Home > Business, General > Running a Profitable Transport Business

Running a Profitable Transport Business

 There is a romantic lure of the road and owning a powerful and heavy vehicle on eighteen wheels that are pounding the pavement. Which man wouldn’t want to own one of these?  Once your wheels hit the road on your first consignment the honeymoon ends and the men are separated from the boys. For some the honeymoon ends even before their first consignment. I have seen people lose thousands of dollars to bogus creditors who promise to finance the purchase of trucks. The honeymoon quickly turns into a nightmare if you have paid a deposit for a truck and never get to feel the smooth glistening paint of your very own truck because the deal fell through. There are many bogus companies that offer all sorts of wonders only to leave you with a bitter taste in your mouth after they con you of your hard earned money.Road transport is challenging and is not a walk in the park. I suppose every business has its risks, but running a transport business is a bit different from running a stall at a market, a boutique or corner shop. There is no secret recipe to running a profitable transport business. The secret is in keeping your costs down and watching the pennies. Below are a few things to consider as you go down the trucking business route. There are a lot of tihngs against the single truck owner. Forwarned is for armed, if you understand you competition, you may be able to act wisely.

Watch every penny

Milano - truck crash foto 3°

Milano – truck crash foto 3° (Photo credit: Uberto)

If there is one thing to say about transport business, it is watch the pennies. It cannot be over emphasised. You must watch every penny of income  closely and every 1/2 penny of expense even closer or you’ll be out of business before you know it. Don’t get over excited by the large figures contracts offer. The amount of money that  goes out is equally as high as te amount of money that you earn. To make sure you stay in the black, watch every pernny like a hawk.

Purchasing equipment

Most small transport businesses begin with the purchase of one truck. When purchasing one truck, the operator does not have much bargaining power. When a large company purchases new trucks, they have a good bargaining power and go direct to the dealer obtaining massive savings. They purchase the latest equipment for much less than the small outfit does, getting the best truck in the industry that gives them an advantage over the small company.

Maintenance costs

Maintenance costs will vary depending on the age of your aircraft. A start-up business will not afford to buy the latest equipment which will be more fuel efficient and will not require much maintenance. The small truckers will often a truck that breaks down quickly and is expensive to maintain.

Fuel Costs

As a result of using older model vehicles, the small operator pays more for fuel than the larger more established outfit. With sky high fuel prices prevailing, it difficult to maintain a profit. This puts pressure on small operators and large ones alike.

The larger company also benefits from economies of scale. They purchase more fuel and get a good rate because of their buying power. The small operator purchases fuel at a higher rate and may even pay for it via a credit card and up front incurring higher charges on their fuel. Larger outfits have arrangements with fuel companies and often have fuel cards and pay for their fuel at regular intervals.

Large companies hedge the price of their fuel that is pay for thousands of gallons at a time, paying for the fuel at cheaper rates if fuel prices increase. Fuel hedges offer a means of stabilizing surcharges and improving predictability of fuel prices throughout the year. Hedging is risky when the fuel prices go down, but on the whole, there are advantages to hedge fuel. The small company cannot do this and are exposed to the uncertainty and sharp rises in fuel prices. This affects profitability and makes it hard to compete with the larger players in the business.

As small start up business, it will be a tough road filled with challenges. Competing and remaining competitive and profitable is a challenge because the big companies have all the advantages. It is easier for them to the tender, but the large company has a track record that you can only dream of. Noone wants to give you a break, but perseverance is the name of the game. Rome was not built in a day. If you can stay in your present job while you build up a client base, that would be advisable. Another option is to drive your own truck, which will mean that you will monitor and watch the cost like a hawk. Just realise that it is a tough industry and it will take more than enthusiasm to get through.

When all is said and done, do your homework, thoroughly if you want to make it. Do not leave any stone unturned.

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Categories: Business, General
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