Higher pay and increased freedom are two commonly cited reasons for starting a trucking company. While a well run company can provide more income for the owner than working as a company driver, it is not risk-free.
Before jumping in with both feet, one should know exactly what to expect so they are aware of the capital requirements and how much work is required.
While YouTube and TikTok videos can glamorize the industry, trucking is not for the faint of heart. A new business requires a substantial investment in both time and money.
Before jumping in with both feet, potential owners should make sure they are ready for the responsibility and stress of being one’s own boss. A few factors to consider include:
Before you can put together an execution plan, you need to know where you’re going. Future owners should carefully weigh the pros and cons of the various types of trucking companies.
Owner operators are individuals that own their own trucks but do not have operating authority. Instead, they lease onto a motor carrier as a 1099 contractor and run under the motor carrier’s authority. When an owner operator has their trucking authority, they are sometimes referred to as “independent owner operators” but they are technically just small motor carriers.
Most companies typically specialize in serving three types of geographic regions.
Before buying a tractor and a trailer, it’s important to know what type of freight you will be hauling to make sure you have the right equipment. Not surprisingly, more expensive loads typically require more expensive equipment, come with increased risk, or need to be delivered on a tight schedule.
Trucking companies can specialize in one or more of the following equipment/freight types:
Most lenders will require companies to have a business plan as part of their application process but even companies that don’t need outside financing should still put together a high-level plan. Running through this exercise will make sure that all aspects of the business have been thought through and writing ideas down often leads to clearer thinking.
Most business plans contain the following sections:
In addition to the standard business filings that all businesses need to file, trucking businesses also need to register with the Department of Transportation to legally operate. Here is a quick overview of what is required.
While it’s possible to run a trucking company as a sole proprietorship, both motor carriers and owner operators will want to form a Limited Liability Company (LLC).
The benefits of an LLC include:
While forming an LLC or S corp is a fairly straightforward process, new trucking businesses will need to form their business entity with their state and possibly their city or county. Most states make it easy to file an LLC or S corporation and it only takes a few minutes but if you want to simplify the process, online tools are available but you will pay a hefty premium.
Once you have filed your company with the state, you will need to apply for an Employer Identification Number (EIN) with the IRS. EIN numbers act as identification numbers for business entities so that owners do not need to use their social security number on tax forms or with clients/suppliers.
Lastly, businesses that want to protect their home address, will need to hire a registered agent. Companies are legally required to have a process agent available to receive notices, government correspondence, and other information during regular business hours. Business owners can name themselves or someone they know as a registered agent but the address used will be publicly available information.
As mentioned earlier, company drivers that transition to business owners need to calculate how much money they need to get started. While this figure might be higher than your personal savings, it’s still possible to start a successful trucking company with outside financing.
Starting a trucking company typically costs $5,000 to $20,000 in addition to purchasing or leasing a semi-truck.
Most truckers will find the easiest form of financing is a loan to buy their truck but depending on their personal finances and credit history, other forms of financing may be available.
First-time business owners should reach out to their local Small Business Development Center for free advice.
Financing sources to consider include:
Figuring out how much money you need to get started is just phase one. Owners need to also set up or consider the following:
When putting together your business plan, you should have decided whether or not you will be leasing or purchasing your truck and possibly trailer. There are pros and cons to each route.
Motor carriers and owner operators will both need to purchase insurance but motor carriers will need a broader range of coverage.
As discussed earlier, trucking is a low-margin industry. Like most businesses, growing revenue is just half of the battle. Carriers and owner operators should research and select the right tools to run their businesses efficiently. Nearly every business will need the following products and services:
The first step to starting a trucking company is deciding whether or not you’d like to become a motor carrier or an owner operator, what type of freight you will be transporting, and how you will get your first customers.
While it is possible to start a trucking company without any trucking experience, individuals with experience in the trucking industry or running businesses will have a higher chance of success.
Yes, it is possible to own a trucking company without a commercial driver’s license (CDL). It’s not uncommon for the owner of a trucking company to not be on the road driving vehicles.
While the most profitable businesses will be those that have good relationships with shippers and manage their expenses, some of the highest-paying loads include ice road trucking, hazmat, and car hauling.
Starting a trucking company is hard work. Most companies operate on slim margins but for business-savvy individuals that know the industry, it can still be lucrative.
Hazmat, car hauling, reefer, and flatbed are among the best-paying types of freight.
Starting a trucking company typically takes a few weeks to a few months. Owner operators can usually get going fairly quickly once they have a vehicle. Motor carriers on the other hand, typically have to wait 20-25 business days just to get their MC number.
While it is technically possible to start a trucking company with no money down, it’s unlikely. Only individuals with strong credit scores and relevant experience will qualify for traditional financing. So while these individuals may not be required to put money down, they will already be on solid financial footing.
Companies or programs that advertise the opportunity to start a trucking business with no money are most likely scams. Many companies have lease-to-purchase owner operator programs but these are widely criticized in the industry.