If you’ve got the vision to start a trucking company, now is the time to make that vision reality. If you manage your new business the right way, you can see $100,000 plus in profit per year as a single owner operator.
With CNS by your side, this roadmap to success will help you prevent the many headaches new trucking companies face when getting off the ground to year three of your business.
A visionary doesn’t just dream about starting their own business, they meticulously undersand it inside and out. This starts with knowing what kind of lifestyle you want.
This means you need to know what your operation will look like, getting the right truck and/or trailer for your operation, know what type of cargo you want to haul, getting CDL endorsements to haul special loads, if you want to haul Amazon Relay cargo or not, how quickly you want to grow, how far you will travel, what state/s you want to haul in, and more.
Many who start out as a hotshot business want flexibility. This is where some people choose to start.
If you are looking to haul commercial loads, it is easier to get hired anywhere with a Class A CDL. A clean driving record and a CDL gives your hotshot business a starting point to build your reputation as well as your customers.
If you are driving hotshot as a steppingstone to bigger things, then hauling hotshot with no CDL is not worth it because you do not have a back-up plan. With a CDL, you can start your business driving smaller hotshot loads locally that might not need a CDL to haul.
If you are not making enough money this way, you can move up to a larger vehicle or 40-foot trailer for bigger and more lucrative loads and haul interstate across state lines. If this is not enough, you can step up to a semi or be a company driver.
Basically, without the CDL, you are stuck hauling smaller local freight, and it will be harder to grow your business and ultimately harder to make more money.
Hotshot haulers quickly find out the importance of understanding gross vehicle weight ratings (GVWR). The size of your truck limits the size of your trailer and ultimately limits the size of the load you can haul and the revenue you can earn.
Generally, commercial motor vehicles (CMVs) are defined as vehicles engaged in interstate commerce (crossing state lines) and:
As a hotshot your CMV can be a cut-away van, medium-duty box truck, a smaller F-250 or equivalent truck to a larger F-450/550 Super Duty or equivalent for towing. All of these vehicles differ in weight, which in turn affects the size of load you can haul.
Similarly, hauling hotshot can have a variety of trailers that are suitable for the types of loads you plan to carry. There can be smaller horse trailers, flatbed trailers, or larger 30 to 40-ft gooseneck trailers. These too differ in weight and affect the size of loads you can haul.
Remembering the regulations, if the GVWR of your truck, trailer, and cargo is greater than 26,000 lbs, then you need a CDL. Similarly, if you are towing, including the trailer weight, greater than 10,000 lbs, you need a CDL.
A CDL gives you the flexibility to haul different size loads with different equipment and vehicles needed for the types of loads you plan to carry.
Now that you understand the importance of GVWR, we can now talk about the economics of hotshot trucking without a CDL.
Simply, if you do not have a CDL, the max weight must be 26,000 lbs or less. If you have an F-350 that weighs 10,100 lbs and a trailer that weights 7,000 lbs empty, then this only gives the non-CDL hotshot the ability to haul a maximum of 8,900 lbs.
26,000 (max weight without CDL)
– 17,100 (weight of truck + trailer)
= 8,900 (max load for non-cdl)
If you have a CDL, you can haul over that 26,000 GVWR limit.
But let us take this a step further.
If you use a 2500 truck with a GVWR of 10,000 lbs and a tandem axle single wheel with 14,000 lbs GVWR, then the combination is rated and licensed for 24,000 lbs.
Empty weight is 14,560 lbs with fuel, luggage, and you in the cab. This means of the 24,000 lb rating minus 14,560 lbs empty is 9,440 pounds of cargo you can haul.
However, the rear axle is rated for 6,200 lbs and the trailer axles are rated at 7,000 each. That is a 22,000 lb design limitation, which you never want to exceed.
The trailer tongue adds 1,940 lbs of empty weight to the rear axle, which scales 3,200 lbs empty with no trailer and 5,140 lbs with an empty trailer.
