Trucks are the lifeblood of the U.S. economy, moving close to 73% of the nation’s freight by weight. Furthermore, more than 7.5 million people are employed in jobs that relate to the trucking industry, even more if you add the self-employed.
If you’re interested in getting into the business, here are the key steps to starting a trucking company.
Have a CDL
While you don’t need a commercial driver’s license (CDL) to start your own trucking company, holding a CDL can help you gain experience behind the wheel and learn the ins and outs of the business. In fact, many trucking company owners started out as drivers. To help you get started, research trucking operators in your area. Some may offer training programs and may even subsidize CDL school.
Select a target market
Trucking is a very niche business and homing in on a specialty can help you avoid competition with established haulers and improve revenue opportunities. Consider the following:
- Which products or trucking services appeal to you? Selecting a niche that brings you enjoyment will ensure your time and investment pays off.
- How can you better meet the needs of customers and shippers than other haulers? What’s your value proposition?
- Who will benefit most from your services?
- If you’re already familiar with the industry, who are your ideal shippers? What can you bring to the table as a niche carrier?
Write a trucking company business plan
A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your enterprise.
Base your plan on research and analysis of the specific market you’ll be entering. Don’t forget to include details of your experience and expertise in the industry so that you can demonstrate that you have what it takes to succeed and be profitable.
Use your plan to demonstrate your operational aptitude. For example, include details on how you’ll build your client base, track finances (expenses, profit and loss, cash flow, etc.), and manage your taxes and choice of business structure.
To help you get started, here’s a suggested outline for your trucking company business plan:
- Executive summary: A brief overview of your business and why it will be successful
- Company description: Provides detailed information about your business and explains your competitive advantages.
- Outline your niche
- Which region, type of cargo, or logistics arms will you specialize in?
- Will you partner with other companies to differentiate your business?
- Do you plan to bring others onto your executive team?
- List your employees and the skills and experience they bring
- Describe your ideal client and how you plan to engage with them
Market analysis: The trucking market is a crowded one. Use this section to explain the market need your business addresses, how large or small your target market is, who the competition is, and how you plan to compete. (Explain how you’ll get there and how much market share you expect to gain.) Trucking is also highly regulated so be sure to demonstrate an awareness of how regulations impact your business.
Financial plan: A description of your funding requirements, your detailed financial statements, and a financial statement analysis, and your profit and loss projections for the next five years.
Sales and marketing strategy: Outline your strategies for reaching the right people, communicating your value differentiators, and selling your services.
How much does it cost to start a trucking company?
Starting a trucking business requires significant upfront capital. This will cover trucks, permits, insurance, storage facilities, and more. Even before you buy equipment you can expect to outlay approximately $15,000. However, the cost of getting started will vary depending on the state in which you operate. Fluctuations can also occur by business type, the type of freight you plan to haul, and more.
Is a trucking business profitable?
Although competitive and typified by a high failure rate during the first year, the trucking business can be profitable. Controlling expenses and maximizing equipment so that you book as many loaded miles as possible is critical.
Determine your operating costs
Understanding your operating costs is key to knowing when you’ll break even and make a profit. To do this, analyse your fixed costs, such as truck payments, wages, utilities, insurance, permits, etc. Then determine your variable costs. These include fuel, any payments to independent contractors, and will vary by the number of miles your truckers drive.
Use your fixed and variable costs to calculate your minimum cost-per-mile. Then subtract that number from your rates, and you’ll arrive at your profit margin.
Set your rates
To determine what you’ll charge your clients, add up your monthly fixed expenses and divide by the number of miles your trucks drove that month. Repeat this exercise with your variable costs and salaries to arrive at your total cost per mile.
Remember, this is the minimum rate you must charge to avoid losing money. Plan to review this rate monthly since your variable rates will vary!
If you plan to expand operations, such as adding more employees or trucks, factor these costs into your calculations and add to your base rate.
Other considerations include the going rates in your freight lane, setting contract versus spot trucking rates, and if you plan on adding fuel surcharges to your rates.
Pick a business structure
Your choice of business structure — whether it’s a limited liability company (LLC), corporation, or partnership — will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a structure that balances legal protections and benefits.
The four most common are:
- Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
- General partnership: A general partnership is the simplest variety of partnerships and created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
- Limited liability company (LLC): This is one of the most popular forms of business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.
For more information on business entity structures, read Comparing company types.
Choose a business name
Naming your business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.
For more information on naming rules for different entity types, read Naming your startup business.
Register your business
Depending on the location and business structure of your trucking company, you may need to register your new business with your state and/or local government.
To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the Secretary of State or business agency where they conduct business.
Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments a process known as filing a “doing business as” (DBA) name.
Get federal and state tax IDs
Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)
An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.
You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.
