On the way to your dreams in the trucking business
The trucking business is wonderful business and it’s constantly growing. Demand is increasing and those who can run a trucking operation are valuable. I’ve been asked, many times, how much trucking companies make on average. I’ve seen many numbers, but on average a mid-sized trucking company can earn $500k a month. How does that sound to you? And don’t get confused, it’s $500k of clean profit, not gross revenue. So, $500k a month equals $6 million 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 if you do things right. The more mistakes you make the further away from your goal you will be.
Here is the uniqueness of the transportation industry: it has relatively low barriers of entry and it offers high risks and high rewards. The good news is that pretty much anyone can do it. The bad news is the competition is definitely out there. The trucking business is what’s known, in economics, as a “pure competition” form of market. It’s a perfect example of “pure competition” because it has a large number of participants and everyone offers pretty much the same service. You might wonder if there is so much competition and everyone can do it, then why do some succeed while others fail?
This article will answer this question for you. The answer is because it’s so easy to enter the industry and there is so much competition, you have to make sure to do things right or you will fail. Many try and either don’t do things right or try shortcuts—it doesn’t work that way. You don’t even have to be better than anyone since the transportation market is so big. There is enough room and opportunities for anyone who is willing to work at it. The key secret is you just have make sure you are not worse than everybody else in order to stay afloat and not to drop out of the market. Those who are the same as everyone else in the market- make standard profits (as mentioned above), those who do something better than others—earn enormous fortunes. Those who are behind everyone else – fail. Unfortunately, a lot of business owners are negligent and overlook what it takes to make them at least as good as everyone else. They jump into the business without doing proper research and without setting up a proper business structure.
You have to remember that a business is a living, breathing organization. It’s especially vulnerable during the first two years, while it’s in its infancy stage. Most of the trucking companies have been started by former truck drivers. They simply don’t have the required expertise in finance, accounting and safety regulations. However, I don’t blame them. They do possess a crucial expertise required for the trucking business—most of them are pretty good mechanics or at least have a working knowledge of the mechanical part of the equipment such as trucks and trailers their company will operate. While it’s pretty easy to set up a good financial and accounting system in the office with the help of professionals, it’s much harder to set up a good team of mechanics to control maintenance and repairs.
Here are a few helpful trends in the trucking industry that other companies are currently following:
#1: Invest in technology for your company. Thanks to technology that keeps evolving, it makes operations in the trucking industry easier and more efficient. If you are keeping up with today’s technology, you will get to your goals even faster than those that came before you. Honestly, it’s amazing to see all the technological changes in the industry over the past 15 years. It has made the trucking business easier than it used to be. Thus, there is absolutely no reason not to take advantage of the opportunity it presents. Actually, it used to be an advantage in the earliest years as well. Those who took advantage of it back then, are probably billionaires by now. Today, it’s an absolute necessity for the trucking business.
Remember, I mentioned that to succeed you don’ t have to be better than anyone, you just have to make sure you are not worse than anyone. Today most of the trucking industry participants recognize the need to keep up with ever evolving technological advancement. They all adjust to it. Thus, those who fall behind this trend, will drop out the market.
#2: 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 a good dispatch system will help you 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 is the trend that all good trucking companies are following right now. The successful ones are all achieving efficiency by reducing their labor cost. Just think of it this way: a good dispatch system will replace 5 bookkeepers in your office and you will need just one accountant to oversee the workflow. Ultimately this is $300k annual savings on bookkeeping staff. Now imagine that everyone is doing this, thus by cutting their costs, they are able to offer more competitive freight rates to their customers and brokers. Therefore, 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 who do.
#3: Also, good dispatch software will give you an ability to outsource your office operations overseas. This is another common trend good 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 since they are one of the most important employees in your business, their salaries could kill you.
Most successful companies recognize that while you can’t outsource truck drivers, you can easily outsource dispatchers from different countries that have lower costs of living. They offer a pretty good salary relative to the average salary for that country, but 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. A salary of $1,500 per month for a dispatching job, is very attractive for that country and will attract the best workforce for your business. In order to set up the process, you need to have 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. However, your intangible part of the business will be outsourced and flawlessly operate from anywhere in the world.
Another advantage of good dispatch software is it eliminates mistakes that we, as humans, all make. No matter how perfect your employees are, mistakes will happen. Some mistakes can be brutal, which will cost your business a lot. That is normal and that’s why computers are out there to help us. Good software is designed to catch errors and warn its users.
Reason #4 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 the trucking business the owners often confuse cash flow 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 profit. However, as time goes by, if the company is unprofitable, the excess cash flow get dissolved and followed by a cash shortage.
That is when most business owners begin to panic. However, it might be too late unless some additional funds are attracted. You have to be able to obtain your financial statements and understand them before you run into trouble. There are lots of components in financial statements, so it’s best if you have an expert who can explain each component if you don’t possess the necessary financial and accounting knowledge.
Reason #5 is that it gives you the ability to scale. What does it really mean? As you can probably imagine a company with 3-5 trucks makes a certain profit. Now imagine a company with 80 trucks; they may make 26 times the profit.
However, what’s interesting is sometimes the owner of a 3-5 truck 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 rocket. Then you have a choice to make. You can simply retire and enjoy life, or you can choose to continue achieving new horizons.
Properly designed dispatch software will help you 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 and efficiency, they will come to your door asking to give you business. Take this opportunity and don’t be afraid. Success is never easy, but if you choose the trucking business and take our advice, you will succeed beyond your wildest dreams..