So, 6,200 lbs minus 5,140 lbs means you can add 1,060 lbs to the tongue before exceeding the trucks design limits.
This is why it is imperative to know how much your cargo weighs and know where to put it on the trailer. If you do not have a CDL, you have fewer equipment and load options to make money.
For more information, contact us at 888.260.9448 or info@cnsprotects.com
Drivers who want to earn more in the trucking industry have a lot of opportunities to acquire high-demand skills and endorsements.
Hazmat CDL Endorsement (H): Roughly one-quarter of all freight hauled in the United States is transported in tanker trucks, and of that, nearly half is petroleum products like gasoline, diesel, and aviation fuel.
To haul hazardous material, drivers and companies face many rules, regulations, and requirements because hauling fuel and HAZMAT is a dangerous job.
This danger leads to a constant high demand for hazardous material drivers as well as a much higher pay.
Hazmat loads consist of dangerous and highly toxic materials found in 9 different classes: Explosives, Gases, Flammable Liquid, Flammable Solids, Oxidizing Substances, Toxic Substances, Radioactive Material, Corrosives, and Miscellaneous Dangerous Goods.
To be certified to haul hazmat, drivers must pass a TSA background investigation and maintain additional endorsements while following state and federal regulations.
Tanker CDL Endorsement (N): A tanker endorsements means drivers are qualified to drive any tank vehicle. These drivers transport water, different types of gas, fuel and more.
Hauling liquids in large containers can be difficult because turning sharply or slamming on the brakes too hard can cause the trailer to tip. A mistake with hazmat liquid loads such as gasoline, or liquid propane can result in large fireballs and extreme heat.
These drivers have a high level of skill in moving liquid materials safely and are often paid much more than regular CDL drivers.
Doubles/Triples Endorsement (T): This endorsement allows drivers to pull double or triple trailers with a commercial motor vehicle. To qualify, you must pass the Doubles and Triples Endorsement Knowledge Test and pass a vision screening.
The choices you make from this point forward greatly impact your startup cashflow, growth timeline, and large future payment dates. A solid business plan will list expenses and revenue expected in your new company. Expenses can be up to $20,000/month as a startup. This stage includes putting aside money for the investments needed in your new career.
A solid business plan will list expenses and revenue expected in your business. Be sure to include your own salary. Costs involved in a trucking startup include tractors, trailers, licensing, and registration costs. Also include the cost of insurance, and data tracking software and services.
The U.S. Small Business Administration website has downloadable templates to create your own business plan.
There are a variety of factors that determine the cost of obtaining a CDL, which include:
Additionally, you can save money by avoiding expensive schools and choosing a quality tutor-styled training. Many are choosing this route and will even choose out-of-state CDL training because the price difference is so drastic, even when factoring in travel costs.
In general, truck driving schools typically cost between $5,000 and $10,000 while CDL tutor training can cost between $2,000 and $3,500.
With that said, there is only one way to receive free CDL training, find an employer who is willing to train you themselves or pay for your CDL training. This is referred to as Company Sponsored CDL Training and you should expect at least a one-year commitment after training.
Should you purchase or lease a new or used truck?
As your most expensive and most important asset, a used truck will likely cost around $60,000 or more while a new truck will cost around $100,000 or more.
To get a new truck, most dealerships require two years of driving experience, a clean driving record, 20% down payment, and a credit score of at least 650.
Many new owner-operators cannot afford to put 20% down and will often choose to lease the truck with around a $1,000 down payment.
In the short-term, leasing is always cheaper because leasing focuses on the value of the truck at the end of the lease term lowering the initial investment with an option to purchase or refinance for the remaining value of the truck after the lease ends.
For example, a $150,000 truck is leased-to-own for 4 years. After 4 years, the value of the truck is worth $50,000. So, during your lease, you are paying off the difference in value of $100,000 and then still owe $50,000 at the end.
