How can you make sure your trucking business is profitable? With the modern demands of transportation, small trucking companies are more valuable than ever. Across pandemics, recessions, and a digital revolution, trucking keeps everyday life moving and is predicted to keep growing in years to come.
Keeping your trucking business profitable is paramount to making sure your vital business thrives. At National Funding we want to make that happen. That’s why we’ve compiled a list of factors to consider to make sure your trucking business provides a solid return on your investments.
Managing Your Trucking Business Costs
For every business, income must be higher than expenses in order to make a profit. Trucking companies are no different but certainly face their own challenges. Overall, three main steps can help any trucking company get on top of basic finances.
1. Determine Your Operating Costs
A trucking company will usually set a cost-per-mile as their means of pricing. This cost per mile must account for operating costs, wages, and room for growth in order to make the business profitable.
The cost per mile for your trucking company must take into account set costs (overhead) and variable costs (running costs). In order to determine these, it’s important to have detailed records of monthly expenses. These records can be used to better understand how much goes into every mile of operation. Make sure to evaluate operating costs regularly using thorough records so that you will know what rates your business needs to bring in more money than goes out.
2. Set a Competitive Rate
With operating costs determined, the next vital step is to make sure rates are competitive. Though the more each mile costs, the more profit a business can theoretically make, setting prices high will send others away. Ensure that rates are competitive to draw in business.
Measuring Your Business Against Competitors
Completing market research can be simpler than one might expect. Sometimes it’s simply a matter of asking the price for comparable routes. Of course, the total cost will be slightly inflated for broker fees. In order to measure your rates against competitors’, simply follow the steps below.
- Use a load board and select your freight lane
- Select at least 10 comparable loads to measure against (only one direction)
- Contact brokers for those loads to find their rates
- Take the average of those prices and add 10% to 15%. This will tell you the price that brokers charge shippers.
- Repeat the process to find the cost for the backhaul.
Another consideration when setting competitive rates includes driver salary. Better drivers that can deliver on time and maintain a clean record due to safe practices are worth investing in. Salaries should be competitive as well to attract effective employees.
Overall, cover necessary costs with enough to scale your business up, but be sure to keep an eye on the market in general. This will ensure your business attains new clients and maintains an ideal balance to keep profitability high for your trucking operations.
If your business is working towards competitive rates and salaries, you may need more flexibility with your funds. Working capital loans and other small business loans with National Funding allow you to shift business strategy with more flexibility, giving you the chance to become more profitable over time.
3. Be Efficient with Fuel Costs
Fuel literally keeps a trucking business running and is often the biggest expense owner-operators deal with. Trucking business owners can be sure to stay profitable by buying fuel by base price (before tax) rather than pump price (after-tax).
Members of IFTA (International Fuel Tax Agreement) pay specific taxes on fuel regardless of where it was purchased, so purchasing fuel with the lowest base price can save a huge amount of money for trucking companies, lowering cost-per-mile and allowing for competitive prices.
Optimize Loaded Miles
Well-booked freight is a great sign for trucking companies. It shows that business is booming. Competition can be fierce and trucking companies are effectively always in competition with one another, so it’s critical to use necessary tactics to assure every mile is loaded and making money.
1. Support Specific Market Niches
Larger trucking companies will be hard to beat for the largest and most straightforward loads. That’s why it may be useful to look for jobs in specialized markets.
Ideal markets can offer loads year-round and are recession-resistant. This means a haul that everyone needs all the time but may be more complicated to move. Niche markets like this can include fresh produce and meat or liquid loads from food to fuel.
Specialized markets often means specialized equipment. National Funding’s equipment financing and leasing can help you gain access to the trucks your business needs to take advantage of market opportunities that will keep your miles loaded
2. Maximize Truck Loads
Loaded miles means growth, so it’s critical to stay competitive and book freight so that your drivers can move effectively.
Finding freight to move can be tricky and a major obstacle to profitable trucking. Fortunately, there are ways to assure your drivers are working with loaded miles more often than not so that your business can boom.
- Hire a Broker: Brokers can find and connect businesses directly with shippers. They will even do the needed negotiating, allowing fleet managers to move forward without the struggle of finding loads alone. This solution can be costly and may require raised rates. Return to detailed monthly records to determine if that cost will be worth it for your business.
- Utilize Load Boards: Load boards skip the broker middleman and connect shippers directly with owner-operators and fleet owners. Load boards are a great way to start and allow fleet owners to keep it simple and connect directly. This option has a low barrier to entry and will favor trucking businesses with competitive rates.
- Register as a Government Contractor: Contracting with federal as well as state governments is another way to assure loaded miles. This option requires its own specific registration and a few extra steps to get started, but it’s certainly an option for fleet owners and owner-operators.
- Become Your Own Broker: It’s far from impossible to load miles as part of your own trucking company. It’s hard work but small business owners are no stranger to putting in the effort. Networking, cold calling, and researching local shippers in the area can all bring in the business you need to grow.
Plan Ahead for Scalable Growth
As long as your rates stay above your cost-per-mile, each mile will be profitable. That means the more miles, the more money made. The more your business can scale and grow, the more you can be sure your trucking business is profitable. At National Funding, we understand that sometimes growth requires a bit of investment. Our small business loans can help your business take new opportunities and start to turn a higher profit than before.
1. Increase Your Fleet Size
One of the most obvious ways to scale your trucking business is to increase your fleet size. Equipment leasing and financing with National Funding can help lower the barrier to a bigger fleet, making your business more profitable than ever.
2. Reward Good Drivers
Owner-operators should never underestimate the value of a solid driver. Safe drivers that can deliver on time improve your business reputation and can bring in more business. Working capital loans with National Funding can bring the much-needed flexibility to provide these rewards and incentives.
3. Avoid Stalls in Cash Flow
The nature of the transportation industry sometimes means that invoices are pending for 15-30 days or more. Working capital loans and other small business loans can help keep cash flow flexible and provide liquid assets needed to take advantage of trucking opportunities. Explore our options or talk with one of our Funding Specialists (888.733.2383) to explore the loan that works for your business needs.