July 8, 2022
What You’ll Need to Build a Profitable Trucking Business
It’s the biggest question you’ll face when determining whether or not starting your own trucking company is worth the risk: How will we make it profitable?
The trucking industry includes many variables that are outside of a driver’s control. These unpredictable variables can have a huge impact on your overall profit — just check out our latest Haulin’ Assets episode to see why in a record month for miles driven, profit dropped by nearly $50k. That’s why it’s critical to get the things you can control, like company policies and practices, nailed down tight, and to have a clear understanding of your fixed expenses before deciding what kind of owner operator you plan on being.
By taking full advantage of what you can control as an owner operator, you will help set your business up for success and be better equipped to handle challenges that arise when the uncontrollable variables don’t add up in your favor.
Here are some of the key variables that are fully in the owner operator’s control when it comes to ensuring a profitable business:
Build a Good Company Structure
One of the quickest ways new business owners can sink their own operation is a failure to stay organized. Many owner operators get into the business of independent trucking after years of experience on the road, but often lack the administrative and technical skills that keep the business afloat behind the scenes.
Some of these responsibilities include tasks like streamlining your company’s pay structure, balancing expenses, and dividing responsibilities evenly within the various roles of your company. All efforts to lower your cost-per-mile or expand your business’ reach are sure to struggle if the behind-the-scenes operations are neglected.
Take special care to tend to this side of the business, either by utilizing freely available resources, hiring employees with the experience you need, or outsourcing critical administrative tasks to other companies who specialize in performing the necessary tasks.
Learn To Be Your Own Accountant (Or Find a Really Good One)
Without knowing how expenses line up with the rates you charge, the routes you run, and ultimately the amount of work you choose to take on, even the most experienced driver can send their own business quickly into chaos. You’ll notice every financial update on Haulin’ Assets has detailed data on total miles run, deadhead miles, total revenue, rate-per-mile, and all other associated costs to trace company finances from month to month.
Keep in mind there are several variable expenses involved in independent trucking subject to frequent change. Budgeting for one month’s expenses may not cover the rising cost of fuel or unexpected maintenance in another. Whether you handle the office duties yourself, hire an accountant, or outsource the job entirely, keeping clear and detailed records in every aspect of your business’ finances is the only way to ensure you’re actually profiting from the jobs you take on.
Remember the golden rule of accounting: never throw anything out. Plus, it will save you a headache in the case of an unexpected audit.
Being Prepared for Various Audits
Clean bookkeeping and readying the business for an audit to go hand in hand. Audits help ensure drivers are kept safe, that equipment is properly maintained and insured, and that all licenses, permits, insurance, and other regulatory requirements to move freight are current and in order. They are a necessary part of the industry, but they can also be an extremely stressful venture if your paperwork is in disarray or missing entirely.
As previously noted, even businesses in total compliance with every rule in the book aren’t exactly thrilled to hear they’re being audited by the Department of Transportation (DOT). The DOT is responsible for ensuring all Federal Motor Carrier Safety Regulations (FMCSR) are properly observed and documented at all times. If they’re in the business long enough, commercial carriers, drivers, vehicles, and shipping companies will all experience a compliance audit. In fact, in the trucking industry, it usually doesn’t take very long to experience your first audit (see for everything you need to know about audits).
While audits can occur at any time via random spot-checks, reports of poor driving, accidents, and weak CSA scores will trigger audits more immediately.
Clearly Define the Type of Owner Operator You Want to Be
The trucking industry is full of specialists. Oversize loads and HAZMAT shipments require special training. Moving temperature-controlled freight, such as produce, presents its own set of unique challenges that drivers have to be prepared to handle. While it’s true that the more types of jobs you can take on, the easier it is to find high volumes of work, specializing in certain types of loads will generally help improve your rates and, with the right endorsements, put your business in a more exclusive market where you can be a sought-after expert for particular jobs.
There are also plenty of owner operators who contract with larger trucking companies on a freelance basis. This skips the need to build your own network of connections that could offer you loads to ship but sacrifices some of the flexibility gained by running the show entirely on your own.
Pay Attention to Your Driving Habits
Setting up your business wisely on the back-end is a must, but when it’s time to hit the road there are still plenty of variables that drivers can control to maximize their profits. The way you drive matters, particularly on long-haul trips in an age of expensive fuel. As covered in a, how driving affects fuel economy, driving fast in a low gear, (i.e. waiting for the engine to run up to an excessively high RPM before shifting) consumes about 45% more fuel than is needed. Practicing good driving habits can dramatically cut fuel costs and increase your fuel efficiency.
The argument for fuel efficiency will always favor automatic transmissions, so if you’re a new owner operator without a rig of your own yet, consider the long-term advantages of an automatic over a manual transmission. Remember to also be cautious of unnecessary idling, which lessens the lifespan of your equipment, and consider the advantages of investing in vehicle aerodynamics. Most importantly, don’t forget about the owner operator’s best friend: fuel cards. You can check out Motor Carrier HQ’s owner, Chris Vernon, frequently discussing the benefits of fuel cards here.