May 2016

Kady Harper

Kady studied Liberal Arts in Arizona and has completed over 50 hours of community service. Her combination of education and volunteer experience has equipped her to be an asset in several areas. In addition to giving back she enjoys cooking, baking, and anything food related. When she is not in the kitchen you can find her nose deep in a thrilling crime novel.

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During the recession, the transportation industry was almost as dry as a desert. Businesses large and small tried to weather the drought by trimming expenses, and as a result, trucking companies suffered. However, now that the economy is healthy once more, trucking is one of the fastest growing industries in the country.

In fact, in 2015, the industry reported a sales spike of more than 25 percent over the previous year, and industry-wide revenues totaled more than $700 billion ― the highest income in the industry’s history.

Now that the time is ripe for trucking, entrepreneurs should seriously consider the earning power of a new transportation business. Still, trucking requires more care than other startups. To ensure a new transportation venture blooms, entrepreneurs will need the following components.

Equipment

A transportation company’s equipment is its soil. To flourish, the business needs a healthy fleet, including a mix of different types of trucks and trailers as well as any other necessary machinery. Without a fleet, a transportation company is just an office space, so acquiring equipment is usually the first act of a new trucking business.

Yet, obtaining trucks can be one of the most challenging steps of starting a transportation company. Commercial vehicles are not inexpensive, which means most companies will require financing to secure their first set of wheels. Fortunately, there are two ways to get ahold of a truck without having cash in hand:

  • Truck loans: these work just like personal vehicle loans. A company puts money down and makes monthly payments until the loan is paid off, at which time, the company owns the truck entirely.
  • Lease agreements: these allow companies to use trucks without actually owning them. There are two varieties of lease: operating and capital. The former relays no benefits and responsibilities of ownership onto the lessee (meaning the owners assume costs regarding maintenance and insurance), while the latter allows the lessee to take smaller steps toward truck ownership.

Of course, while deciding how to finance a fleet, a new trucking company should research what classes, makes and models it needs. Unscrupulous salesmen may try to push naïve companies toward expensive models, so companies should be certain they visit a dealership they can trust to fulfill their needs for a tough, durable fleet. Nextran Mack Truck dealers is a great place to start.

Networks

No transportation company is an island. In fact, a company’s network of truckers, trucking associations and industry experts is the fertilizer that helps the company grow faster and stronger. Entrepreneurs new to the industry need guidance to ensure they don’t waste time or money on fruitless endeavors. Connecting with experienced trucking professionals, like those in the American Trucking Associations (ATA), the National Association of Small Trucking Companies (NASTC), the Owner-Operator Independent Drivers Association (OOIDA) and other regional groups could provide new business owners with invaluable advice for starting a transportation company.

Customers

As the seeds of a growing trucking company, customers are necessary to keep a company operational for years to come. Unfortunately, finding customers can be difficult if business owners don’t know where to start. Often, companies take advantage of online loadboards, which are complicated matching systems that bring customers and companies together using certain criteria.

On one hand, loadboards are extremely convenient, and many paid loadboards provide useful additional services, such as credit checks and invoice factoring. However, some transportation companies avoid loadboards due to the extreme competition for jobs found online, which lowers rates and limits profits. Worse, loadboards prevent companies from developing long-term relationships with clients, which stifles growth.

Efficient Finances

Entrepreneurs (even those in the transportation industry) are dreamers, which means boring administrative tasks like managing money often fall to the wayside. Businesses can survive for a time without organized expenses, but like sunlight to plants, efficient finances are necessary for a company to truly succeed.

Cash flow problems are common amongst younger transportation companies, as traditional billing schedules are often 40 to 60 days after delivery. Yet, most expenses are frequent and regular; costs like fuel and maintenance must happen whether a company has the funds or not. Sometimes, companies lose money to competitors because they must wait for past clients to pay. Having a competent and orderly back office should prevent the grounding of a new fleet and ensure relatively stable income during the rocky first years of business.