Now, during the last 4 years, your business plan would be to save money to purchase the rest of the value of the vehicle at the end of the lease or refinance for the residual left on the truck.
The average cost to lease a semi-truck is between $1,600 to $2,500 per month for new trucks and $800 to $1,600 per month for used trucks. Don’t forget that there is still likely around a $1,000 down payment if you’re leasing from a dealer.
Do you have enough money saved right now?
The biggest reason owner-operators fail is not having enough money saved up before going on their own to manage start-up costs, maintenance emergencies, or lagging payments after finishing a load.
Truck drivers who are looking to go on their own must find a way to start a savings plan where you are regularly setting aside money, at least $200 per month. As you build your savings, you should learn how to build and use your credit score for when you later need to borrow for a truck purchase or repairs.
How much money do truckers need to save before becoming an owner-operator?
Starting your own business has a lot of expenses you should be prepared for, which includes:
On average, truck expenses alone for a new owner-operator is usually around $15,000-$20,000 per month for a single truck.
Before starting out, you should save up at least twice that to manage the first couple months of your new business. Ideally, many consultants recommend saving for at least 6 months of operation, which is closer to $100,000.
This advice stems from the biggest issue after starting your new trucking business, dealing with your load payment terms.
Cashflow is the amount of money coming in versus coming out of the company. The issue for owner-operators at the beginning is not having money come in for at least 30 days after completing their first few loads.
The choices you make from this point forward greatly impact your startup cashflow, growth timeline, and large future payment dates.
Step 1: Start-up compliance of company type (LLC) and Federal EIN.
Step 2: Licensing compliance of DOT#, MC authority, BOC-3, special tax requirements, UCR, IFTA, IRP, and more.
Step 3: DOT Compliance of drug and alcohol consortium, driver files, ELD, and more.
Let us help you get started.
You may want a sole proprietorship, a partnership, or a limited liability company. Each of these has pros and cons, which vary by state.
To own and run a private company in the United States, you’ll need to form a limited liability company (LLC). This is a business structure that combines pass-through taxation (like a partnership or sole proprietorship), with the limited liability of a corporation.
CNS can prepare and file your LLC application with your home state. Or if you want to start a partnership or sole proprietorship, click here.
This unique nine-digit number gets assigned to businesses in the United States by the Internal Revenue Service. Use this number to file your business tax returns.
CNS can obtain your EIN on your behalf. Click here to begin obtaining a Federal EIN.
First be sure you even need a USDOT number. Obtaining a USDOT Number can be confusing and costly. Here’s where CNS can help by getting your number quickly and accurately. Click here to learn more.
Companies are required to have interstate operating authority (MC Number) in addition to the DOT Number if they do any of the following tasks:
CNS can file for your MC Number at the same time we apply for your DOT Number.
A BOC-3 is a required United States filing that activates your Motor Carrier Authority. This filing assigns legal agents in the event court papers ever need to be served to your company by an outside state. It is required before federal operating authorities can be granted in the U.S.
CNS, unlike many of our competitors, does not charge an annual fee for a BOC-3 filing.
You may need to apply for further credentials if your company drives in the following states:
A trucking startup needs to be aware of special tax codes and procedures in accordance with State, District of Columbia, Canadian, and Mexican law. When a vehicle has a taxable gross weight of 55,000 pounds or more, the company has to electronically file a HVUT Form 2290.
Once this is filed, you will need to get a stamped copy of your Schedule 1. Companies are required to file all taxable highway motor vehicles registered in your name during the tax period when the truck first operated.
The Unified Carrier Registration (UCR) program requires ALL carriers (private, exempt, or for hire) to register their business with a participating state and pay an annual fee that is based on the size of their fleet.
Brokers, freight forwarders, and leasing companies also are required to register and pay a fee, unless they are also operating as a motor carrier.
