Is starting a trucking company worth it? For some people, yes. For others, it turns into debt and stress. A trucking company can earn money, and it can also lose money. This article walks through what starting one involves, what it costs to get going, and why the first months are often the hardest, so you can decide with clear eyes.
A trucking company can earn — and it can lose
Every load a truck moves produces revenue, but revenue isn't profit. Out of every load come fuel, the truck payment or lease, insurance, maintenance, tires, tolls, permits, driver pay, factoring or dispatch fees, and your own overhead. When rates drop or a truck breaks down, those costs don't stop.
Many new companies are caught off guard by a few things:
- Startup costs. Filing fees are only the beginning. Insurance down payments, equipment, ELDs, a drug and alcohol testing program, IRP plates, permits and working capital all add up before the first load pays.
- Insurance. New authorities usually pay higher premiums, and the down payment can be a large share of startup cash.
- Cash-flow gaps. Shippers and brokers often pay on terms of several weeks. Fuel and driver pay are due now. Factoring can shorten the wait, but it has a cost. Read more in partnering with a factoring company.
- Slow first months. Many brokers and shippers won't load a brand-new authority, or will only offer certain loads, until the company has some time in business and a safety record. Expect the first months to be slower and less profitable than you'd like, and plan your cash to carry you through them.
Rates also depend on the type of trailer you pull and the lanes you run. Choose equipment you understand, and make sure your driver can manage it safely.
What it takes to get your authority
You'll apply with FMCSA for a USDOT number and operating authority. After you apply, FMCSA publishes your application in the FMCSA Register, and your authority becomes active only after the protest period passes and your insurance and BOC-3 are on file. If your insurance isn't filed within 20 days after publication, FMCSA gives you 60 more days before it dismisses the application (FMCSA). For current fees and insurance minimums, check FMCSA's insurance filing requirements and registration pages.
Fees and requirements vary by state, so confirm what applies to you before you budget. Read the full guide on how to start a trucking company.
Standard filings to start a trucking company
- USDOT number – This number from the U.S. Department of Transportation (DOT) is used to collect and monitor your company's safety information, inspections, crash investigations, etc.
- Operating authority – All for-hire carriers must have authority from the DOT to haul freight across state lines. Your authority also determines what types of freight you can haul.
- Heavy Vehicle Use Tax – Applies to trucks with a taxable gross weight of 55,000 pounds or more, filed each year on IRS Form 2290.
- International Registration Plan (IRP) – IRP distributes registration fees based on distance traveled in each U.S. state or Canadian province. You have to register on your state's transportation website.
- International Fuel Tax Agreement (IFTA) – IFTA is an agreement among the lower 48 U.S. states and Canadian provinces to simplify reporting of fuel use by carriers who drive in multiple states. Carriers file a quarterly fuel tax report that determines their tax and distributes it to the states. Your truck must have an IFTA decal on it, and you have to apply for a new one at the beginning of every year. More in our IFTA guide.
- BOC-3 filing – This names your company's process agent, who will be the one to get served on your behalf in any legal proceeding. A carrier needs a process agent in each state where it operates or travels through, and most carriers use a blanket company that covers all 50 states (FMCSA).
The new entrant safety audit
New carriers are placed in FMCSA's New Entrant Safety Assurance Program and must pass a safety audit during that period. You can learn more on the FMCSA website: New Entrant Safety Assurance Program. Getting your driver files, drug and alcohol program, hours-of-service records and maintenance files in order from day one makes the audit much easier. LFS offers DOT compliance services if you'd like help setting this up.
Leasing an owner-operator onto your authority
You don't have to own a truck to own a trucking company. Some new companies start by leasing an owner-operator's truck onto their authority. The owner-operator provides the truck and drives it, and your company provides the operating authority, insurance and compliance oversight.
This arrangement has to follow the federal leasing rules in 49 CFR Part 376, including a written lease that spells out compensation, who pays which expenses, how and when the owner-operator is paid, and how escrow and chargebacks are handled. As the authorized carrier, your company is responsible for the safe operation of that truck while it runs under your authority. Your insurance company will also have its own rules about how many trucks and drivers a new authority may add.
Working from home with your trucking business
Owning a trucking company doesn't require a large facility. Many owners start from a home office. The truck is usually out on the road, and you see it when it comes in for maintenance and inspections. You can follow its location through GPS tracking.
The basics are a computer, a phone, load board access and a TMS (transportation management software). The driver sends delivery documents electronically, you invoice the load, and you're paid on the customer's terms or sooner through factoring. A TMS also handles basic reporting and accounting.
If you'd rather focus on compliance and running the company, LFS's dispatch services can handle finding freight and the back office for you. Even then, the owner still has to stay on top of compliance, driver inspection reports, cash flow and maintenance.
Get educated before you start
If you're thinking about starting a trucking company, get educated first and consider working with a coach or consultant. Good advice up front can help you avoid expensive mistakes. LFS offers trucking company consulting and help to start a trucking company. Contact us if you have questions.
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