Is it Profitable to Own a Trucking Company?

The trucking industry is highly competitive but with careful planning & dedication it's possible to make it profitable! Learn 6 steps on how.

Is it Profitable to Own a Trucking Company?

The trucking business can be incredibly profitable, but it's also highly competitive. Every year, many truck drivers try to enter the business, only to fail. This is often due to the fact that they are great drivers, but not necessarily good business owners. You may have chosen a career as a truck driver because you like the idea of being your own boss and setting your own schedule.

But is the trucking business actually profitable? Statistics suggest that it is not, and the National Association of Small Trucking Businesses said that only 15% of new trucking companies will survive beyond their first year of operation. However, you don't have to be one of those statistics. Whether you are an owner-operator or a rental truck driver, you can create a successful and profitable trucking business with careful planning (in addition to hard work and dedication). Here are six of the most important things you need to know to make your business profitable.

A key factor in determining if a trucking business is profitable is understanding what an acceptable U. S. profit margin should be. While carrier revenues and profits vary depending on their particular situation, most truckers should aim for a profit of 6% to 8%.

Plan your earnings based on your annual gross truck revenue and then determine your expenses (we'll talk about this later). You can increase those margins by looking for loads that pay more, reducing dead miles, and being aware of competition in lanes. Although numerous factors determine the profitability of a trucking business, the two main factors to consider are fixed and variable costs. Fixed costs are already set and relatively predictable, whether you're on the road or parked at home.

These are costs you have to pay, no matter how much you earn. Variable costs occur while you're on the road and can vary depending on where and how far you're driving. They also affect cash flow, so it's good to make estimates at the high end. After counting all these costs, you may wonder again: “Is road transport a profitable business?” The good news is that it can be if you consider the following six steps: 1.Know Your Costs: The best way to do this is to know how much you are spending, including fixed and variable costs.

For example, you can reduce fuel consumption by paying attention to speed and driving habits. Ongoing maintenance can prevent costly road breakdowns, and careful planning can reduce off-road miles. 2.Increase Your Rate Per Mile: Charging shippers a higher percentage on top of your expenses is one way to increase payments. In addition, picking up cargoes from the headhaul market and taking them to backhaul markets could increase that rate per mile.

Reducing dead miles by transporting LTL would also help. Using a reliable load chart known for higher value loads is another way to increase your options per mile. 3.Maximize Your Miles Charged: Miles charged are when you drive paid cargo. Try to match your routes to the shipper's demand and be willing to roll back to ensure your trailer is always full.

There is nothing more frustrating than waiting at a pick-up or drop-off point longer than expected. While chargers allow a two-hour delay in stopping, it can sometimes be extended to three hours or more - time that you don't get paid for! Worse, it could slow you down in other jobs. The best way to reduce dwell time is to incorporate additional space or “pay per stop” into loading and unloading times, and avoid taking loads from facilities or carriers known for their long waiting times. 4.Factor Your Freight Bills: Factoring means you can sell your invoices for a job to a third-party finance company, also known as factor.

You leave with the money right away (minus the factor fee) instead of waiting for the typical 30-90 days it takes for a broker to process your bill. Meanwhile, the factoring company tracks the broker's payment so you don't have to. With a little planning and easy-to-use technology, you'll grow your business in no time. 5.Negotiate With Brokers: A common complaint among carriers is the struggle of negotiating with brokers - as long as your rates stay above their cost per mile, every mile will be profitable.

That means that the more miles, the more money you earn - the more your company can scale and grow, the more confident you can be sure that your trucking business is profitable. 6.Get Financial Support: At National Funding, we understand that sometimes growth requires a little investment - our small business loans can help your business seize new opportunities and start earning higher profits than before! Starting and managing your own trucking business is difficult - in an industry where only 15% of newly formed trucking companies reach their second year of operation according to the National Small Trucking Business Association - running a profitable trucking company may seem impossible! But with careful planning and dedication, it's possible - the average net profit margin of a trucking company averages between 2.5% and 6%. That means it can be a profitable business and an industry you can earn a decent living from - as long as you enter the trucking business with your eyes wide open!.