Do you think about starting a hotshot trucking business?
A hot shot trucking business is an opportunity for truck drivers who can't afford to buy a semi-truck but can afford to acquire a medium-heavy duty vehicle.
Find below the steps to start a hot shot trucking business.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Step 1. Write a business plan
A business plan is a vital part of starting a hot shot business because it keeps you accountable every step of the way towards achieving your business goals.
That means considering your operating costs and managing business expenses while doing the necessary actions to keep the business profitable.
Creating such a plan for your hotshot business ensures that you fully understand your market and how to apply the correct business strategy.
When you need to raise money, a well-written business plan allows investors to better understand your hotshot business and proves that you know what you are doing.
A business plan should include the bellow sections:
Executive summary: this section is a brief of the entire business plan.
Business overview: this section of the business plan goes over your company history, vision, mission, ownership, and corporate goals.
Product and services: this section describes your offerings in detail.
Market analysis: this section describes the existing market trends such as seasonality trends, demand variations, and growth opportunities.
Customer analysis: this section describes who your target customer is. It develops an overview of its demographics, interests, and problems.
Competitive analysis: this section evaluates the key strengths and weaknesses of your competitor. At the same time, here you point out the advantages of your hot shot services over your competitor.
Sales and marketing: this section shortly describes the company's sales and marketing strategies.
Management team: here you describe the roles of your team. If you are a solopreneur, describe your role.
Operations plan: here you need to mention what you need to run your day-to-day operations such as office location, equipment, logistical details, etc.
Financial plan: this section includes three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Step 2. Hotshot trucking start up costs
Even though a hot shot business equipment is cheaper than a semi-truck business meaning that starting a hot shot business includes some start-up costs.
The start-up costs for a hotshot business may range from $28,000 to $75,000.
Of course, the bulk of this cost goes to the purchase of the pick-up truck and trailer.
In case that you own the pickup truck and the trailer, your hotshot business start-up costs can be reduced by up to 80%.
|LLC incorporation, licenses and permits
|$500 - $1,000
|$3,500 - $4,000
|Marketing and advertising
|$500 - $2,000
|$100 - $750
|$200 - $250
|$15,000 - $45,000
|$7,000 - $20,000
|Other tools and equipment
|$200 - $1,000
|$1,000 - $1,000
|$28,000 - $75,000
Step 3. Brainstorm a business name
In just a few words, your business name should make your objectives, services, and mission clear to your potential customer.
To achieve that goal, the hotshot business name should be short and easy to remember.
Here are some other ideas on brainstorming your company name:
- Short, unique, and catchy names stand out.
- Business names that are easy to spell to do better.
- It should be relevant to your product or service.
- Include words such as “transportation”, “hot shot" or "trucking”.
- Avoid location-based names that may hinder future expansion.
Once you’ve got a list of potential names for your hotshot business, visit the website of the US Patent and Trademark Office to make sure they are available for registration.
Once on the website, go under Trademarks ==> Searching Trademarks ==> click the "Search our trademark database (TESS).
Step 4. Get a CDL
A CDL type is required for commercial motor vehicle drivers.
However, when hot shot drivers don't exceed the gross weight limit set by the authorities, a CDL may not be required.
Despite that, you need to check if your specific circumstances do not place you in the category of needing one.
You don’t need a CDL if you meet the following criteria:
- If you’re pulling a total weight of fewer than 10,000 pounds.
- If the vehicle’s and trailer's combined weight is less than 26,000 pounds.
You may have extra flexibility in where and what you can haul. You will need a CDL to haul across state lines (interstate).
Step 5. Purchase the right equipment
If you want to save yourself a lot of trouble in the future, you should invest in a solid and trustworthy truck.
A heavy-duty truck such as a Ram 3500 is easy to run and cheaper to purchase than a semi-truck.
The prices for the most expensive hotshot equipment are:
A good pickup truck might cost anywhere between $15,000 and $60,000 with a weight limit as below:
- Class 3 medium-duty trucks have a weight limit of 10,001-14,000 pounds. Mainly contractors and last-mile delivery drivers use this class. But you can also use them for lighter hotshot loads.
- Class 4 medium-duty trucks have a weight limit of 14,001-16,000 pounds. These are heavier trucks but they’re still classified as non-commercial.
