- Posted on
- Riley Draper
You’ve been wanting to open up a new trucking company. Are you ready to get started?
But wait, hold it right there. There are some startup costs entrepreneurs need to be aware of before starting this new endeavor. And if you don’t have the funds for your own business, this can seriously set your plans back. In this article, we will cover everything you need for your trucking business plan and prepare you for all the initial costs you can expect to see.
Trucking Company Business Plan
First things first: you will need a trucking company business plan. To approach lenders, investors, or partners, you will need to show them your business plan. Think of it as a roadmap to creating a profitable business. For your trucking business plan, you will need:
- Executive summary: Briefly describe why you are starting a trucking company. What sets you apart from other companies?
- Company description: Describe your client base and how you want to connect with them. What exactly will your company be doing?
- Operational plan: The operations plan should describe how you intend to carry out your company goals.
- Services: Detail the trucking services you plan to carry out for your potential customers. What needs are you meeting for your clients? Explain how this is a profitable mode of income, including detailed pricing.
- Market analysis: Talk about how you have a competitive advantage in your target market. Give a competitive analysis and price comparisons.
- Management and personnel: Explain how you will hire your management team, as well as your goals for hiring drivers.
- Sales and marketing strategies: How do you plan to reach new customers? Include your sales strategy. Will you use social media or other marketing strategies to reach your target market?
- Financial projections: Try to predict your state of finances five years ahead. How much do you think it will cost you? Are you allowing for any possible speed bumps along the way?
- Funding request: If you will be seeking a loan, you will need to have a specific number in mind. Include your assets and how much you will be contributing to the initial expenses of the business.
To get your financial plan together to request funding, you will need to know what initial startup costs you can expect.
How Much Will It Cost to Start?
Trucking businesses can be quite lucrative. But also, the trucking business can be very expensive. It can cost a truckload (pun intended)! Business owners of trucking companies need a lot of capital to get them going. The initial costs vary depending on what business model you go with. Let’s take a closer look at these startup costs you will likely encounter.
Permits and Licenses
Commercial Driver’s License (CDL)
If you don’t already have one, you’ll need to get your CDL. You cannot drive a commercial vehicle without one! The cost to get your CDL is different in every state. In Florida, it costs $75 to get an original CDL. However, you are required to complete CDL training to receive your CDL. And this can cost anywhere from $3,000 and $7,000 to attend an independent CDL school (but significantly less if you attend a community college program).
USDOT number and Motor Carrier (MC) number
To have a trucking business you will need both a United States Department of Transportation (USDOT) number and a Motor Carrier (MC) number. The USDOT number is necessary for any company to operate commercial vehicles that transport either passengers or cargo as a part of interstate commerce.
And the MC number gives operating authority to carriers that transport regulated commodities either interstate or in multiple states. While the USDOT number currently comes at no charge, it will cost $300 per authority for MC/FF/docket numbers from the Federal Motor Carrier Safety Administration (FMCSA).
Unified Carrier Registration (UCR)
Trucking companies involved in interstate travel must pay an annual registration fee, stipulated by the UCR Act. This registration will ensure that your vehicles are insured. The fees fluctuate based on the number of trucks in your fleet. Currently, if you have 1-2 trucks, you will pay $41.
For 3 to 5, you pay $121. If you have 6 to 20 trucks, the fee is $242, and 21 to 100 trucks will cost $844. You can apply for your UCR online.
International Registration Plan (IRP)
The IRP is an agreement between the contiguous United States and Canadian provinces. This agreement recognizes the registration of commercial vehicles registered by other jurisdictions. Renewed annually, the total fee for an apportioned license plate and cab card depends on the state you are registered in, and the number of miles traveled in each jurisdiction.
As a rough estimate, an 80,000-pound truck registered in Florida covering 100,000 miles over 4 states will pay an apportioned fee of approximately $1,120.
International Fuel Tax Agreement (IFTA)
IFTA is an agreement between the contiguous United States and the Canadian provinces to make it easier for the government to track the use of fuel for semis. This means that you may owe taxes to some states depending on how much fuel you use in that state.
Track the miles you’ve traveled in each state, add up your fuel purchases, and calculate your fuel mileage. Then you will need to figure out the fuel tax rate in each state. Currently, the fuel tax rate in Florida is 0.3637. The calculation is as follows:
Fuel tax required in State X – Fuel tax paid in State X = Fuel tax owed to State X
Heavy use Tax
If your vehicle is over 55,000 pounds, you will need to pay a heavy use tax. This is because heavy trucks put wear and tear on the highways, which subjects them to additional tax payments. Commercial vehicles at 55,000 pounds will be taxed $100. For every additional 1,000 pounds over that, you will be subjected to $22 more. If you are over 75,000 pounds, you will pay $550.
In every US state, you must fill out Form BOC-3. This form is required if legal issues arise. The Federal Motor Carrier Safety Administration requires that a process agent file the form on behalf of motor carriers. The cost varies from state to state; anywhere from $20 to $40.
