The trucking business can be very competitive and, at the same time, quite profitable. Sometimes even the roughest of warriors find it challenging to succeed in this business. Still, with a disciplined approach, it has the potential to earn you a lot of income.
But amidst the economic crises, massive technological changes, and global pandemic, one may ask themselves, how to make money in trucking? The trick requires more than just knowing how to drive a truck.
For those who want to succeed in this rough playing field, getting familiarized with major key points is necessary. If you can take these committed steps, there’s no better way to make a living than trucking.
Making Money in Trucking
We have mentioned 12 steps to point you in the right direction and help you become a successful trucker.
1. Support the Right Market Niche
One of the most important parts of doing business, especially in trucking, is to pick the right niche market. The competition in the trucking business is extremely fierce in the US.
Focus on a market you’d be most comfortable with and that most large carriers avoid. By considering hauling special needs, you have a better chance at avoiding dry van.
And you should know by now that making decent revenues with a dry van is very difficult in the business.
By choosing the right market, you determine what type of equipment you need to buy.
Working with a niche market also gives you a better fighting chance, more control, and less competition. If you can make a good network here, chances are you’re set for a lifetime.
2. Determine Your Operating Costs
You need to spend money on operations to get your business running. But spending too much on it will eventually diminish your profit. That’s why knowing your operating cost in detail is vital for survival.
In economics, operating cost consists of two major cost types; fixed and variable. The fixed doesn’t change regardless of the distance your truck traveled.
Variable cost, on the other hand, depends on the distance traveled, amount of fuel used, and more.
When you subtract the total operating cost from the rate you demand, you’ll end up with the profit. So, this understanding is important for the next time you take upon a new customer.
3. Know Your Cost-per-Mile
The cost per mile for a trucker falls under operating cost. But it is such an important part of the business that discussing it is necessary.
Knowing the exact cost per mile of your trucking business is vital to set the price or rate of your service and make a profit out of it. Accurate bookkeeping and financial reporting are critical to finding this information out.
This includes every large or small business expense from ticket items to even small office supply purchases; nothing can be left out as too trivial. Every dollar counts and adds to the overall picture in a business.
Most small trucking businesses fail to keep a clean financial book. Their inability to understand key business metrics and accounting leads them to have an extremely messy book which doesn’t help control their finances.
Therefore, it is advised that if you want to make good money in the trucking business, accurately record all the transaction details and use a cost per mile calculator.
4. Set a Competitive Rate-per-Mile
How will you attain profit if your rate per mile minus cost per mile doesn’t balance? Without establishing a competitive rate per mile that would attract shippers to your business, you cannot pay your expenses and make a profit.
The key is to make the rate competitive as well as profitable. Although the solution is simple enough, it is a difficult balance to maintain. The first step is knowing the exact cost per mile of your business (discussed in the previous section).
The next big step is to apply the profit margin and set your rate. But while doing that, keep in mind to be competitive and measure the rate against your competitors.
Remember, while you’re trying to make a bigger profit out of your rate, the shippers are trying to get the cheapest rate on the market.
And with the brokers taking a share of the money for their own services, the challenge to make the rate attractive becomes very tough.
When measuring against the competitive rates, try to select at least ten comparable loads going in your direction and determine their average price. Add to that 15% of the broker’s charge and then set your rate.
5. Keep Your Skills Sharp and Your Reputation Safe
What if you are not able to do competitive pricing and your rate falls in the average category? Why would a shipper pick you instead of another out of dozens and dozens of options?
It is your past reputation, service, and skills that will set you apart from the rest of your competitors. Be careful to always keep a respectful and professional standing with all your shippers.
This will inevitably result in good word of mouth. And in Marketing, word of mouth is the most powerful marketing technique to have.
Always try to improve your skills and learn from previous gigs. Don’t forget to keep up with the changing technology and make good use of it (we’ll discuss it later).
6. Use the Right Fuel-buying Strategy
We’ve already mentioned the cost of fuel in the operating cost section. However, this is actually the largest expense for a truck owner or operator.
Every shipping needs a lot of fuel, and most times, the fuel is bought incorrectly by inexperienced and experienced owners alike.
This wrong decision comes from the incorrect thinking that the cheapest pump will provide them the most affordable fuel. The issue here has to do with the fuel taxes. You see, truckers need to pay the fuel taxes based on their usage while driving.
