On the way to your dreams in trucking business

On the way to your dreams in trucking business

The trucking business is a wonderful business that is constantly growing with increased demand and operations.

I’ve been asked many times how much trucking companies make on average. I’ve seen any numbers, but on average a mid size trucking company can earn $500k a month. How does this sound to you? And don’t get confused, it’s $500k of a clean profit, not revenues. So, $500k a month equals to $6mil of annual profits. Being an owner of such company makes you a pretty solid millionaire, right? The best part is that this goal can be achieved in just about two years milestone if you do things right. The more mistakes you make the further they will be putting you from your goal.

So, this is the uniqueness of the transportation industry: it has relatively low barriers of entry, high risks and high rewards. The good news is that pretty much anyone can do it, the bad news is the competition is very high too. Trucking business is what’s known in economics as a “pure competition” form of market. It’s just a perfect example of a “pure competition” as it has a large number of participants and everyone offer pretty much the same service. So, you might wonder if there is so much completion and everyone can do it, then why do ones succeed while the others fail?

So, this article will answer this question for you. The key is that because it’s so easy to enter the industry and so much competition you have to make sure to do things right not to fail. Well, you don’t even have to be better than anyone as the transportation market is so big, that it has pretty much enough room and opportunities for anyone who is willing to participate in it. So, the key secret is that you just have to be not worse than everybody else in order to stay afloat and not to drop out the market. Those who are the same as everyone is the market- makes average business standard profits (as mentioned above), those who does something betther than others- picks up enormous fortunes, those who are behind everyone else – fail. Unfortunately, a lot of business owners negligently overlook what it takes to make them at least like everyone. They jump into the business without doing a proper research and setting up a proper business structure for the business to operate. You have to remember that a business is a living breathing thing and it’s especially vulnerable during the first two years while it’s in its baby stage.  However, I don’t blame them, as most of the trucking companies have been started by former truck drivers, so they simply don’t have the required expertise in finance, accounting and safety regulations. However, they possess another crucial expertise required for the trucking business: most of them are pretty good mechanics or at least have a working knowledge or a basic understanding of the mechanical part of the equipment such as trucks and trailers that their company will operate.  While it’s pretty easy to set up a good and healthy financial and accounting system in the office with help of professionals, it’s way harder to set up a good team of mechanics to control maintenance and repairs. 

We will share for you a few helpful trends in the trucking industry that currently other companies are following:    

#1: Invest into technology for your company. Thanks to technology that keeps evolving, it makes operations in trucking industry easier and more efficient, which means that if you are keeping up with today’s technology, you will get to your goals even faster than it was yesterday. Honestly, it’s amazing to see all the technological changes in the industry for the past 15 years, it made trucking business way easier than it used to be.  Thus, there is absolutely no reason not to take advantage of it. Actually, it used to be an advantage in the earliest years and those who took advantage of it back then, are probably billionaires by now. Today it’s a necessity for the trucking business. Remember, I mentioned that to succeed you don’ t have to be better than anyone, you just have to be not worse than anyone. So, today most of the trucking industry participates recognize the need to keep up with ever evolving technological changes, so they all adjust to it. Thus, those who fall behind this trend, will drop out the market. 

 Thus, you need a good dispatching and accounting system for your business. Operational workflow should seamlessly flow between all business participants. What this means is that while dispatchers do their job, accounting and safety departments have to be able to process the information without any interruption. Using good dispatch system for your trucking business will help you to achieve efficiency: this means less employees will be required to complete the same amount of work. You ultimately will save on salaries for your dispatchers, accountants and safety personnel.  Keep in mind that this the trend that all trucking companies follow right now, which means they are all achieving efficiency by reducing their labor cost. Just think this way: a good dispatch system will replace 5 bookkeepers in your office to just one accountant to oversee the workflow, ultimately this is $300k annual savings on bookkeeping staff. Now imaging that everyone is doing this, thus by cutting their costs, they are able to offer more competitive freight rates to their customers and brokers, thus they win the business. Those companies that do not follow the trend will drop out the market as eventually they won’t be able to compete with those ahead.

Also, good dispatch software will give you an ability to outsource your office operations overseas. This is another common trend that trucking companies follow. Dispatchers salaries are enormously high: I’ve seen anywhere from $140k-$250k a year for a good dispatcher.  And while they are the bread winners and you need good dispatchers as they are one of the most important employees for your business, their salaries might kill you. So, most companies recognized that while you can’t outsource truck drivers, you can easily outsource dispatchers from different countries that have lower costs of living. So, they offer a pretty good salary relatively to the average salary for that country, however it’s still nothing compared to US salaries.  For example an average salary in Belarus, which is a popular country for outsourcing dispatching, bookkeeping and safety jobs,  is $700 a month, so a salary of $1,500 per month for a dispatching job, will be very attractive for that country and will attract the best workforce for your business. So, in order to set up the process, you need to have a good software to oversee and have control over the loads they book. While it’s a very good and efficient strategy, it has to be very well controlled.  As a business owner, your presence in the USA will be required where you will be controlling most of the physical part of the business, while your intangible part of it will be outsourced and flawlessly operate from anywhere in the world.

Another advantage of a good dispatch software is it eliminates mistakes that we, as humans, are designed to make. No matter how perfect your employees are, mistakes will happened no matter what. Some mistakes can be brutal, which will cost your business a lot. That is a normal and natural process, that’s why computers are out here to help us. Good software is designed to catch errors and warn its users.

The reason number four is to easily get access to your financial situation and analysis. While it sounds very cliché, it’s one of the most common mistakes business owners make. In trucking business the owners often confuse cash flows with profitability. The deal is that most of the trucking companies use factoring companies that load them with cash. So at earlier stages of business most companies have excessive cash flow and they get pretty excited confusing it with profits. However, as time goes by, if the company is unprofitable, the excess cash flows get dissolved and followed by a cash shortage. So, that is when most of the business owners begin to panic. However, it might be too late unless some additional funds are attracted. So, you have to be able to obtain your financial statements and understand them. There are lots of components in financial statements, so it’s best if you have an expert who can explain the meaning of each component to you in case if you don’t possess necessary financial and accounting knowledge.   

The reason #5 is that it gives you ability to scale. What does it really mean? So, as you can probably imagine that the company of 3-5 trucks makes certain profit.  So now imagine a company of 80 trucks, well they make 26 times of that profit. However, what’s interesting that sometimes the owner of a 3-5 trucks company has to work harder than the owner of 80 truck company. Sounds like a dream come true to make 26 times more and work less? This is only possible through scaling your business. Once you have set up a proper system for your business it’s no longer relevant if you have 3, 80 or 200 trucks. Only your profits will sky rack, while leaving you a choice what to do: you can simply retire and enjoy your life, or you can choose to continue achieving new horizons.  So, properly designed dispatch software will help you to seamlessly process operations either for 3 or for 200 trucks.  

     The trucking business is a business that generously rewards those who work hard and commit themselves to providing the best service.

And once customers see your commitment to your services and efficiency, they will come to your door asking for your business. Take this opportunity and don’t be afraid of it, as we know you can do it. Success is never easy, but if you choose the trucking business and take our advice to heart, you will succeed.