Even today, the bulk of commercial transportation takes place via roads. In the US, there’s an estimate that about 70% of products get delivered by trucks. Therefore, starting a box truck company is a lucrative idea in 2023.
The purpose of any business is to make money for its owner. Whether you’re running a trucking business or in any other industry, your profitability depends on your resource management. With that in mind, here are the top five financial tips to help you start a profitable box truck company.
Get all the necessary licenses
Before starting a business, you need to get all the necessary permits and licenses. You need to register a company in your state, but you need an EIN (employer identification number) before doing this.
Depending on your ambitions, you need to choose the appropriate business structure. If you plan to buy one truck and drive it yourself, you should register as a sole proprietor. On the other hand, if you plan to have a fleet eventually, it’s better to register as an LLC.
The next step is to get credentials from organizations like FMCA. Depending on your country of origin, this might vary. Once you complete this step, establish your driver qualification file.
The reason why this is a financial tip is that some of these licenses require fees. Other than this, your EIN is a federal tax ID. Also, the structure of your business may determine the scheme under which you’re paying taxes. Although it seems relatively administrative, these bureaucratic decisions will affect your finances for months and years.
Buy your truck trucks and prepare documents for insurance
You can’t have a box truck company without box trucks. The number depends on whether you need one (to work as sole proprietor owner-operator). Buying a used truck is usually a smarter financial move, but for more prominent investors, purchasing new trucks provides that extra layer of reliability.
Remember that the cost of the truck is not the only expense regarding its purchase. The truck will probably need checkups and repairs. It may also require additional equipment. This can be affected by the type of cargo you intend to transport.
Aside from this, you’ll also need to pay for truck insurance. Now, the cost of insurance is not the only task that you’ll have to deal with. Acquiring documents required to get box truck insurance can also be an arduous task. This is why you want to start fairly early and even ask for some help.
Before buying the truck, try to make a projection of your profit in the near future. Then, set a break-even point. Once you do both of these things, ask yourself whether this is financially viable.
Get a checking account
If you’re running a sole proprietorship, the IRS won’t recognize a difference between your personal and business assets and finances. However, you’ll have to keep your private and business accounts separate as an LLC or any other corporate entity. Therefore, you need to set up a business checking account.
To simplify things, you should pay yourself a salary instead of just dipping into company funds whenever you need money. While it’s your money, the government recognizes LLCs as separate legal entities. Therefore, you’ll further blur the lines and make things more challenging to track.
Another brilliant idea is to get a business credit card. This way, you can cover business-related costs from a single source. This involves:
- Gas bills
- Meals on the road
- Maintenance and repairs
Even things like motel rooms and coffee on the road can be considered business expenses. Therefore, you can count them as deductible.
The most crucial financial tip that you’ll ever receive is that you should keep track of everything. Keep every receipt and note down every payment. This is much easier in the digital era via a budgeting app.
Finding work is the most important
As we’ve already mentioned, your break-even point depends on your profitability. The equation here is simple; you’re only making money while driving.
Your top priority is to find enough work. Some might argue that the most efficient way to run a trucking business (in the long run) is to not sit behind the wheel. Instead, you find drivers and act as a full-time broker and fleet manager. Early on, this will dent your profitability, seeing how you’ll have to pay salaries to drivers. Still, the benefits will scale up exponentially once the business starts growing.
Once the workload exceeds your capacity, you might feel tempted to get another truck and expand. The problem is that workload seasonally fluctuates in some areas of the transportation industry. This may cause a considerable challenge further down the line when you have two trucks (possibly with monthly credit payments on them) with barely enough work for one.
Don’t overinvest
While doing badly is worse, doing too good can be just as dangerous. In these situations, some business owners become more ambitious and start overinvesting. Buying an extra truck is one such example that we’ve already covered.
A healthy cash flow is just as important, if not even more critical. Remember that unexpected expenses always happen, and you need a contingency plan to deal with them. With a steady cash flow, none of these problems should be too bad to handle.
Whenever you feel the need to spend more money than planned, do the following:
- Project the ROI
- Assess the priority
- Consult your accountant
Careful resource management will ensure the success of your trucking business
It all comes down to resource management. You need to avoid spending money you can’t afford and be careful with every dollar you invest. Starting on the right foot will make things easier for you in the future. Later on, finding enough work makes a difference. With a steady supply of cash, you’ll be ready even for the worst-case scenario.
