Business A guide to owner-operator success
Winning trucking company strategies for owner-ops
A detailed, thoughtfully written business plan is more than just an outline from which to start a business. It’s the guide you use to be successful. Following is a list of solid reasons why a trucking company needs to have a business plan.
Set specific objectives. To correctly and successfully manage any business—in particular a trucking operation—it’s imperative you, the owner, establish defined and specific objectives with the means to track the success and failure of those objectives. You probably have a mental list in your mind; let’s get it down in writing so you can better organize the priority of each objective and how it’s going to be accomplished. Having it on paper provides the means to evaluate, tweak, and communicate to others where you are and where you’re planning to go.
Learn to deal with displacement. This is likely the most important management concept you can use. Multitasking is a huge part of being a business owner; however, there will be times when you need to take care of priority items, e.g., doing load searches while driving a truck. You need to identify these displacements in your business plan and then plan on how you’ll ensure the important ones are accomplished. This could require contracting or hiring another person or company to handle the task so it’s completed in a timely basis.
Know when to grow. Growing too soon or too quickly is one of the fastest routes to failure for many trucking companies. As a business owner, you’ll be presented with a multitude of new business opportunities. Keep in mind that in order to move on that opportunity, you must be sure you’re financially prepared and have the personnel and equipment along with the means to manage the increase in business.
Growth is costly. Not only do you have the cost of investing in the necessary equipment, but there’s also the expense of hiring and training the people to drive the trucks, insurance, permits and licensing, and operating costs and equipment payment for the first 90 to 120 days to bring the new opportunity to a positive cash flow. All of this requires detailed planning long in advance of the actual opportunity.
Grow new business alliances. Develop a program setting specific targets for new alliances and customers. You should always be looking for others who can either replace current service providers or customers if any of those relationships start heading south, whether that’s a mechanic, equipment provider, freight broker or shipper. The rule of thumb is to never have any one broker or shipper represent more than one-third of your total revenue on the customer side. On the service and vendor side, always have at least two backup companies or individuals in case your primary service provider or vendor has problems that would prevent them from fulfilling what you need when you need it.
Sell your business. Could you sell your trucking company if the need arose because of injury, sickness or other unforeseen event, a better business opportunity, or retirement? Having a detailed business plan that’s constantly updated and tweaked to the current market needs, along with all the necessary financial hauling contracts, helps to ensure you have the information a buyer requires to make that purchasing decision. The better the history you have about your company, the better selling opportunities will present themselves.
Update technology. In today’s trucking environment, technology is an absolute must. Incorporate an annual review of what’s new in technology and what will provide your operation with a competitive edge. Have a list of areas within your company where technology is vital and other departments where it is beneficial. When choosing add-ons or apps, select by key requirements: ease of use, function, security, cost, ease to upgrade, and integration with your current data and systems. Not all technology is good or necessary, but the right technology is invaluable.
Valuate the business. Basically, this is the process of determining how much your company or business is worth. You do this for various reasons, e.g., divorce proceedings, death of a partner regarding inheritance, estate planning and tax issues. The business plan tells the valuation expert what your business is doing; when, why and how much that will cost; and how much it will produce. By planning for the unexpected, you will significantly reduce the negative impact of these types of events. Knowing everything about the business and its worth is invaluable information for the owner.
Back up a business loan application. Lenders tend to take loan requests far more seriously when a loan application includes a business plan. That’s also very true with insurance underwriters. A business plan provides a detailed look at a company and how it operates, its current operations, and its plans for the future. It also demonstrates how seriously the owners take their business.
Provide a service conditions and rules circular. This spells out the following:
- Governing publications (mileage guides and tariffs)
- Scope of operations
- Statement of services (territorial area serviced, interstate vs. intrastate, dry van, temperature-controlled, intermodal, hazmat, etc.)
- Accessorial services and charges (detention, lumpers, expedited or exclusive use services, etc.)
- Claims liabilities and limits
- Claims processing and salvage
- Credit and collection provisions
- Fuel surcharges
While it’s no longer necessary to file rates or tariffs with any federal agency (as was required prior to the Motor Carriers Act of 1980 that deregulated trucking), “a trucking company is required, upon request, to provide a shipper a copy of the rate, classification, rules and practices which apply to its shipment or which were agreed to between shipper and carrier” (49 U.S.C. 13710).
Ironically, most shippers, brokers or carriers are unaware of this rule. A service conditions and rules circular meets this requirement. More importantly, if there’s no other written agreement between your carrier and the broker/shipper, terms and conditions published in your service conditions and rules circular apply.
This single published document is a trucking operation’s greatest protection of its revenue as it contractually ensures a means by which a carrier has the legal clout to be paid for services it provides or for delays in loading and unloading over which it had no control.
In the end, a good business plan is the road map to your company’s success.
Article Courtesy of American Trucker