The trucking industry abounds with stories of carriers that began with a single truck and a person with a dream. The entrepreneurial spirit is still alive and well in trucking — and the first step to building a business could be buying a truck of your own.
However, buying a truck is far from the only step when striking out on your own.
On top of that, buying that truck is probably not as easy these days as it was in years past. Freight rates that reached record highs in the months following the COVID-19 pandemic plummeted as the market became saturated with trucks.
Those seeking to finance a truck, whether new or used, discovered that Interest rates doubled — and then then doubled again because of inflationary pressures. Worse, lenders, still reeling from huge numbers of repossessions and voluntary surrenders, tightened up their loan requirements. Generally, lenders are requiring better credit scores and demanding larger downpayments, when credit is available at all.
Drivers who already own trucks are feeling the pinch, too. Fuel price increases can largely be offset by fuel surcharge programs or negotiated into rates. Rising prices for parts and repairs, however, must be covered by freight rates. Increased costs for meals and other services on the road are making things worse.
There are several things a person looking to purchase a truck and go into business can do to smooth the way.
Know your revenue source
One of the biggest mistakes new truck owners make is not knowing their revenue source(s). In other words, exactly how will you generate income?
Leasing your truck to a carrier is one way to lock in a revenue source. Whether the carrier pays for your services by the mile, a percentage of load revenue or another method, you’ll at least have an idea of the revenue you can expect. Carriers sometimes offer discounts and even freebies that can reduce your business costs.
Permits, registration and insurance are areas to ask about. Ask if the carrier provides registration for your truck or if you are required to purchase your tag through them. Ask which permits are required and whether they are provided.
Some carriers place leased equipment under their liability umbrella at no charge to the truck owner, while others require each lessor to pay their share of the bill. The same goes for cargo insurance. Some companies require the truck owner to purchase bobtail insurance through the carrier’s insurer, while others accept what the owner brings. Occupational accident, or workers compensation insurance, is another type of insurance you’ll want clarity on.
Discounts on fuel, tires and repairs can save expense but can also limit where you can make purchases, so be sure you understand how these programs work before you lease on.
A question of authority
Many truck owners choose to obtain their own authority and find their own freight rather than rely on a carrier. Doing this may increase the amount of revenue you can earn, but your expenses will be higher.
Dealing directly with customers is one option for generating revenue. You can offer contracts for specified lanes, negotiate fuel surcharge tables and clarify any special handling requirements. Companies of any size, however, often prefer to work with carriers that are large enough to handle a substantial amount of their shipments, rather than with smaller or single-truck outfits. Even so, regular freight from a known customer can help keep revenue dollars flowing.
Brokers and load boards
Many smaller carriers work with brokers to obtain freight. The broker keeps a part of the revenue from the shipper in exchange for handling the load arrangements and other services. Brokers can be a blessing or a curse to the carrier. Establishing a relationship with a reputable broker is the best way to ensure that problems will be kept to a minimum.
A good broker will ask questions about your business to learn what lanes you prefer to run, preferred freight types and other information. Providing loads that fit your business model and paying quickly with a minimum of issues is a valuable service.
Some carriers prefer to utilize load boards for some or all of their freight. Doing so might provide the greatest variety of available loads, but can also present issues. One is that you’ll still need to deal with brokers in most cases. Each will need copies of your truck paperwork and insurance coverage. Some will only deal with carriers who have been in business for a year or more. Each has its own requirements.
Reputable load boards often come with tools that can help you make good decisions. When negotiating a rate for a load, for instance, the load board may offer information such as the average rate for the lane you’re bidding on, or how many available trucks have been posted in the area you’re trying to find a load in. Large numbers of empty trucks mean lots of competition for loads, while few trucks may mean you can ask a little more for your services.
Load boards often provide information about your destination, too, such as how many loads will be available once you are empty and their average rates.
Since using load boards often means establishing relationships with brokers you haven’t dealt with before, the board can offer information about brokers, too. You may be able to learn how quickly they pay, how often problems are reported and other useful information.
Have a business plan
If you’re considering the purchase of a truck, knowing your expenses and where your revenue will come from is a great start towards a successful business plan. Accurately estimating your costs for fuel, maintenance and other expenses will help you understand how much money you can pull from the business for personal income. Creditors may ask to see your business plan when considering whether to loan to you or what interest rate to charge.
Preparation is the key to successful operation of a trucking business. Those who fail are often guilty of failing to put together a solid plan before starting.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
