For entrepreneurs, running a trucking/transportation company can seem like the perfect way to live the Great American Dream. And it can be. But there are dozens of aspects to running the business successfully.
Let’s start with the things you need to avoid.
Common new trucking company mistakes to avoid
Many factors can conspire to ensure new trucking company failure—from not having enough customers to high operational costs, low-paying freight, unpaid invoices, or too many accounts receivable.
Furthermore, charging the wrong rates for your services, non-compliance with federal or state regulations and rules, a floundering economy, or not investing in technology can all mean your new company takes a hit. Meanwhile, bad managers can scare off good employees. Or truck drivers leave because they don’t like the fleet manager or dispatcher.
To make matters worse, some trucking firms set up shop before they understand how profitable they will be for their first year.
And before we get started, a word to the prudent new owner: Your customers are your bread and butter, so it’s wise to avoid getting into a price war with your competitors. Instead, learn what your customers like, often a mix of on-time delivery, safe and secure transport, and reasonable rates. Being proactive will ensure loyal customers will usually pay a little more for excellent service.
How to overcome new company pitfalls
To avoid pitfalls, you’ll need to understand your costs fully, ranging from fuel, lease, purchase payments, repair, and maintenance to truck insurance premiums, permits and licenses, tires,and tolls.
Next, you’ll need to choose the right managers, rigorously screen potential hires, train new employees on what high-performance is and your workforce needs and equip managers with the skills they need. You may also need to hire additional talent to help your business grow. If you don’t need full-time employees, you can hire professional services to handle financial regulatory compliance, for example.
And because employee turnover can kill a company, take your time, and hire slowly. Have plenty of interviews, conduct thorough background checks, and hire only the right people to run your company. To ensure your business thrives, you’ll want to put particular emphasis on a safety program that can include regular training, in-house safety audits, a safety director, or an entire safety department.
You’ll also need to understand how to rein in cash flow problems, whether they come from insufficient customers, high operational costs, low-paying freight, unpaid invoices, or even too many accounts receivables.
To ensure an excellent cash flow and anticipate any problems, you’ll need to measure the cash flow and prepare cash flow projections. You’ll also want to improve receivables byhaving customers pay you as soon as possible. It’s a good idea to invoice promptly and follow up on payments due. If customers don’t pay on time, institute a cash-on-delivery policy. You’ll be wise to take advantage of payment terms, paying only when payment is due. Keep an eye out for early payment discounts or suppliers with flexible payment terms.
Remember that cash flow problems are natural for any business. The trick is to anticipate them so you can get a line of credit from your bank or ask suppliers to extend due dates. You can also use factors–businesses that pay you for your receivables for a discount.
After you have figured out your cost per mile, you can calculate your freight rates and choose your freight lane. Rather than relying on ad hoc orders, having a well-defined freight lane helps you secure constant revenues and earnings from multiple sources. When you get a haul, you can get more loads along the way, maximizing your profits on a single trip.
But the most significant advantage is profiting from cheap freight if you have the right customers and rates. Once your freight lane is defined, you can look up load boards. Find ten loads going to one direction in your preferred freight lane and see how much they pay. Get the average of these quotes. You can find a load to haul using a brokerage firm if you somehow find your trucks idling.
It is also essential to understand federal rules and regulations. If you breach them, the Department of Transportation (DOT) can suspend or fine you or tell you to close your business. However, there are checklists to help you ensure compliance with various regulations. You’ll want to understand hours-of-service (HOS) regulations that specify the number of hours for the trucking industry. You’ll need to know the documentation that you need for your drivers and monitor your Compliance, Safety, Accountability (CSA) Score and Behavior Analysis and Safety Improvement Categories (BASICs) scores and status.
You’ll also want to explore technology that helps your drivers streamline inspection and logging to ensure your efficiency. Fleets must have electronic logging devices (ELDs) that automatically record HOS and drive segments and provide updated electronic logs almost in real-time. Telematics devices also make inspections more manageable, and sensors can alert you of an issue before it becomes a problem.
You can also find the best routes possible with dynamic routing, so your deliveries get there faster, as your drivers avoid traffic jams or excessively long dwell times. In addition, driver scorecards help you know how your drivers are performing while on the road. GPS technology lets you keep an eye on your trucks’ location, and trailer trackers allow fleet managers to trace a stolen truck or even warn drivers if they are in an area where theft is common.
A few last tips.When you watch the market at all times viatrade magazines, news sources, and industry connections, you can set the correct rates, plan for the future, and make operational adjustments to your business plan. Closer to home, it’s essential to keep your back office organized. And if work dries up or you face delayed payments, you still need to pay for insurance, fuel, and other costs, so you’ll need to keep at least three to six months of expenses on hand. Running a successful trucking company takes excellent processes, great leadership, and superb technology. Processes must be automated using technology like the Axele TMS, which helps carriers find the most profitable loads and grow their business. Contact Axele today.