Whether you want to start a business as a small transportation company or as an in-town, the first thing you think of – is profit.
Starting a trucking business is tricky, mostly to the mistakes you could make when dealing with different types of freight.
Although starting a small trucking company invokes challenge and excitement, as an owner, you need to be careful with 7 crucial factors affecting the industry.
Crucially, those factors might be killing your profit and you might not be aware of the fact.
The Effort With Small Transportation Company
Nowadays, the era of trucking is constantly changing. The trucking is all about profit.
Every year, we witness numerous transportation companies rise above the average in the market and then watch them fail before they even establish themselves.
There are numerous factors playing a great role behind the scenes of the profit fall.
In addition to this, being an owner of a small transportation company takes to be in a constant development.
In fact, it takes more than just knowing the basics.
Furthermore, it takes dedication, full energy, and a strong vision.
With regards to the expenses, you are always ought to know them. Further, learn to effectively save because that is one way to improve your small transportation company.
In order to create a winning scenario for your employees and the company, in the end, you need to consider what mistakes are you doing.
In particular, these are the top mistakes that kill your profit:
- Not Paying Attention to Cash Flow – calculating the expenses and doing the math is obligatory. There are ways to help you improve it.
- Avoiding Regular Truck Maintenance – plan, maintain and schedule repair appointments. In this way, you will prevent the engine from damaging.
- Cost Per Mile – not doing the math for your mileage costs is the path leading your company to an end. Luckily, there are ways to calculate revenue per mile.
- Out of Route Miles – not calculating the miles or taking the long way to complete the route results in high fuel costs.
- The Idling Time – when putting your truck in idle, you are not only damaging your truck but the health. On the contrary, you need to tell your drivers to turn it off while parked.
- Bad Quality of Fuel – trucks get 5% lower quality fuel consumption.
- Providing Traditional Postage – replacing the standard postage with innovative, electronic emailing is crucial for costs reduction.
1. Cash Flow
One of the main reasons why a small transportation company fails to create success is the bad cash flow analysis.
As a matter of fact, it is the biggest mistake that small transportation companies make, in general.
In order to start this business right, you need a good chunk of capital.
In particular, 25% of your trucking business is killed by the cash flow.
Continually, it is the greatest phenomenon that people fail to understand.
Furthermore, it is widely known among the rest of the businesses and the companies as the cash flow problem.
Accordingly, keeping your cash flowing until it becomes a problem, you can hardly find a solution to it.
Small transportation companies dealing with this are led to bankruptcy, eventually.
However, you are probably wondering:
“How can a seemingly healthy transportation business go bankrupt?”
Imagine you own a company which has a contract with a due date to transport particular freight.
Further, let’s say your company produces that freight and it needs to transport it on-time.
Continually, in order to make the cargo materials, you need cash.
Moreover, you need to pay the producers.
This means you need to have money for the product.
As a small transportation company, you need cash in order to find a creative way to manage cash flow.
In addition, one way is with freight bill factoring.
Continually, you need good money management.
Notably, there are two ways to avoid it by doing the following:
- Charge customers in advance
By charging your customers in advance, you are keeping a very close eye on the cash flow. To put it in a different way, you are creating available cash for the future of your business. If you never try, you will never know how profitable trucking business is.
- Hire freight brokerage companies
Hiring brokerage companies could be the best thing that will ever happen to your company – when you lack cash. The top brokers in the USA are always willing to provide detailed financial analysis of your trucking company including expenses, earnings, and tax.
2. Avoiding Regular Maintenance
Owning trucks from some of the best truck manufacturers like Kenworth, Freightliner, or Volvo, provides you with the best equipment.
However, this equipment has a license expiration which in translation means your truck will someday require a diesel mechanic.
In addition, regarding this, it is very important for you to remember the following:
Do not avoid the downtime.
Sometimes, due to certain freight contracts, you will not leave the truck at a technician because you would probably think the truck will endure just a couple of weeks.
However, this can be done without thinking about consequences.
Accordingly, although the truck will not eventually stop moving until the repairment, it will definitely cause further problems with the engine.
Continually, the bigger the problem, the bigger the expenses.
Therefore, if you want to reduce your repair expenses as a small transportation company, it is better if you provide regular engine maintenance.
On the other hand, you could make a scheduled appointment.
In this way, you will never fail to skip the maintenances of the truck.
Why is it important to never skip it?