Did you ever wonder about what makes a trucking business roll?
What makes an owner-operator's trucking business go through the mundane of daily operations and still be efficient at the end of the day?
These are good questions because the trucking industry is a market where many things can go wrong.
Tires blow up. The truck breaks down. Loads cancel.
If all these issues happen all at once, that becomes a big problem.
Your ability to manage your trucking business determines whether or not your company will survive in this industry.
Today, I'll share tips on trucking business management.
What is trucking business management?
To build a successful trucking business, every business owner has to manage three things.
First, you have to manage the finding freight process.
Second, you have to manage the process of finding drivers to haul loads.
Third, you need to manage the equipment on which drivers can deliver the loads.
Once you have all the pieces in place, you may keep a complete record of all business expenses.
And when you know the size of your business spending, then you can understand the size of your profits.
1. Managing the business operation costs
Not all freight costs are ideal for your trucking services.
Some of them are profitable and others may lead the company to a financial loss.
It's much better to see the full picture of the business so that you can check it or make changes to it whenever you need to.
You need to manage the costs of the business in such a way that you have enough money to finance your business against future earnings.
You need to keep truck of fixed costs and variable costs.
Fixed costs are things like truck installment payments, insurance costs, necessary permits, licenses, etc.
Variable costs are costs for fuel or truck repair expenses because these change depending how many miles are driven.
When you are able to combine the variable and fixed costs, you may have a chance to have a clear feel for the company's ideal cost per mile. That allows you to set a rate that yields a profit.
2. Manage load costs by cutting the middleman
When you are at the beginning of building your trucking business, brokers and load boards can keep your trucks rolling.
But as your trucking company grows, you should change your strategy of finding loads.
You should eliminate the middleman such as brokers and load boards and focus on dealing directly with shippers.
When searching for loads, brokers retain 10% to 20% off the load prices, which eats a big chunk of the profits.
Your long-term strategy should be to build long-term relationships with shippers with sufficient freight volumes and competitive rates.
In time, you should rely less on using brokers and load boards until they have less presence in your business.
3. Manage your back office employees
As your trucking company grows, you'll need to learn how manage your back office that is taking care that your operations run as smoothly as possible.
You'll have to hire an accountant, a dispatcher, and if needed even a tracking person.
To make the team run smoothly, you'll need an accounting software, a computer, and connection to the internet.
4. Manage Expenses
To understand the business profitability understand its expenses.
Make sure that your trucking company is spending less money than it makes.
That's why keeping records of all the trucking business expenses is key in managing a healthy cash flow.
Some major expenses that you have to face as an owner-operator include fuel, insurance, food/drink, and your truck.
Some expenses are unexpected. And you have to be ready for those as well.
Keeping an emergency savings fund helps to manage these unexpected expenses.
Over time, you will become better at managing expected and unexpected expenses.
Once you have an idea of how much you spend each month, it will be good for you to come up with ways to operate more efficiently to lower the cost of these expenses.
5. Manage Taxes
As a trucking business owner, you are responsible for calculating your taxes and paying to IRS the correct amount each quarter.
To make your life easier, set aside 25% to 30% of your weekly net income for quarterly estimated tax payments.
If you don’t manage your taxes, your company will begin falling behind and it will become increasingly more difficult to get caught back up.
6. Save on business deductions
After paying your taxes for the income that the business has made for the previous year, you can apply for truck driver tax deductions.
This option can save you money.
So, take a look at this list of trucking business deductions and check if any is available for you.
7. Reduce the Number of Sitting Trucks
Sitting trucks in your yard are not good for the company's profitability.
Your transportation management strategy should focus on keeping each available truck on the road as often as possible.
To do this, managers should increase their driver to truck ratio to one driver per truck, at least.
Some companies utilize two drivers to ensure the truck is always moving for long hauls.
8. Use a TMS system
A TMS helps to manage so many different areas of the trucking business from dispatching, invoicing, and managing your loads.
There are so many different areas where a TMS is capable of helping you in your business.
Using a TMS for your trucking business is a smart way of managing your company.
When an issue arises, it attracts other issues that happen at the same time. So staying organized is extremely important to make the company's life easier.