This agreement is between the lower 48 states and Canadian provinces and it simplifies reporting of fuel use by motor carriers operating in multiple jurisdictions. Alaska, Hawaii, and Canadian territories do not participate.
An operating carrier with IFTA receives an IFTA license and two decals for each qualifying vehicle. The carrier files a quarterly fuel tax report. This report determines the net tax or refund due and redistributes taxes from collecting states to states where it is due.
This registration gives reciprocity between the United States and Canada without the need for additional registrations. Under this Plan, only one license plate and one cab card is issued for each fleet vehicle.
Trucking companies need to keep impeccable records in the event of an audit. Physical or electronic driver files allow you to pull an MVR report, look at previous employer inquiries, PSP reports and more.
CNS has solutions to keep your Driver Qualification Files up to date with regulations and ready to help you pass an audit. All of our driver files are monitored by actual DQF specialists to ensure documents don’t expire. We communicate personally about soon-to-expire materials to avoid computer overlooks. Click here to learn more.
Anyone holding a Commercial Driver’s License needs to have a pre-employment drug test and be enrolled in a DOT drug and alcohol consortium.
CNS offers a low-cost, DOT-compliant service that covers DOT random testing through the year. Our service gives you a secure portal to track test results. We also have personal representatives to call when you have questions. Click here to learn more.
Per a 2017 Electronic Logging Device mandate, non-exempt carriers are required to install an FMCSA-registered and compliant electronic logging device.
Today’s ELDs can actually help you grow your business. ELDs offer many fleet management features like diagnostic tools and advanced reporting. With their reports, you can maximize your fleet efficiency and simplify your operations.
There are different types of insurance available include: Primary Liability, Cargo Insurance , Physical Damage, Non-Trucking Use (Bobtail), Worker’s Compensation Insurance. You can expect to pay much higher insurance rates if you do not have 2+ years of experience. The higher premiums will impact your profit and monthly cash flow. Other factors to the cost of your insurance include age, personal driving history, garaging location, the distance you drive, and your credit score.
As a carrier driver, the earlier you can build your safe driving history, the better underwriters will measure the risk when they insure your new business.
The best thing you can do now are:
Now you are ready to obtain the correct insurance for your company. There are different types of insurance available and often are required to cover certain aspects of your trucking company.
These include:
Primary Liability: It is important to keep in mind your legal requirements. Trucking insurance is mandatory in all 50 states, and not having proper insurance could cost you pricey fines or your license.
To stay legal on the road, you are required to have primary trucking liability insurance as a minimum. As a truck driver your primary liability insurance must be at least $750,000 worth of coverage.
Non-trucking (Bobtail) Liability: All time spent in a truck is not billable, but it is insurable. When you use your truck for non-business purposes, you need insurance coverage.
Non-Trucking Liability offers liability coverage for property damage or bodily injury to a third party when trucks are being used for non-business purposes.
Cargo Insurance: In addition to covering your vehicles, it is just as important to protect the cargo that you are hauling, whether it is yours or a clients’ cargo.
Truck Cargo coverage insures the contents of the trailer, temperature-control machinery, and other appliances or accessories that keep cargo secure.
Coverage is custom-evaluated for the type of commodities hauled and the requirements of the shipper.
Below is a list of all risk and broad form policies to consider:
Physical Damage Insurance: Any time you drive, you are exposed to risk. Your truck could be damaged in an accident or from another disaster. It could be stolen or vandalized. Any of these issues could put your truck out of commission and compromise your business.
Physical damage insurance coverage is not required on your truck unless your vehicle is leased. If it is, then you are most likely required to have Physical Damage insurance.
On the other hand, if your vehicle is fully paid for, physical damage coverage is optional, however, it offers 24-hour collision coverage for damages to your tractor or trailer.
Worker’s Compensation Insurance: If you have one or more employees and do not carry workers compensation insurance, you will be liable for these costs, and additionally be subject to fines and fees based upon the state your operation resides in.