Open a business bank account and credit card
A business bank account and credit card keep your personal and business transactions separate and afford certain legal protections. For example, if you operate an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.
A bank account and credit card also help build business credit — something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.
Basic business licenses and permits
Most small businesses need some form of business license or permit to operate. These vary by business type, location, and regulations. Your state or local government may also require you to obtain the following:
- Basic business operation license: This is a license from the city in which your business will operate, or from the local county (if the business will be operated outside of the city's legal boundaries).
- Zoning and land use permits: Local governments’ zoning laws may prohibit certain business activity in designated areas.
- Building permit: If you plan on remodelling or building a commercial space, you'll need to get a building permit.
Legal and licensing requirements specific to trucking companies
Expect to deal with a huge amount of paperwork to ensure your trucking business complies with all licensing and registration requirements. These can vary depending on the cargo you’ll be transporting, if you plan to operate intrastate or interstate, and the gross vehicle weight rating (GVWR) of your truck(s). Failing to comply can result in severe criminal and civil penalties.
Before you start hauling, your company will need to comply with most of the following:
- Obtain an authority to operate (MC number): This is essential for any trucking company involved in transporting goods interstate, freight forwarding, carrier moving, and other transportation activities.
- USDOT number: If you transport cargo interstate, you must be registered with the Federal Motor Carrier Safety Administration (FMCSA) and have a U.S. Department of Transportation (USDOT) number. If you haul hazardous materials intrastate and are required to carry a safety permit you must also register for a USDOT number.
- Unified Carrier Registration (UCR): If you operate a truck or bus in interstate or international commerce, the federal Unified Carrier Registration Agreement (UCR) applies to your business.
- International Registration Plan (IRP) license plate: The IRP is a cooperative agreement that regulates commercial vehicles traveling within the 48 continental United States and most Canadian provinces. Under the IRP, interstate carriers must file an application with the jurisdiction in which they are based.
- International Fuel Tax Agreement (IFTA) permit: This simplifies the reporting of fuel used by trucks and allows your trucking business to have a single fuel license. To maintain the license, you must file quarterly fuel use tax returns in the state where your business is registered.
- Heavy Highway Use Tax Return (Form 2290): If you operate trucks over 55,000 pounds you must file a special tax return with the IRS to fund infrastructure budgets.
- State transportation permits: These permits are issued at the individual state level and are required for hazardous cargo, oversized or odd-shaped cargo, and for crossing state lines. Check with your DMV to determine which permits you’ll need.
- Standard Carrier Alpha Code (SCAC): This is a private code used to identify trucking companies and is required if you plan to transport government, military, international, or intermodal loads.
- Drug and alcohol clearinghouse: Stay legal by properly managing a drug testing program and registering all drivers with the FMCSA Clearinghouse.
- BOC-3 filing: According to federal law, the designation of a process agent is an essential requirement for obtaining the authority to operate from the FMCSA. To receive and keep this authority, these companies must file Form BOC-3 with the FMCSA. For more information, see What is a boc-3 filing for transportation companies?
Insurance
Before you can receive many of the permits and licenses you’ll need to operate your business, the FMCSA requires that you take out public liability insurance. This insurance must cover both bodily injury, property damage, as well as environmental restoration. You can check out the insurance requirements on the FMCSA's website..
Most shippers will request cargo insurance to protect their goods from damage, loss, or theft during transit.
Finance your trucking business
Because starting a trucking business involves a degree of upfront investment, you may need to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.
Your business may also be able to secure financing from an equipment lender with the vehicle or other financed equipment serving as collateral.
Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.
Consider a factoring service
Freight factoring, in which your business sells its invoices to a factoring company, can help you offset the costs of waiting 30-plus days for a broker to pay the invoice. Also known as transportation factoring, trucking factoring, or freight bill factoring, the factoring company pays the invoice for a small percentage share and delivers the funds to you in less than 24 hours.
Factoring is different from lending. It’s a tool for streamlining cash flow so that those funds can be used to pick up new loads without the debt of traditional financing.
Buy equipment
The equipment you purchase will depend on the routes you intend to drive, the cargo you’ll carry, and whether you require refrigeration. You must also consider if you want lower cost, higher-mileage vehicles that may need more maintenance, or you’ll opt for more expensive but lower mileage vehicles.
Grow your business
Build a company website, get active on social media, and network with shippers both online and in-person. Attend trucking shows, networking events, and business meetups. Nurture the relationships you build and deliver great service — two surefire ways to generate recommendations and referrals.
Conclusion
Being an entrepreneur is about embracing the uncomfortable and pushing into the crazy. There is no right answer and it's not always "all or nothing". Work hard, do your research, and fill a need, that's how you'll find success.
Learn more from BizFilings
BizFilings is dedicated to making starting a business easier so you can focus on doing what you love. For more information, check out our state guides for LLCs and corporations.
