There's so much to love about the trucking industry - fulfilling work, flexibility, and the freedom to roam the open road - not to mention the high salary. I'm sure you know all of that already, and I'm sure you've imagined yourself as the leader of your very own trucking company.
The problem isn't the why its the how.
Starting a your own business of any kind is tough - not just in terms of blood, sweat, and tears, but also in the paperwork, finances, strategy, and operations. This is especially true for trucking companies, which have to deal with complex carrier compliance documentation, tax documents, and waybills on top of the typical incorporation or LLC fillings. The thing is, it's not impossible. There are hundreds of thousands of people just like you who have made the leap to start their very own trucking companies, and I'mg going to show you how you can join them.
1: Make sure you have your CDL
Before you can do much else, you're going to have to get your commercial drivers license (CDL) and some driving experience. I'm assuming that you're already in the industry and have experience as a driver for another company, but if you're looking to get started from scratch, becoming a company driver is a great start. Many trucking companies have their own training programs, and some will even help you pay for the process of getting your license. This is especially good idea right now, as we're facing a major trucker shortage in North America.
2: Develop your business plan
This is where it can get tricky - you need to figure out how your business is going to run, where the revenues and expenses will come from, and what type of company you need to file. You should always consult a professional business advisor or accountant if you have further questions, but here's some starters.
The first thing to think about when you're developing your business plan is to determine what size of company you're expecting to start. Do you own your own truck and want to start an owner-operator business? Are you looking to lease a few trucks and start a small carrier business? What about contracting other owner-operators and running a hybrid carrier-brokerage? There's a ton of options that you can choose between, based on things like your financial situation, risk aversion, and the amount and type of work you want to do.
Once you've figured this out - the type of company - it's time to start considering some of the normal operating expenses and revenues you'll incur and collect. Remember to include all the factors involved with running a company, like your own salary (and any others), the lease (if you have one) for your vehicle, fuel expenses, taxes, and expenses from services like load boards, professional email, a website, and accounting. With this information, you'll be ready to figure out the legal framework for your company.
3: The nitty-gritty
This is where a lot of people give up - the boring, confusing, and frustrating part filing the legal documents and sorting out the startup expenses for your company. Let's start with the legal aspect.
There's a few ways that you can structure your trucking company, each with their own pros and cons. Here's a quick overview of the general pros and cons, although it's important to keep in mind that regulations and the pros and cons associated differ by state and country, and that you should always consult a professional accountant if your confused or you need extra help making these decisions (it's worth it in the long run trust me).
- Sole proprietorship: cheapest to file, best if you're planning to become an owner-operator. Remember that the company will not exist separate from you, and you'll be on the hook for any debts the company owes.
- Partnership: if you're starting a company with others, but want to limit initial filing costs and aren't worried about company debts transferring, a partnership is an excellent option.
- Limited liability corporation (LLC): this is probably the best option for the majority of people looking to start a trucking business. The assets and debts of the company are held separately from your personal accounts, which means that your personal assets won't be at risk from company debts.
- Corporation: very similar to an LLC, but is owned by one or more shareholders instead of individuals. This provides a lot of flexibility in the future if you grow, but is probably unnecessary at the start.
Next up is the startup expenses - the initial costs to get the company off the ground. Here it's important to consider the first six months of expenses for your company - your tracker or trailer, licensing and registration, fuel, and accessory costs from necessary business components like accounting. Besides the classic advice of saving money before you start your business, it's an excellent idea to talk to your bank or financial institution about financing options like a commercial line of credit to help fund your business. In any case, make sure you're not putting yourself in financial jeopardy, and that you keep careful track of the terms of any credit cards, loans, or lines of credit you do use or pursue. If you need more help with finance, there's a ton of great resources on the web, like here.
4: Compliance and Insurance
Once you've completed the difficult tasks of legal structuring and financing, compliance and insurance for a breeze. Although it's boring and time consuming, you need to make sure you have all of these documents (if they apply to your business specifically) in place and correct. Here's a quick overview if you're in the US:
- USDOT Number – This number from the U.S. Department of Transportation (DOT) is used to collect and monitor your company's safety information, inspections, crash investigations, etc.
- Operating Authority – All for-hire carriers must have authority from the DOT to haul freight across state lines.Your authority also determines what types of freight you can haul.
- Heavy Vehicle Use Tax – Applies to all trucks that weigh more than 55,000 pounds.
- International Registration Plan (IRP) - IRP distributes registration fees based on distance traveled in each U.S. state or Canadian province. You have to register on your state's transportation website.
- International Fuel Tax Agreement (IFTA) – IFTA is an agreement among the lower 48 U.S. states and Canadian provinces to simplify reporting of fuel use by carriers who drive in multiple states. Carriers file a quarterly fuel tax report that determines their tax and distributes it to the states. Your truck must have an IFTA decal on it, and you have to apply for a new one at the beginning of every year.
- BOC-3 Filing – This names your company's process agent, who will be the one to get served on your behalf in any legal proceeding. You need to designate a process agent in each state where you maintain an office or establish contracts. Some companies offer blanket coverage that designates a process agent in every U.S. state.
There's a list of links from the U.S. Small Business Administration to help you sort through everything. Others offer services that deal with the regulatory maze for you so you can get your authority. The documentation for Canadian companies are obviously different, but the Government of Canada has an excellent webpage that goes over all the requirements in detail.
Once you've gotten your compliance documents in order and filed, you're ready for insurance. There's a few key types of insurance documents that you'll need to manage as a new trucking company.
- Primary Liability: You must carry at least $750,000 in primary liability coverage, which covers damages or injury that result from an accident when you're at fault. Many shippers and brokers require $1 million in liability coverage.
- Cargo: $100,000 is the most common amount for cargo coverage, but it depends on what you are hauling. This covers damage to the freight and/or theft.
- Physical Damage: Covers truck damage in accidents where you are not liable.
- Non-Trucking Use (Bobtail): Covers your liability if your truck is involved in an accident when you're not hauling a load for someone else.
The Owner-Operator Independent Drivers Association (OOIDA) has more info on trucking insurance at www.ooidatruckinsurance.com.
5: Get your truck(s)
Now it's time for the exciting part - buying or leasing your first truck and/or trailer for your business. There's a few ways to go about this:
- Operating (Full-Service) Lease: You take care of maintenance, taxes and permits, and you walk away at the end of the lease.
- Terminal Rental Adjustment Clause (TRAC) Lease: You make a small down payment, and at the end of the lease, you can cover the difference in value and purchase the truck. Or you can have the leasing company sell the truck. If the leasing company makes money on the sale, you get the profit. If it loses money, you pay the difference.
- Lease-Purchase Plans: These are for truckers who don’t have enough for a down payment or have bad credit. You may pay more in the long run on these plans, versus traditional financing.
With any of these options, make sure you read the fine print, consider the impact of financing and whether of not you can financially handle lease payments based on your projected revenues and expenses. At this point - you have everything you need for a trucking business - but you're not quite done yet.
6: Grow and Scale
You didn't start a trucking just to say you did it - you started a trucking company to do something you love while making great money. And this can't happen until you've developed strategies to grow and scale your business. This is a little out of the scope of this article, but there's plenty of resources out there - including here at FreightPath! Whether you're looking to scale your business - or you're looking to add your first truck - we've got resources for you on the FreightPath Blog.