When most people think about booming industries in the U.S., trucking might not be the first one that comes to mind. But one drive on an interstate should tell you all you need to know about the demand for trucking and haulage companies. And if you’ve been thinking about starting a business of your own and love driving and/or logistics, a trucking company may just be the right fit. Just over 70% of all U.S. freight moves through trucks, which means that there’s always a demand for trucks—and, more importantly, trucking companies.
There are plenty of good reasons to figure out how to start a trucking company: high demand for your services, plenty of high-paying jobs to go around within a company, and enough room for industry growth to make it sustainable for a new trucking company to enter the fray.
If you want to know how to start a trucking company, there are plenty of factors to consider. You’ll have to determine how large you want your trucking business to be (it can be as small as just one driver), what kind of business entity you want to set up, and how you intend to get the capital to get (and maintain) your fleet of trucks. We’ll break down what you need to know about how to start a trucking company from start to finish, and help you make the right decisions to get your trucking business in high gear.
4 Reasons to Start a Trucking Company
Finding success as a new business in any industry is far from a guarantee. Some are more challenging than others, largely depending on the overall demand for services, the costs involved, and the ability to scale a company with minimal hassle.
Thankfully, trucking companies have all three of these major factors in their favor. Demand is high, and looks poised to stay high so long as the economy stays strong. Better still, goods always need to be shipped no matter the economic climate, which helps provide the industry with a financial bulwark during a recession. The costs involved in starting a trucking business are somewhat fixed as well, with driver salaries being the biggest area of fluctuation. Last but not least, trucking companies can be as small as a single driver with a leased truck or as large as a multi-vehicle fleet with several employees.
Here are the top four reasons why learning how to start a trucking company could be a great decision for you. There are plenty of others (as well as a few potential downsides), but here are the most important pros to starting a trucking business.
1. There’s a Major Shortage of Drivers
The trucking industry is forecasted to need 100,000 drivers in the near future, and companies are desperate to find drivers to fill the void. When you want to figure out how starting a trucking company, this will likely provide you with a tactical advantage, considering that you’ll be helping to fill a need for more trucks and drivers.
Getting drivers can be a competitive gambit, no doubt, but you can set your trucking business apart by offering more than just good wages. Health benefits and 401(k) plans as well as other perks and incentives should be on your radar when setting up your trucking company’s employee benefits package.
2. There’s a Need for Innovation in the Industry
The lack of truck drivers isn’t the only hurdle most trucking companies are up against. There’s also a need to continually innovate—this means finding more efficiencies with your fleet, setting up less fuel-intensive routes and logistics, and delivering value for clients.
This is not an easy feat; if you’re able to innovate and run your business in a way that provides you with a competitive advantage, you’re likely to set yourself up for long-term success and a full roster of clients.
3. A Strong Economy Means Greater Demand
The decade-long economic boom has created a need for more trucks on the road as consumer confidence leads to increased spending. As a trucking business owner, you’ll play a pivotal role in getting goods to stores and warehouses. Trucking is the backbone of the country’s economy, which means that you’ll be primed to keep the financial gears churning by getting things where they need to be.
Even in a down economy, there’s still a need for trucking companies to get goods and materials across the country. While not entirely recession-proof, trucking is certainly better prepared to withstand an economic decline as it provides a service that people need in any economic market.
4. It’s Easy to Start Small (and Scale)
Whenever you can start a business without having to take on a ton of overhead or capital expenses, you’re making the path toward profitability substantially shorter. You won’t have to invest as much into your trucking company before it turns a profit, and you can better expand your business as demand grows (rather than following your profit margin toward a magic number for sustainability).
Trucking companies can be as small as a sole proprietorship (more on that later), which lets a driver operate his or her own business without the need for additional employees. Other business entities make it easy to start a trucking business in whatever size is most comfortable for you.
How to Start a Trucking Company: The Basics
If you’re still with us so far, odds are you’re ready to make the plunge into starting your own trucking company. Now that you’re convinced, let’s get into how to start a trucking company by looking at the top-level tasks you’ll need to accomplish before you get on the road and join a great big convoy.
Write a Business Plan
It might not seem like you’d need to write a business plan for a trucking company, given that the basic operating premises are somewhat straightforward. Writing a business plan, however, helps you keep focus on core parts of your company. A good business plan lays out the reason for your company’s founding, the capital required in order to get started, financial projections that display costs versus anticipated profits, and other strategy details.
A business plan helps keep you focused on building your company according to a blueprint, which is especially helpful as you get into the dirty work of getting started and may not have time to refocus on your overarching strategy. Just as importantly, you’ll also need a business plan as part of just about any small business loan application. You’ll be glad you created a plan before you start applying for funding, as the process will be smoother.
Register Your Business
Once you’ve written a rock-solid business plan, the next step you’ll want to take to start a trucking company is to register your business with any local or state governments that require it. Most, if not all, states will require you to get a business license if you intend to headquarter your business within its boundaries.
