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Starting a Trucking Business
Starting a Trucking business requires a significant capital investment and effective trucking company business plan. And few start-ups have succeeded on a shoestring budget. This is especially true for the capital-intensive transportation industry.
The start-up Owner-Operator needs cash for the down payment on a truck, the registration, permits, and insurance as well as for the day-to-day operation of the truck until revenue starts flowing in. Buying that first truck is an emotional experience, and the decision will have long-term implications. Therefore, you must carefully research the market and choose well-maintained, easy-to-handle and reliable equipment.
Before selecting a truck, the Owner-Operator needs to establish business connections where (s)he can get loads. That means talking directly to manufacturers and businesses, transportation brokers, and/or obtaining information from carriers about their lease-on programs, and checking references. Owner Operators can also utilize a dispatch manual that will locate loads and explains how to succeed. TruckingSuccess.com offers such a dispatch manual for a modest price of $19.95
Although you may dream of a fancy, shiny new truck, a good quality used truck with a modest monthly payment will make more sense for the Owner-Operator who has to gain industry experience. Most Owner-Operators prefer long-nose trucks, but for the beginner cab-overs offer better value for the money, because they are considerably cheaper than conventional trucks.
A buyer can choose from a huge selection of pre-owned trucks, which are offered through Internet auctions, used truck sale magazines, dealerships, private parties, and manufacturers.
Also consider such factors as fuel efficiency and cab comfort because you spend most of your day driving. Fuel costs make up a significant part of the operating expenses, and a fuel efficient truck can greatly improve the business’s bottom line An Owner-Operator will need between $5,000 to $10,000 just for the cost associated with the purchase of a good used truck in addition to financing the rest of the truck’s purchase price.
Used truck prices range from $10,000 to over $50,000, but a good four- to five-year-old Cab-over should sell for approximately $20,000, with a down payment of $4,000 to $5,000. The finance company will require a down payment of 10 to 20 percent, depending on the buyer’s credit rating, and may also require a cosigner. Interest rates generally are higher than regular vehicle loans because only a few companies specialize in truck financing.
Additional expenditures include the registration fee (license plate) and operating permits, as well as insurance premiums. The Owner-Operator will need several types of coverage. Department of Transportation regulations require liability coverage, however, other coverage, such as physical damage or workers’ compensation, may be necessary to comply with state regulations or to meet shipper requirements. Insurance rates have significantly increased due to losses associated with the terrorist attacks. Most Owner-Operators make a down-payment and finance the annual premium, making monthly payments. About 15 insurance companies specialize in truck insurance, and most require three monthly premiums upfront, which amounts to several thousand dollars, and nine monthly payments.
The Owner-Operator will need financial resources to cover several weeks of operating expenses until revenue starts flowing in. Some brokers may pay right away when you present documents that you have delivered the load, but most brokers and lease-on carriers will make weekly or biweekly disbursements.
Additionally, you will incur smaller expenditures for a CB radio, having your business name and DOT number painted on your truck, buying log books and office supplies, as well as supplies and items you will need for the sleeper.
The Used Truck Association (UTA) has released a set of guidelines for “industry standard” trade terms and conditions. These are used to establish the condition of a used truck, as agreed by the buyer and seller. The UTA Trade Terms & Conditions covers engines, drive-trains, brakes, tires, frames, cabs, sleepers, and bodies. It also takes into consideration de-identification, safety inspections and fleet trades. A free copy is available at www.uta.org. Source: Transportation Equipment News.
Visit the truck dealerships in your area and check the equipment they have in stock. You will hopefully find several trucks that meet your specifications. When you talk to a salesperson, ask questions and take notes. You should have prepared a list of items you need to know to help you make a purchase decision. Some of the questions you need to ask should include:
How many miles are on the chassis?
How many miles are on the major components such as the engine, transmission, differentials, turbo charger, power steering, and air-conditioning system?
Is the truck or certain components still under factory /manufacturer warranty?
Does the dealership offer a warranty?
Are used-equipment warranties available for you to purchase?
Who performed the truck maintenance and where?
Are maintenance records available?
For what type of service was the truck used for?
How many previous owners?
In what climate was the truck operated?
Does the truck have all original components?
If not, which components have been replaced and why?
Has the engine been overhauled?
Has the truck been in an accident or collision?
Ask additional questions and demand explanations or clarifications if you do not understand what the salesperson tells you. You need to make sure that you learn as much as possible about the truck that you want to purchase, and an honest dealer will respect that. Also resist any pressure to close the deal until you have all the answers and explanations you need to make your final decision. Keep in mind that you invest a great deal of money in this truck and your success as an Owner-Operator will in part depend on your ability to select a well-maintained used truck whose major components will perform well for you.
Also perform a close and careful visual inspection. Start by walking around the vehicle, looking for physical damage such as body work, bent wheels, broken springs, frayed air lines, chipped or cracked lines, metal fatigue, welding marks, and anything unusual.
Then check the engine. Tilt the cab or hood and check the outer surface for leaks. Also look for signs of leakage on the side of the engine block just below the cylinder head. Ask for an explanation if it appears as if the engine was steam cleaned.
Next, pull out the oil dipstick and check for water beads. If you find water on the dipstick, it may indicate a sealing problem. Again, ask for an explanation. Then start the engine and let it idle for about fifteen minutes and check for leaks again. Ask for a test drive and take the salesperson with you to answer any questions you may have. The test drive may reveal trouble spots or problems that would otherwise hide by only idling the engine. While you drive the truck, also check for smoke. Heavy black smoke may indicate injector, pump or engine breathing problems.
The next major component to check is the transmission. If the truck has a transmission temperature gauge, watch it. The normal transmission temperature should be 200 degrees Fahrenheit or below. You should also check the transmission and rear axles for leaks. Then carefully check for cracks on the frame and make sure no welding was done at the frame rails.
Congratulations if you found the perfect truck and an effective trucking company business plan with which to begin your trucking business. If not, do not hesitate to walk away from a bad deal and start searching again.