Workers compensation insurance protects your employees and your business from work-related illnesses or injuries. The coverage is mandated by each state and the workers compensation laws and benefits vary by state.
If trucking workers’ compensation insurance is mandatory, it can provide coverage for:
Employees filing claims for workers’ compensation insurance can only do so if their injury or illness is caused by their duties while on the job and often include:
The injured parties must visit a healthcare professional immediately so a medical doctor can provide medical reports to support any claims. Upon approval by the insurance carrier, the employee will receive compensation payments and can return to work when cleared.
Fleet owners who lease on to motor carriers sometimes need to offer workers’ compensation coverage for their employee drivers.
Owner/operators have the option to purchase their own coverage called Occupational Accident Insurance (OAI). OAI and is used for medical benefits and disability coverage in the event of an injury on the job.
This coverage option typically costs about half of a traditional workers compensation policy coverage cost. It will not have all the benefits that workers compensation coverage provides.
Before we can get you an estimate, we are going to need some information. Fill out a complete quote or quick quote to get started.
Trucking companies deal with big numbers, from large revenues to large expenses. As a start-up, you must be ready for these numbers to come in and out of your bank account frequently. Remember, on average it takes 35 to 45 days to receive payment after completing your first load.
One of the biggest challenges for carriers is cash-flow. There are costs paid out up-front before you even move a load, including: insurance, equipment investments, operating authority, fuel, maintenance costs, etc.
On average it takes 35 to 45 days to receive payment after completing a load.
For example, if you haul your first load for $2,000 and bill the shipper or broker, you will not get paid for at least 30 days. Owner-operators need to have money on hand to pay for fuel, insurance, food, and more for the entire month before the money enters the bank account.
To take control of your cash-flow:
One way truckers mitigate these start-up expenses is factoring.
Factoring is the selling of the invoice after you complete the load to the factoring company. Doing this allows you to get paid that same day, but with a cut for the factoring service. Carriers then use that cash to fund operating expense moving forward.
While factoring has its place for new or growing fleets, if you saved at least $20,000-$30,000 in your bank account, then you do not need to take a cut from your invoice for the cost of the factoring service.
Good freight brokers can bring peace of mind by connecting you with trusted shippers, negotiate the best rates to haul cargo, optimize routes to prevent dead-head miles, and help you save time in order to keep your wheels moving.
Look for brokers with experence and make sure they are licensed, bonded and insured. Otherwise, you need to find the best loadboards to find loads, negotiate rates yourself, and more.
As one of the most common ways for new carriers to find loads, good freight brokers can save owner operators a lot of effort since they do most of the work to match loads with drivers.
Naturally, the time savings comes with a broker fee for their services.
Tips for vetting brokers: Look for brokers with experience and make sure they are licensed, bonded, and insured. Be sure to read both the positive and negative reviews and start growing a relationship with them. The more you both trust each other, the better the loads being offered.
When you receive a load, note that the broker is negotiating rates on the back end with the shipper. Make sure the load makes sense for you and will make you money after the fees and general expenses.
The easiest way to find loads without a broker doing the research for you is using load boards.
Load boards are websites that essentially provide a venue for shippers and truckers to make arrangements to move freight. Shippers and brokers post truck loads that they need transported.
Many of these website or mobile apps allow you to filter searches by weight and route, let you check credit scores of brokers, see reviews of shippers and other carriers, and more.
There are free load board services (such as TruckerPath) and others that can be used for a monthly fee (such as Truckstop.com’s starting at $39/month). Other popular load boards are DAT Loadboard, 123Loadboard, and Direct Freight, but there are dozens available to research.
You will have to experiment with which load boards to use, how many to use, start building relationships and improve your profile overtime.
As we stated earlier, some carriers already have relationships with a few shippers through their previous driving experience.
You can use these shippers for referrals, reviews, and more.
If you are just starting out, start cold calling local shippers in your area and start building a relationship since local shippers may be in the market for an exclusive driver.