The process of incorporating your business is relatively straightforward, even if it’s a little paperwork-heavy. Typically all it takes is some supporting documentation about the company’s principals and founders, tax identification information, a general business agreement, and a few other materials about your soon-to-be company (which largely differ depending on the state you’re registering in).
You’ll want to take a look at the different kinds of business entities available to you before submitting your paperwork. Each business entity offers different personal liability protections, taxation methods, ownership structures, and other technical differences. If you’re starting a one-person, self-owned trucking company, look into sole proprietorships and limited liability companies (LLC). If you’re establishing your company with a business partner, you will also want to consider the different kinds of LLCs designed for partnerships (limited liability partnership) and corporations. There are other business entities out there as well worth considering, but it’s best to start with these two categories and determine from there whether or not you need to go with something different.
Get Any Required Insurance and Licenses
Trucking companies face unique challenges and liabilities, which makes it crucial that you line up all the required licenses and insurance policies as required by your state of operation. You’ll need to get these policies and licenses set up before your first shipment hits the road.
As regulations vary by state, consult with your state’s guidelines to find out exactly what you need in order to stay on the right side of local regulations. Some types of insurance you’ll likely need include public liability insurance, cargo insurance, bobtail, and physical damage insurance. If you’re unsure about exactly what insurance and licensure your trucking business requires and whether you’re fully compliant, it’s always a good idea to consult with a lawyer to help make sure you’ve taken all the legally required steps before starting your trucking business.
How to Start a Trucking Company: The Financials
Trucking can be lucrative, no doubt. It’s also guaranteed to require a fair amount of capital to start a trucking company—a commercial truck costs around $80,000, after all. Then, of course, there’s the capital that goes into keeping your fleet operating at peak performance. Unless you’ve got deep pockets or private investors, odds are that you’ll need a bit of extra financing to start your trucking company, to grow your business, or to keep things running smoothly.
The good news is that there are a ton of business loan options available to you, each with different advantages and disadvantages, depending on what your needs are. We’ll go through a few of the most common kinds of small business financing that works for trucking businesses, as well as what you’ll need in order to improve your odds of qualifying.
Small Business Administration (SBA) Loans
You’ve likely heard of SBA loans, as they get talked about quite a bit with regard to financing a new business. That’s because they come with low interest rates, high loan totals, and generous repayment terms. The SBA doesn’t offer these loans itself: rather, the administration partners with banks to dole out loans, with the SBA guaranteeing up to 85% of the loan’s total in the event that the borrower can’t make repayments.
These loans are great for businesses that need access to cash and can be a great way to start your trucking company—but SBA loans are notoriously hard to get. You’ll need a long and established credit history, a good credit score, and a high tolerance for paperwork. The SBA reserves these loans for only the best candidates, and one of the main deciders of who does and does not fit the bill comes down to how much information a candidate can provide within his or her application. Check this full list of SBA loan types to find the right one for your needs.
Equipment Financing Loans
If you don’t qualify for an SBA loan, or are put off by the steep requirements and long application process, there are other options out there to help you start your trucking company. For instance, equipment financing loans are among the top SBA loan alternatives, in fact, as they also come with borrower-friendly repayment terms in most situations. These loans are also a great option for borrowers who are looking to finance specific purchases, as they’re designed with this explicit purpose in mind.
Under the equipment loans umbrella, there is also commercial truck financing, specifically to help trucking business owners buy or lease new or used trucks, or to repair or upgrade a truck they already own. The way this type of loan works is you will approach the lender with a quote for exactly how much your equipment (in this case, most likely a truck) will cost. If approved, the lender then provides you with the appropriate sum of money, which you’ll repay (plus interest) over a fixed amount of time. These loans do not require external collateral, as the equipment itself serves this purpose. This means that the bank can repossess your truck if you stop making payments on the loan—because of this, though, these types of loans are typically easier to obtain because there’s a safety net of sorts for the lender.
Trucking companies that need money to help buy machinery have a great option in equipment financing loans. They often come with lower interest rates too, which makes them an affordable alternative to term loans.
Small Business Term Loans
Another option to help start your trucking company is a business term loan. These are the kinds of loans you typically associate with lending from a bank. A lender provides a certain sum of money to the borrower to be repaid during a set amount of time. The interest rate associated with the loan may stay fixed throughout its duration, or may vary based on economic factors. So, too, can the payment amounts, depending on how the loan is set up in the first place.
While short-term business loans are easier to get than SBA loans—chiefly because they have lower credit requirements and easier applications—this convenience comes at a cost. Term loans usually have higher interest rates, lower loan tallies, and must be repaid much more quickly. If SBA loans and equipment financing don’t work for you, though, term loans can be a good way to get the money you need quickly so you can start your trucking business.
How to Start a Trucking Company: The Bottom Line
Learning how to start a trucking company can sound complex. In reality, it’s not dissimilar to the steps involved in starting a small business of any other stripe. Your equipment costs may be a bit higher, and the hunt for talent a bit more competitive, but the underlying principles involved in starting a trucking business are still the same. With the right business plan, licensure, and financing in place, you too can get the wheels rolling on your trucking business in no time.