Small businesses aim to survive, thrive, and grow by spending less and earning more. While this is a logical approach to small business financial management, it’s far from comprehensive. So, if you’re planning on launching a small business, the first place to start would be to find the sweet spot between what you know how to do and what the economy needs right now.
One business that appeals to entrepreneurs is the idea of running a trucking company–because, if done right, it can be a highly lucrative business. It’s a great business to start because small, medium, and large businesses all over the country need truckers for fast, safe delivery of their goods. The trucking industry manages more cargo than planes, trains, and ships, and trucks are necessary to transport goods from airports, rail yards, and docks to their destination.
Although trucking is a lucrative field, there are some major obstacles that you’ll need to be overcome related to cash flow, startup costs, competition, red tape, and driver retention.
Invoices Aren’t Paid on Time
It’s common for customers to expect a 30- to 60-day credit, and some brokers and shippers even ask for 90 days. This extended period between when you do the work and when you get paid for it can limit the growth of your business.
Worse still, you don’t have much choice in the matter. If you’re not willing to provide these generous terms, customers will simply go elsewhere. One way to maintain cash flow and manage to pay for business operations is to partner up with a trucking authority like Truckers Bookkeeping Service. Their well-established business approach includes solutions for compliance, insurance, and freight bill factoring. You’ll be able to choose from a variety of cash flow products to suit your business needs and break free from tedious office work to focus on running your trucking company.
High Startup Costs
Although owning a private fleet and hiring your own drivers is the most profitable business model, it’s also the most difficult way to get started because you’ll need to buy one or more commercial vehicles. Most new owners start small, with one or two trucks, and then reinvest their profits to build up their fleet.
Deciding on the type of commercial vehicles to use will depend on the type of customers you wish to serve. If you want to work for the food industry, you’ll need to get a refrigerated truck, and if you want to transport oversized cargo, then invest in a flatbed truck.
Heavy Competition
Since the trucking business can easily become a six- to seven- business operation, many entrepreneurs want to enter this space. Unfortunately, this heavy influx of new entrants poses a problem. The heavy competition makes it difficult to receive contracts. What’s more, in the beginning, you won’t have earned the reputation necessary to win large accounts.
Again, the solution is to start small. Build up your client base by going to small trade shows and by bidding for local contracts. As you complete each small job, you’ll build your reputation, and this will eventually lead to larger contract work.
Lots of Red Tape
The government has many rules in place to make trucking safer. While safety is a good thing, of course, keeping up with this red tape will increase your business expenses. You’ll need to keep up with regulations related to emissions, E-log devices, and hours-of-service. The best way to handle all your compliance needs is to hire a full-time person to make sure it all gets done.
Keeping Drivers
Perhaps one of the biggest problems facing the industry is a shortage of drivers. In fact, America has such a huge shortage of drivers that retailers often resort to either delaying shipments or paying more to get their goods delivered quickly. Currently, the industry needs about 900,000 new drivers to meet the rising demand.
Because of this shortage, you’ll need to boost salaries, increase benefits, and offer performance bonuses just to make sure you have enough drivers to help you fulfill your contracts.
Challenging, But Rewarding
Reviewing all these challenges faced by the trucking industry, you might feel discouraged to even try. But each problem has a solution. The reason many trucking businesses are flourishing is because the industry plays such an indispensable role in the economy. According to the American Trucking Association, truckers move as much as 71% of the nation’s goods across the country.
