Do you wonder about how to start a car hauling business?
There are two main reasons why you'd want to get into the car hauling business.
Second, you want to increase your earning by providing a specialty type of service to the car supply chain.
A lot of businesses need to safely and securely move cars from dealerships, auctions, or its recovery between locations.
Below, find out the actionable steps of starting a car shipping business.
Choose to hot shot car hauler or big rig car hauler
Depending on the car size and trailer model, the weight capacity is limited to 80,000 lb under U.S. law.
However, there are two options to ship cars:
First, use non-CDL mini Dodge haul between three to five cares as a hot shot car hauler.
Second, use a big rig with CDL required to haul between five to nine cars.
If one of the above options works for you that's a good proof to follow the below steps of starting a car hauling business.
Step 1. Gain initial experience in the trucking industry
Without experience, car hauling is not the type of trucking business that you want to start.
Car hauling has its unique industry aspects and complexities.
That doesn't mean that you need to be a hauling veteran to start a car hauling business. But having previous experience working as a truck driver for a transport broker as Jack Cooper.
Step 2: Make sure you know how to load and unload properly
Loading and unloading of cars on the auto transport trailer is a complex process and it requires a lot of skill.
Also, the driver is responsible for making sure that the cars were loaded correctly on the trailer.
To make everything work correctly, the driver needs to consider many things, such as, the size of each vehicle and the order in which they are to be loaded.
Step 3. Research the car hauling market
To be able to figure out these low competitive areas in the car hauling market, you need to understand who are your customers, who are your competitors, and you also need to have an understanding the car hauling business landscape.
Once you understand where you can fit in the market and create a profitable business, you may determine your exact car hauling services.
For example like "do you offer short haul or OTR interstate car hauling service?"
Once you've figured out a market gap, you need to decide your car hauling price range. To stay profitable, after fuel and maintenance expenses, add a profit margin that keeps you competitive in the market.Your target market is likely to be car dealers.
You can find them by networking or advertising on LinkedIn or just calling on them directly. You can also offer services to private buyers and sellers and find them on sites like Facebook.
If you have experience in trucking, you may know at least what to look and where to look for when doing market research.
By researching the car hauling market, you prepare yourself to target the least competitive areas of the industry.
Step 4: Create a business plan
To succeed, every business needs a plan.
That means that the next step of starting a car hauling business is to create a plan.
This plan should include such thing as where you can find customers, which are the businesses financial goals, and what needs to be done to achieve those goals.
By creating such a detailed plan for your business plays helps when obtaining funding from investors, keeping track of your business progress, and making any necessary improvements.
Basically, your car hauling business plan is a guide to help you grow your business.
A business plan should touch on the below aspects of your business:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your offerings in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
Step 5: Choose a car hauling business name
The next step in starting a car transportation company is choosing a business name.
The company's business name should be easy to remember and clear and it should easily support all the marketing efforts.
Here are some ideas about how to come up with a good brand name:
- The business name should be short, unique, and catchy.
- The business name should be relevant to your product or service offer.
- Including keywords, such as “hauling”, “car hauling”, or "car transportation" improves its clarity.
- Leave a place for expansion in your business name.
Once you’ve decided on a potential name for your car hauling business, visit the website of the US Patent and Trademark Office to make sure it is available for registration.
Also, to harmonize your future marketing efforts, check if the name is available to be used in the URL of the company's website and it needs to be used in all the company's social media profiles.
Step 6: Plan your business budget ahead of time
Before starting a car haulage business, it’s important to be aware what will be your future costs such as the ongoing business costs.
Secondly, it's important to make sure that you have the cash to cover all these business costs.
To be able to cover your daily operating costs and any unexpected costs, you need to set up a budget up front that can cover all these issues.
Step 7: Fund your business
Securing financing is your next step and there are plenty of ways to raise capital:
- Personal: Self-fund your business via your savings or the sale of property or other assets.
- Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Bank and SBA loans are probably the best option, other than friends and family, for funding a car hauling business.
Step 8: Register your business
During the registration of the business, you need to choose the form of the business entity that the company will operate under.
These business entities come in several varieties and each of them has its pros and cons.
Here are the main options:
- Sole Proprietorship – is the simplest structure for small businesses. It makes no legal distinction between the company and the owner because everything is tied up to one person. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
- General Partnership – is similar to a sole proprietorship but, in this case, it affects two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
- Limited Liability Company (LLC) – combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
- C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
- S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
After choosing the legal structure of the business, you need to register your business name with the
Secretary of State in each state where you operate your business.
Step 9: Register for taxes
Next, you need to register your business with the Internal Revenue Service (IRS), which will issue you an Employer Identification Number (EIN).
Most banks require you to have an EIN to open up an account. In addition, to hire employees, you need an
EIN since that is how the IRS tracks your payroll tax payments.
You can file for your EIN online or by mail or fax: visit the IRS website to learn more.
Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN or taxpayer identification number.
Once you have your EIN, you’ll need to choose your tax year.
Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month.
This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
To set up your company correctly, you may need to consult a certified tax professional, business consultant, or accountant.
Step 10: Get insurance
In the car hauling business, the carried freight is high-value.
As a serious car hauling business, you want to protect your equipment as well as the hauled cargo.
As such, insurance companies want to make sure you have adequate coverage.
Most often, you can expect to carry about $2 million in liability insurance and $500,000 in cargo insurance.
However, there are other types of insurance to consider:
Here are some types of insurance to consider:
- General liability: This type of insurance acts as a catch-all for many business elements that require coverage. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies owned by the business.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
Step 11: Fulfill legal requirements
Before you hit the road with your car transportation truck, you need several permits:
- UCR — Unified Carrier Registration fees.
- IFTA — International Fuel Tax Agreement tax.
- IRP — International Registration Plan taxes.
- HVUT — Heavy Vehicle Use Tax.
- DOT — Department of Transportation fees.
- MC Number — Assigned by the FMCSA.
It’s important to pay the fees on time to avoid paying heavy fines or having your vehicle placed out-of-service.
Step 12: Apply for car hauling business licenses and permits
Starting a car hauling business requires obtaining several licenses and permits from local, state, and federal governments.
The below licenses and permits are required:
- You’ll need to obtain a commercial driver’s license from your state DMV.
- You’ll also need a Department of Transportation number (DOT) and a Motor Carrier Authority (MC) number, both of which you can get by registering with the Federal Motor Carrier Safety Administration (FMCSA).
- You’ll need to complete a unified carrier’s registration, and if you plan to drive to other states or Canada, an International Registration Plan tag and an International Fuel Tax Agreement decal.
- You may also need other state-level and local county or city-based licenses and permits.
The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Step 13: Open a business bank account
The next step is opening a business bank account.
Keeping your business finances separate from your personal finances keeps your finances organized. That makes it easy to file taxes and track your company’s income.
Opening a business bank account is quite simple, and similar to opening a personal one.
Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you.
Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 14: Search for loads
After the FMCSA approves your authority, your last step in starting a car hauling business but a continuous one is to look for loads.
The way to find loads for your business can be endless. But a good place to start is by using load boards for truck drivers to find work.