Guess Which Small Business Industry Is Growing the Fastest?
Growth in manufacturing and consumer spending has helped this unglamorous industry prosper
Those big rigs you see rumbling down the freeway are a sign of good times.
Trucking is now the fastest-growing small-business industry in the U.S., thanks to a robust economy and expanded options for small-business loans and financing.
Two kinds of small businesses in trucking posted the biggest jumps in revenue in the 12-month period ending May 31, according to a report released this month by Sageworks, a financial analysis software company.
General freight trucking, which covers small businesses that transport a wide range of merchandise, was at No. 1, recording a nearly 25% uptick in sales, the report said.
At No. 2 was building and construction, at 19%, followed by specialized freight trucking, which covers tankers and refrigerated trucks, at No. 3 with a 17% gain.
The survey was based on an analysis of financial statements of small businesses with annual revenue of less than $5 million.
Trucking’s momentum is evident in California, home to the biggest trucking association in the nation.
“Trucking is one of the great entrepreneurial opportunities,” Shawn Yadon, chief executive of the California Trucking Association, tells NerdWallet. “We typically trend with the overall economy.”
And the trend has been upbeat, highlighted by growth in manufacturing and consumer spending that’s “still doing well,” he says.
Trucking’s momentum was also underscored in May when the American Trucking Associations reported that the industry’s revenue topped $700 billion for the first time ever.
“Trucking is, and will continue to be, the dominant way to move goods in this country,” Bill Graves, the association’s CEO, said in a statement.
In fact, there’s so much demand for trucking services that the industry is wrestling with a shortage of 35,000 to 40,000 drivers, according to the American Trucking Associations.
That points to even more opportunities for entrepreneurs who now have more access to small business loans and other kinds of financing.
David Gilbert, CEO of alternative lender National Funding, says his company is “seeing fundamental growth” when it comes to transportation-related small business loans. “People are transporting more stuff,” he tells NerdWallet. “The economy is growing again.”
Trucking can be a complex industry, and entrepreneurs interested in entering that industry should focus on three key areas:
Make sure you know and understand rules and regulations
Yadon of the California Trucking Association stresses the need to “go through the proper channels.”
If you plan to operate in multiple states, the website of the Federal Motor Carrier Safety Administration of the U.S. Department of Transportation includes information on requirements.
A key step is getting a USDOT number, which federal authorities use to keep track of your small business in connection with safety audits and crash investigations and inspections.
You also have state regulations to think about. In California, for example, you’ll need to comply with regulations related to air emissions and carrying different types of cargo, such as animals, crops and produce. A good place to start is the website of the state’s Department of Transportation.
Have a clear plan for buying and maintaining trucks
Of course, one of the most important steps in starting a trucking business is, well, buying trucks.
Yadon estimates the cost for a truck ranges from $50,000 for a used rig to $150,000 for a brand new vehicle “with a lot of bells and whistles.”
“There’s a lot of very good technology going into the equipment now,” he says.
But you need to plan this investment carefully, says Gilbert of National Funding, which offers financing to both owner-operated companies with just one truck and bigger firms operating at least five vehicles.
That means having a game plan for maintenance and being prepared for the business impact of trucks breaking down, he says.
“They need to really manage good quality vehicles,” he says. “If they need to fix the vehicles, if there’s a hiccup and they don’t fix it, it could hurt their business.”
Join a local or state association of truckers
For entrepreneurs who are just starting out, it’s wise to reach out to other trucking companies, which usually means joining local or regional associations, Yadon says.
For example, members of the California Trucking Association get access to exclusive programs, such as special deals for tires, legal services and financing truck purchases or leases.
The trucking industry has so much momentum, “you’re probably going to see another uptick in the second half of the year,” Yadon says.
“It’s definitely a good time for trucking,” he adds.
By Benjamin Pimentel in Time’s Money Magazine