Friday, June 26, 2020

The Secret Risks of Being In The Trucking Industry That You Need to Know

Edward Dzialo 6/26/2020

Trucking is like any other industry because it takes an incredible amount of work and planning to be successful inside of it. Without understanding the industry, it can seem like it has a low barrier of entry. For example, if someone didn’t take the time to comprehend the business, the taxes, the operational costs, the profit margins, then it would appear, albeit falsely, that to be a trucker, all you’d need is a truck and load to transport.

Don’t underestimate the complexities of the industry. Anyone who thinks the business is that simple could easily find themself in a position where they owed more money than they made each month. Imagine driving 12-14 hours a day, successfully delivering a load safely and on time, and still having zero profits.

We don’t want this. At SPAN Enterprises, we love truckers; we support them. That’s why I want to go over some of the complexities of the business so you can account for them BEFORE you find yourself financially underwater. And because I never like to outline a problem without suggesting a solution, I will explain how we can help you negotiate the obstacles you’ll encounter in this business.

Lease Wisely

I wanted to go over this one first because of how tempting it can seem. I’m not saying to not enter the business by leasing a truck, but do so armed with the right questions.

After a casual internet search, you can discover that a trucker, on average, will gross between $100,000-$150,000 a year. To chase profit, you’ll quickly look into trucks. A new one, one capable of pulling larger loads with a sleeper cabin, could run you upwards of $200,000.

To pay for it, you opt into a lease-to-own program. Maybe the company who is leasing the truck to you offers to give you loads to transport. So now you have a truck and means to pay it off.

The pitfall here is that you are beholden to the people loaning you money for you to be able to transport loads. I am not advocating or condemning this, but I do want you to understand the possible pros and cons of each option.

Company Driver

Maybe after reading that you’ll decide to play it safe by choosing to work for someone. You won’t have to buy a truck because you’ll be using someone else’s. You’ll have responsibilities, but all the compliance requirements will be on the company.

The trucking industry is a vital part of our economy, so there is ample opportunity here as well.

With little risk also comes little reward. For example, as a new driver, you won’t have seniority. Better routes and schedules will likely go to more experienced drivers who have been at the company longer. You’re there to execute decisions that are being made for you: the clients, the loads. Your earning potential might be lower than you’d expected because of it.

Owner Operator

Unlike the previous example, as an Owner Operator, you make the decisions and execute them as well. You are free to fail or succeed based on your drive and work ethic.

And these are just two of the qualities you’ll need to possess to be successful as an Owner Operator. There are a whole number of responsibilities and decisions that you will have to navigate through.

All of the decisions will be yours to make. And I mean all of them: the type of truck you buy, your work schedule, the routes you use, your clients and vendors, and how you manage profits (all are yours).

Although it can be burdensome, you are going to have a tremendous amount of responsibility. Your ability to rise to the occasion will dictate if you succeed or fail.

The amount of money it takes to start is significant. In addition to being a truck driver, you are now your own CEO/CFO. Not only will you need to shape and sculpt your vision for success, but you’ll need to have phone calls, answer emails, cultivate business relationships, and manage your finances.

If you get hurt or sick, how will your business continue? The repairs and preventative maintenance schedule will be yours to map out. Compliance (something we mentioned before) will be on you. This isn’t just compliance with the IRS, but if you’re transporting food, federal laws outline your legal obligations when doing so.

Build a Plan

Just because being an Owner Operator is incredibly difficult doesn’t mean it’s something you should outright reject or avoid. Maybe the challenge is what attracts you the most to it.

Get a plan. Get a good one. Stack the deck in your favor.

Before you do anything, decide on what type of trucking you intend to get into. There are vast differences between moving cement and food. The nature of the business you are in will highlight the financial costs and potential gains to be made.

You need to know how much money you have or can get. The reason I bring this up is because we need to look at the expenses. These are not meant to be deterrents. These are hurdles that you will face. Plan for them now so they don’t sideswipe you later on. 

Here are some: road use taxes, fuel taxes, repairs, preventative maintenance, fuel, personal taxes, insurance, financing your truck.

Your ability to manage these costs (and the unforeseen ones) will make or break you. When, and only when, you have a budget, you’ll be in a position to know exactly how much money you need to make each month to generate a profit.

When you see the loads that are available for you to transport, you will see how much each one pays and how far you’ll have to go. How much will you make per mile? How much is it going to cost you per mile? Without knowing this you cannot pick the right loads that you will meet your business needs.

Remember when I said I wouldn’t present a problem without a solution, well, here it is: TruckLogics. This will be your best friend, your closest ally, your most trusted tool. This will allow you to see and manage your profits and losses.

Just knowing you need maintenance is not enough; you need to know when to do it. Don’t take your truck off the road during your most profitable months. When you know what is coming in versus what is going out, then you can pick the size of the load and the distance.

Plan months in advance with efficiency and ease.

Try TruckLogics Today!

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