So the trick is to go for the lowest base price instead of the pump price. The calculation here is: Base price = fuel or pump price – tax.
7. Work Directly with Shippers
Often time, tuckers rely on the freight brokers for getting a shipper. While this is easier for the trucker, it costs a lot. Brokers tend to keep from 10% to 30% of the load price as their service charge.
We can’t say that’s unfair since they have to make a living as well. And they’re providing important service to the shipper and you. But if you manage to develop a good relationship with several good and reliable shippers, it will remove the middleman for you.
Always try to keep a list of the best shippers you know and maintain a healthy relationship with them.
Please provide them with the best service and charge them a competitive price to the brokers. That will inevitably keep you busy and minimize your use of brokers and theirs as well. Why not keep everything for yourself?
8. Run an Efficient Back Office
If you want any business to run smoothly, the back office has to be smooth as butter. Efficiency in the back office is what will keep your trucking business profitable. But the key is to keep the cost of it to a minimum.
One way to do it is by doing it yourself. You’ll need a laptop, a printer, and a good internet connection. If you aren’t tech-savvy or great with accounting, then you’ll need accounting software as well, which will run your business for you.
There is quite a few such software in the market, but you can go for a well-known solution, Truckbyte. It costs less than others and has a free entry-level package as well.
But if you choose to outsource the back office work to a dispatcher, keep in mind that they cost a lot usually. If not hired correctly, they’re going to be the end of your business.
9. Avoid Cash Flow Problems
The cash flow problem is a huge deal for any small business, and as for trucking, no business is as flow intensive as this.
And the problem with cash flow is that often shippers and brokers tend to take 15 to even 45 days to pay the invoices. This type of huge delay may cause you troubles during the early business days.
One great way to deal with this issue is by using a freight bill factoring service. It will cost you a bit of service charge, but it can solve your cash flow problem by advancing them as much as 95%.
Some of these service companies will also provide you with services like fuel advances and cards etc.
10. Use Technology to Get the Best Load and Hotshot Gigs
Technology has opened us to brand new possibilities and more so for businesses. Use the technology correctly, and you may not have to look back ever.
Traditionally truckers go into the market, look at the load boards, and pick loads that best suit them.
But the way to earn the highest profit is to obtain loads offering the best freight rate. This rate can range from $1.5 to $4 per mile, and using a typical load board could get you average paying gigs. But those gigs don’t make a good profit, do they?
If you want to make the highest income, try to use any dedicated smart trucking load app that will help you pick the best shipper on the market. Besides, those apps also help with higher truckload capacity, which means you can get an even higher rate per mile.
11. Become a CDL Truck Driver
Last but not least, become a CDL trucker because studies show that truckers with a Commercial Driver’s License tend to make more profit than those without a license.
Big companies like Amazon and Walmart only allow drivers with a license. Besides, it is not hard to get a CDL and takes just a few weeks.
The average income of truck drivers without CDL was $43,680 in 2018. On the other hand, an average CDL driver earned $51,500 in the same year.
In the year 2021, the average truck driver with CDL made $59,925. Notice the difference? That is the result of a simple driver’s license.
12. Adding Additional Endorsements
Another benefit of acquiring a CDL is that you can add additional endorsements. This makes you open to a larger number and types of trucking jobs with better pay and more loaded miles.
If you get a double or triple endorsement, you’ll be able to haul as much as three times more freight. Endorsements like Tanker or HAZMAT (Hazardous Materials) will open your doors to new opportunities.
Reasons Why Some Trucking Business Fail
The United States is the best place in the world for trucking, and recently, the country saw a boom of trucking companies. However, most of those companies found themselves in the red within only a year or two.
Close observation shows several reasons for their failure. These include:
- Poor management
- Bad financing
- Charging wrong rates for services
- Lack of technological know-how and
- Not meeting customer expectations, among other reasons
Poor management leads to bad financing, which is the result of insufficient management of fixed and variable costs.
Business is not only about handing over the good but also keeping promises and providing a good service. If these aren’t taken care of, meeting customer expectations becomes close to impossible.
If you want to profit in the trucking business for a long time, you have to know what not to do. Having a clear idea of what to avoid and things to acquire keeps the door open to loyal customers and runs the business.
Even with a huge potential in the industry, many trucking businesses fail simply by not being efficient. In the end, when it comes to the question of how to make money in trucking, there is no better way than being proactive by keeping a clear goal in mind for the future.