Commercial Truck and Trailer
Now for the most important part: your truck and trailer. Depending on whether you buy your truck new or used, the price ranges widely. Mileage and size also affect pricing.
- A new commercial semi-truck: $80,000 to $200,000
- A used commercial truck: $15,000 to $100,000.
- Leasing a truck: $1,000 for a used truck and up to $2,500 for a new truck.
- Trailer: $30,000 to $50,000
Technology and Equipment
In addition to truck and trailer costs, you might also consider adding on some necessary equipment to help your fleet run effectively and efficiently. This includes:
- Dynamic routing software: To optimize your routes, you might consider purchasing dynamic routing software. You will save time and avoid wasting fuel, which will be a long-term payoff. Expect to pay between $5 to $45 a month per vehicle.
- Logging device technology: As a requirement to ensure drivers are working within regulations, logging technology offers a way to keep track of this data. Since drivers must stop a certain number of times within a certain time, trucking businesses must have a way to ensure workers are following the rules. It is an imperative investment for worker safety. Electronic logging devices can cost from $20 to $35 a month per vehicle, or select a device that requires a one-time purchase of around $295 per unit.
- Cameras: For safety and efficiency, camera technology helps record accidents on the road, as well as comes in handy for insurance claims. You can expect to pay approximately $250 for a good dashcam.
- Temperature tracking and recording equipment: If you transport food, you must ensure the products are stored at the designated regulatory temperatures. Having this kind of temperature-tracking device could give you a leg up on the competition. The hardware can cost around $30, plus $50 yearly to get monitoring alerts to your phone.
- Collision Technology: Installing sensors on your truck is a good idea to avoid possible accidents and keep the driver, the load, and the road safer. Costs are estimated at $2,500 to $4,000.
Operating large commercial trucks requires two insurance policies: auto insurance and liability insurance. This will help protect both your equipment and your drivers. Since you are just starting, premiums are higher. This could range anywhere from $12,600 to $17,900 per truck.
As a new authority, you will likely be paying a higher rate for a few years. So it would be a good idea to shop around to find the lowest rate. Other factors that can affect your rate include the type and age of your vehicle, your credit score, your payment plan, your drivers’ routes, the cargo, and drivers age and experience.
To keep your business liabilities and personal assets separate, you will need to set up a Limited Liability Company (LLC). This will give you some tax and legal advantages. The filing fee is different in every state. In the state of Florida, it currently costs $160 to open an LLC.
Before you get your trucking business started, you will need to hire drivers. This will be one of your highest business expenses, so you must determine the right payment strategies early on. Truck drivers make an average of $48,310 per year in the US according to the Bureau of Labor Statistics.
The trucking industry has a high turnover rate, so if you can offer a higher salary it can help you retain employees. Will you hire drivers to drive your trucks or their vehicles? When you hire drivers with their vehicles, this could cut into your profits and you will have less control over some aspects of the business.
So let’s take a closer look at possible payment strategies for you to determine which option is best for you.
- Hourly: Though uncommon, it is possible to pay your drivers at an hourly rate. This payment option would be ideal for those drivers traveling regionally or locally. The position often includes more hands-on work, like loading and unloading freight. These types of routes are highly sought after, and the positions often go to more experienced truckers. The average hourly wage is $24 an hour.
- Cents per mile (CPM): The most common way to pay over-the-road (OTR) truckers is per mile. You can calculate the distance either by using routing technology, determining the length of the shortest possible route, or going by the truck’s odometer reading. The average CPM can vary widely. Most truckers can expect to be paid $0.48 to $0.75 per mile.
- Per diem: Some drives are paid per diem, meaning they are paid a stipend every day. They will be in addition to their regular pay rate. The stipend is tax-free and is based on the money used for meals and lodging. Currently, 2022 per diem rate is $69 per day when driving inside the continental US. Trucking companies will often charge an administrative fee to the driver for this added benefit.
- Sliding pay scale: The length of the trip can determine a different amount per mile. In this payment strategy, companies will pay more per mile for shorter hauls than longer ones.
- Percentage pay: This is the most advantageous for owner-operators since they can make some good money. In this payment strategy, the driver is earning the amount that each load costs. This means they will get paid for the quality, safety, and efficiency of driving rather than hourly or per mile.
- Bonuses: You can incentivize your drivers by providing bonuses if they save fuel costs and time. Safe driving bonuses can be arranged to avoid preventable accidents or losses by maintaining a minimum CSA score.
This is a reminder that these costs are just the initial startup costs. You must also factor remember there are ongoing costs such as truck maintenance, fuel costs, general business expenses, and commercial space.
Next Stop: Successful Trucking Company
Are you ready to start your trucking company but are short on capital? If you are looking to get a Small Business Administration (SBA) loan or simply equipment financing, Coastal Kapital can help. Start by putting together your trucking business plan, and we will take care of the rest.
Next stop: Successful trucking company!If You Like Please Share It: