A freight transport business can be relatively lucrative. After all, over half the freight transported in the US reaches its destination by road. But with many risks to navigate and occasionally tight profit margins, it pays to do some serious thinking first. There’s no easy money, but freight transport is one of the more demanding areas for trying to make it.
It’s also pointless going in as a complete newbie to your trade. It’s important to know how freight transport works – and that’s a lot more complex than just shuttling goods back and forth! You need a strong understanding of liabilities and risk management. You need to know who the various role players in the industry are and what they do – and more.
If you’re acquainted with the world of freight transport, and are equal to hard work and the possibility of irregular working hours, it’s time to start planning!
1. How Can You Keep Costs Manageable?
The startup costs for a freight transport business are relatively high. Investigate your options and make careful choices. For example, International trucks are very reliable, and if you opt for them, you’ll need a good relationship with an international dealer. While shopping around you’ll get a good idea of who you want to work with as well as the running and maintenance costs you’ll have to cover.
Insurance is a big line item on any cartage company’s books. Legal compliance is a must, but it may be worth reducing risk still further with even more comprehensive cover. Consider getting advice from an insurance broker with no brand affiliations. He or she will understand the market and is likely to give sensible advice.
Running even a small fleet can be quite a complex business, and staying organized while monitoring vehicles that are out on the road requires fleet management systems. The initial outlay for this may seem a little off-putting, but its potential for saving you money ensures that, well-managed, it has the potential to pay for itself before very long.
Prepare a financial plan for your business before you take the first steps towards opening it and include all the possible costs including license fees, maintenance costs, driver salaries and so on. It would be wise to consult an accountant with experience in handling the books of similar business, because he or she may spot costs you would otherwise overlook and fail to prepare yourself for.
Having “done your homework,” you may still have to return to it and rework the numbers. You will probably have to adjust your financial planning in the light of your further planning and any changes or adaptations you may make
2. What Income Can You Expect to Generate?
Although you can expect your share of once-off transport contracts, you ideally want some predictable income from longer-term or recurring contracts. How easy are they to get? What kind of income can you expect from them? Sound out the market to plan your approach and compare the potential income you can realize to the costs you’ll incur in the process of delivering the service.
Include this information in your business plan – you will be looking for finance, and finance institutions, potential business partners, or investors will all want to know that you have a plan that stands a good chance of success.
However, starting any business involves risk, and the less experience you have the greater the risk. Having said that, the freight industry can be subject to volatility and even experienced players have tried and failed in the past. Broadening your customer base can help you to combat the problem of being overly dependent on one specific type of industry, or worse yet, a single client within that industry for your income – but it’s still no guarantee that you’ll succeed.
The market may dictate your choice of vehicles. For example, if transporting perishable goods seems like a profitable option in your area, you will need refrigeration while transporting building supplies may mean choosing tipper trucks or flat-beds. Beyond the size and design of vehicles for your fleet, you will face many choices and understanding the portions of the market you will serve will help greatly in informing your decisions.
3. Will You Cope With the Business’s Demands?
Apart from the need to understand a great many legislative requirements and freight-related documentation processes, the business will make plenty of demands on its owners and managers.
Freight transport companies work at all hours of the day and night, and if there are any hitches, you will be needed to provide leadership, take action, or authorise action. The demands on your time will be unpredictable and meeting the challenge can be exhausting.
Consider how you will be able to find time for yourself while still enjoying peace of mind. Will you have supportive team members that you can trust to take care of the business if you are away? What contingency plans and systems should you have in place so that operational staff will know what to do in a crisis? Coping with everything yourself will be unsustainable, so think this through thoroughly before entering this intensive and often stressful line of work.
Freight transport is a highly competitive area, and although it can be profitable, margins are often tight. It is therefore important to consider whether you are temperamentally suited for running a concern in which the stakes are high and the potential for financial losses can be enormous.
Business ownership in general, and freight transport business ownership in particular, is not for the nervous, nor is it suitable for those with less than five years of experience in the industry. If you don’t really know much about freight transport, but are still considering it as a potential business opportunity, look for work as an employee in such a firm to ensure that you gain the necessary experience as well as a “feel” for what it will require of you.
Determination, Strong Management Skills, and Forethought
Despite the complexity and often-challenging nature of a freight transport business, owning and running one can be a very rewarding experience. However, it’s not the kind of business you can plan, open and run successfully if you are hasty or impatient with details. The right mindset will be invaluable in helping you to navigate the potential pitfalls that lie in wait for the unwary, making you well-positioned to turn your business into a resounding success.