Making a New Trucking Company with Your Motor Carrier Authority
Applying for your Motor Carrier Authority and starting a trucking company of your own is a not only exciting, but can also be very profitable. However, running a successful trucking company is more than just knowing how to drive a truck. So what makes a good business owner? The following tips will help you start your business in the right direction.
1 – Get the right equipment
Getting the right equipment is the first and most important part of starting your trucking business. Once you find the right equipment, you’ll need to decide whether or not you want to buy or lease the equipment. Unfortunately, either one of these options can be costly.
Leasing equipment can be complicated, however, in some cases it can lower payments and often times requires a lower down payment. There are two types of leases. One can be structured like a rental, where you pay a monthly fee for the use of equipment. The other type of lease can be structured so that you own the equipment after the last payment.
Buying the equipment is an easier route. You can take out a loan with a down payment and purchase the equipment. As long as you make the payments, you own the equipment.
Both options have their benefits and drawbacks, but depending on your situation, one may be a better option for you. To find out what works best for you, meet with a CPA who specializes in small businesses. The visit may cost $100-$300, but it will help you save in the long run.
2 – Get the right customers
When starting out, you may get your first shipping customers from a load board. However, load boards are very competitive, which means you’ll have to bid low, leaving little room for profits. To top it off, load boards aren’t usually long-term clients, making it so you have to constantly be searching for new clients.
Only use the load boards to get started. While you’re using the load boards, make sales calls and build your own customer list. This can be hard work, but it’s a smart way to start your business. Eventually your list will grow and you’ll have repeat customers and they will be your most profitable clients.
3 – Know your expenses.
When making a bid, you need to make it low enough to be competitive and high enough to make a profit. The only way to know the right bid is to know your expenses. This includes maintenance, truck repairs, truck and trailer payments, fuel and cost of your work. Ideally you want to know exactly what your cost per mile is to operate your truck. Often times, people forget to include costs like tire replacement, cost of the truck and trailer, insurance and other general overhead costs when calculating cost per mile.
You should also factor in costs for pulling a load through a congested area, which can add difficulty. Remember, once the load is delivered, you need to find a load nearby or head back home. The cost of deadhead miles can easily kill a profit.
4 – Avoid cash flow problems.
Many trucking companies experience cash flow problems, especially when they are just getting started. Often times this is because many shippers payment terms are net 30, meaning you don’t typically get paid until 40-60 days after you deliver the load. Because of this time lapse, expenses come ahead of revenues, making it difficult to keep fuel in your truck and pay your other bills before you actually receive payment.
One way to solve your cash flow problem is by using a freight factoring service like iThrive Funding. Having a factoring service can reduce your stress by eliminating the delays of getting paid, getting you money within 24 hours. They’ll also eliminate the hassle of invoicing, making collection calls and the worry that you won’t get paid by some of your brokers. This accelerated payment allows you to cover your expenses and take on new loads.
Now that you know what to consider with your future motor carrier company, it’s time to get started. Motor Carrier HQ can help by filing for your new Motor Carrier Authority at a low cost; it’s as simple as filling out an online application. Paperwork can slow you down so let us worry about that and you can focus on what matters most, your future business. If you prefer, you can always give us a call at 866-739-2032 and we’ll get your information over the phone and help you develop a customized game plan for getting your business off the ground.