About This Lesson
The trucking industry is a vital component of the American economy. Without freight companies, most other businesses wouldn’t be able to exist. Running your own freight business can be incredibly profitable. Just being a great truck driver isn’t enough. You need to actually know how to run a business.
There are several reasons why businesses, including trucking companies, fail each year. One of these reasons is a lack of positive cash flow. Here are five ways to increase your profits to run a successful freight company.
Know Your Operating Costs
To make a profit, you have to know your operating costs. First, determine your fixed costs, such as your payments for your building lease and insurance. Next, figure out your variable costs, such as fuel, tolls, and lodging. Add all of your costs together and subtract them from your rates. The figure you’re left with is your profits.
Once you have your numbers, you can figure out where you can cut costs. A good place to start is with your highest variables. You can also invest in accounting software to help you manage your expenses and revenue more effectively.
Reduce What You Pay for Fuel
Fuel is one of the biggest variable expenses that truck drivers have. When buying fuel, many drivers automatically assume that the lowest price at the pump is the cheapest price available. Every state sells fuel at a different price and imposes taxes at their own rates. Freight companies have to pay tax for every state they drive through, regardless of where the fuel was purchased. Instead of looking for the lowest pump price, you should be looking at the lowest base (pre-tax) price.
Work Directly with Shippers
Another big variable cost many freight companies have is the use of brokers and load boards. While these sources can be beneficial at times, they can also be quite expensive. Brokers may keep as much as 20% of your load price, which cuts into what you can actually be making.
Instead of using these services, work directly with shippers. Make prices competitive with brokers to help gain more customers. The biggest difference is that you get to keep all of your profits.
Get the Word Out
To build your customer list, you need to get the word out about your company. There are several things that you do:
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Build a great website and optimize it so that shippers have an easier time finding you
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Create profiles for your business on various social media sites. Here, you can interact with potential clients and share company updates
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Ask for reviews from satisfied clients
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Join associations
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Make yourself known on forums
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Contact shippers you would like to work with and offer your services
Consider Your Financing Options
You have a lot of payments to make. Monthly bills (insurance, rent, truck payments) need to be paid, fuel needs to be purchased, employees need paychecks. If shippers or brokers don’t pay invoices quickly, you may not have enough funds to cover your expenses. Or you may be left with very little to cover anything else until you get paid.
Instead of dealing with delays in invoice payments, look into financing options. There are several options available. Consider factoring invoices for immediate working capital. Instead of waiting for your invoices to be paid, you sell your invoices to a company and they wait for the payment. Approval is generally quick and you don’t accrue any debt.
Another option to consider is a small business loan. Using a loan, you can get the money you need to cover your expenses. Depending upon the lender, you will need considerable documentation to qualify. It may also take several weeks to approve the loan and receive your funds. You also have to repay the debt, including interest. Running your own freight company can be lucrative. With the right strategy, you can increase your profits, grow your business, and achieve success.