- Class 5 medium-duty trucks have a weight limit of 16,001-19,500 pounds. Many of the lightest commercial trucks are categorized as Class 5.
A trailer might cost anywhere between $7,000 and $25,000 and can be of different forms as below:
- Bumper pull trailers are generally shorter and less expensive. They’re easy to use, which is why they’re popular with civilian drivers. But they can’t haul as much. They usually haul less than 10,000 pounds.
- Gooseneck trailers have a tighter turn radius than bumper pull trailers. They can also usually carry larger, heavier loads. This can be an advantage when delivering to construction sites or other remote areas with little space to turn around.
- Tilt deck trailers tilt at an angle, so it’s easier to load heavy cargo.
- Lowboy trailers have a low center of gravity, ideal for the heaviest loads.
- Dovetail trailers work well if you’re hauling cars or other equipment with wheels.
The types of loads that you plan to haul largely determine the kind of equipment that you may need to deliver hotshot freight. Such equipment may be a gooseneck trailer or a regular flatbed trailer.
You may need to invest in some tools and equipment to help you with your shipments, such as ramps and tie-downs.
Step 6. Obtain an EIN
An employer identification number, or EIN, is a number issued to your company by the IRS.
You will use this number to file your business tax return, open a business bank account, and receive payments from customers. It lets you pay yourself and other employees.
You can apply for your EIN here.
Step 7. Get a DOT and MC numbers
To move freight in the United States, you need a DOT and MC (Motor Carrier) number from the Federal Government.
The DOT number is unique to your company and is used to track your safety scores and information.
Your MC number, also known as your Operating Authority, states what type of cargo your company is legally allowed to haul.
On the side of your truck, you’ll need both a US DOT and an MC number.
First-time applicants can apply for both through the FMCSA’s Unified Registration System.
As a hotshot driver, you may also need a DOT physical and a medical card.
This is a medical, mental, and emotional assessment to guarantee that commercial truck drivers are physically, psychologically, and emotionally fit to transport cargo.
Step 8. Get the right level of insurance
Business and vehicle insurance protects your LLC from liability when someone claims your hotshot business in court.
There are 5 critical types of insurance coverage needed to protect your hotshot business. See below:
- Primary auto liability: also known as Bodily Injury Physical Damage (BIPD) is required by the FMCSA at a minimum coverage of $750,000.
- Non-trucking liability: Non-Trucking Liability offers liability coverage for property damage or bodily injury to a third party when trucks are being used for non-business purposes.
- Cargo coverage: Cargo coverage ensures the contents of the trailer are covered when the cargo is damaged due to temperature-control machinery, other appliances, or accessories that keep cargo secure. The Minimum recommended coverage is $100,000.
- Uninsured motorist insurance: If your pickup truck is damaged or you sustain injuries in an accident that is caused by a party that does not have sufficient Auto Insurance coverage, this coverage will pay for your injuries.
To review your insurance options, sit down with an agent to evaluate your business and find what fits your needs.
Step 9. Open an LLC
An LLC is the simplest way to organize a hotshot business.
A limited liability corporation (LLC) or other company structure protects you from liability claims.
Instead of purely operating as a sole proprietor, this is when legally establishing your business comes into play.
If you are taken to court, as a sole prop, all of your assets are vulnerable while a business filing, such as an LLC, acts as a legal separation from your life assets.
Step 10. Open a business bank account
Once you have an LLC set up and have your EIN, your next step is opening a business bank account.
A business bank account is another way of separating personal assets from your business assets.
Having a separate business bank account is important to track business expenses and income, to determine whether the business is profitable or not, and clear financial accountability helps a lot during tax time.
The process of opening a business bank account is simple:
Identify and contact the bank you want to use.
Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address).
Complete the bank’s application form and provide all relevant information.
Meet with a banker to discuss your business needs and establish a relationship with them.
Step 11. Find freight
Driving with an empty trailer means that you are losing money. So, to make money in the hotshot business, you need to find freight to haul
A trucker's ability to find freight is his most important ability. After that is the driving ability.
If you find it difficult to find freight or negotiate the best rates, then consider setting up with a hot shot dispatching agency. They will handle these tasks and help you stay in the trucking business.
Another option to find freight is by using load boards. The major load boards are DAT, KeepTruckIn, 123LoadBoard, Convoy, and TruckStop.