Breaking into the trucking industry can be harder than before, given the tightening regulations and the move of the big players to strengthen their position. That is why many aspiring owners and operators wonder if it is worthwhile to start a trucking business. But, is the trucking business truly profitable?
In general, the success of a trucking company depends on how it is managed. The key is to play the strengths of the company, manage resources wisely, and be proactive in solving problems. A trucking consultant at Suivant Consulting can help with most aspects of managing a trucking business. While keeping tabs on all aspects of running a trucking business, the right mindset and tools can help a trucking business enjoy a good profit.
Knowing Business Expenses
As with other industries, the trucking industry is driven by cash flow. A trucking business has to deal with refueling costs, staff wages, vehicle payments, insurance deductibles, it tries to make a profit. Understanding ways to maintain finances and improving cash flow relations allows a company to experience significant improvement in its operating efficiency, which in turn can lead to a better bottom line. Knowing business expenses is the first step in determining the profitability of a trucking business. These expenses include the following:
- Employee wages. Truck driver wages costs more to employees. But, this can help increase the driver retention rate, which means a business can hire and keep the best driver for their fleet. By keeping good drivers means the clientele will consistently get excellent service, ensuring they keep coming back and making referrals for new clients.
- Fuel costs. Fuel accounts for more than 20% of all trucking business costs. Factors such as changing gas prices cannot be controlled by owner-operators. But, they can optimize fuel costs to buy fuel more smartly.
- Broker delays. Delays in getting invoice payments from brokers can have a negative effect on one’s bottom line. It can take up to 45 days to process invoices, which means a company will go without payment for a long time. Thankfully, freight bill factoring can help address this. This means that up to 95% of invoices must be paid in advance while the remaining 5% is rebated once the shipper pays, minus a fee.
Managing a Trucking Business Properly
Good management skills can make a significant difference in how a company will move forward. A trucking business must retain a good team and build good relationships with its clientele.
Trucking business owners and managers must consider whether they are working in the right niche. Breaking into niches can minimize competition, offer year-round work, and help resist recessions. Also, they should consider the efficiency of their back-office operation.