What are some steps and considerations when starting out?
Remember, you are not the only driver out there, so diversify your business across multiple shippers to ensure steady business.
The last option to consider are the local, state, and federal governments transportation needs.
Unlike other types of loads, you will have to first register as a government contractor to be able to haul their load or partner with another company who is already under a government contract.
Either way, you should contact your state or city government for more details if you are interested in fulfilling government trucking contracts.
Remember when we said that there are daily, monthly, and annual compliance requirements? This is the time they will make sure you are following the rules. You must undergo a safety audit within the first 6 – 18 months after receiving your DOT number.
This is the first chance for a new carrier to garner safety history that will later be accounted for during the next insurance renewal. If the safety history is bad due to not complying with federal regulations found in the audit, insurance rates will stay high.
A lack of basic safety management controls or failure to comply with any one of the following 16 regulations will result in a notice to a new entrant that its USDOT new entrant registration will be revoked:
You did it, Congratulations!
If you follow this roadmap and utilize CNS to guide you through these 3 years, we guarantee success for your business and your insurance rates will drop.
One secret in the insurance industry is that carriers who prove their low-risk safety history will get much lower preferred rates as they go into their third year of business.
Do you now realize that owning a trucking company and maintaining everything can be overwhelming and time-consuming?
You can outsource many of these tasks and requirements to CNS. Our Proactive Safety Management Programs are designed to fit your company.
For more information, contact us at 888.260.9448 or info@cnsprotects.com.
Since March 2022, the trucking industry is slowing, which coincides with fuel prices rising 26% nationally, and now sit 62% higher than the same time last year.
For now, truckers should be able to cope, as the market is still affected by supply chain challenges and “driver shortages”.
But what if the downturn gets worse, leading into a recession? What can you do to lower your risk in a weaker industry?
Do not wait until a recession hits, you can start preparing now.
Lower risk and increase safety. Generally, trucking companies with minimal loss activity, utilizing telematics data, and great CSA scores are in a better position to gain access to more insurers with better pricing. It is time to:
Base decisions on data. The best source of information is your ELD telematic data. Since most interstate trucking companies were required to add electronic logging devices (ELDs) to their trucks, back-office management has been given an opportunity to better manage their vehicles and drivers when it comes to violations, driving habits, audits, maintenance, and more. Don’t forget to create and optimize a Preventative Maintenance schedule that includes service reminders so you pay less in unexpected maintenance problems instead of issues on the road.
Strengthen relationships with your customers. Building relationships with your customers, while generally being interested in how they conduct their business, will strengthen that relationship. A happy customer will expand your book of business through word-of-mouth referrals. The goal is to be a part of the shipper’s supply-chain and being an asset to their success. Also, having a loyal repair shop will also get you’re the best rates.
Enter the contract market. Even if spot rates continue to decline, owner-operators can take their trucks into contract work with big fleets. While there may be overcapacity within the spot market, that doesn’t mean there is overcapacity in the contract market. Many shippers are in the middle of negotiations, as motor carriers have given an initial offer, then calling in to say they would like to adjust it down even further to protect their revenue. That is happening right now.
Work more. If you have been making more during the pandemic, you may have been doing so while driving less. Many made $71,000 during the pandemic comparted to $67,000 the year prior, and they did so while driving thousands of miles less. It may be time to take on more loads and drive more miles.
Work more efficiently. With fuel prices still above $5 a gallon, it is imperative that carriers find ways to reduce empty miles and keep the wheels moving underneath loaded trailers. Also, if you are an owner-operator handling every aspect of your business, it may be time to work with a third party that can handle safety regulations, driver and vehicle paperwork, taxes, drug testing consortium, and more. We at Compliance Navigation Specialists can be your partner so you can focus more on finding better loads and stay on the road.
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Fill in your information and one of our Commercial Truck Insurance specialists will be able to assist you.
