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.
How much does it cost to get a CDL?
There are a variety of factors that determine the cost of obtaining a CDL, which include:
- CDL training cost (based on number of training hours)
- CDL application fees
- Road test fees
- CDL skills test fees
- Cost of the license (Class A, B, C, etc.)
- Cost of additional endorsements (hazmat, doubles, etc.)
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.
Location, Location, Location
Where you choose to start your trucking company could save you thousands on insurance.
Startup business location is important: One of the easiest ways to save thousands of dollars in insurance premiums when you first start your trucking company is the geographical location of your business. In most cases, it is best to avoid major cities or areas susceptible to severe weather.
For example, trucking insurance is expensive in Atlanta, GA. However, a new carrier can save thousands of dollars if they just start the location of their business outside of the city.
Location consistency is important: It is best practice to live and have your driver’s license in the same state that your business will be located in.
If your place of business has an address in New Jersey, the insurance company expects your driver’s license to be in New Jersey as well.
Additionally, if you declare to the insurance company on your application that you are going to operate within a 500-mile radius of your New Jersey place of business, yet have a Florida driver’s license, that causes yet another unexpected mismatch.
If there is a mismatch, you will almost always see a significant insurance premium increase.
Garaging address location is important: In general, living in an urban area compared with a rural area can have a major impact on rates. In a metro area where there are more cars on the roads and more traffic, accidents are more likely, pushing rates higher.
If you plan to make changes to your garaging address, it is recommended that you notify your insurance company as soon as possible. Your insurer can make the necessary adjustments to your insurance policy to protect you against possible risks.
Delivery radius is important: It is also important to consider your expected routes and delivery radius. Most insurance companies want you to stay interstate or within a 500 air-mile radius from your business location for the first couple of years of your business.
As you prove your safety history and show you can manage your company well, then expanding to long-haul trucking will be more affordable.
If you are committed to start as a long-haul trucking business, then expect to pay expensive insurance premiums for a couple years.
Employing out-of-state drivers can be expensive: If you want to grow your young business by adding new drivers, insurance companies want these drivers to stay within a localized 500-mile radius location for the first couple of years until you gather more evidence of good business management and safe driving history.
For example, out-of-state drivers tend to cost $10,000 per person in insurance premiums for startup carriers.
It is recommended to not use out-of-state drivers for the first three years of business.
Routes matter too: Underwriters also look at the location of frequent routes your drivers travel.
Insurance companies are big fans of regular routes as it lowers the overall risk of an accident because the more regular routes you operate in, the more familiar your drivers are.
However, the location of these frequent routes could negatively affect your risk as well.
Underwriters use road safety data that highlight the more dangerous roadways to map out which states, metropolises, and cities are the riskiest to travel in.
Purchasing a Truck affects Cashflow
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.
Maintaining an Owner-Operator Business requires Cashflow Savings
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:
- Paying taxes
- Start-up licensing and compliance costs
- Vehicle payments
- Vehicle maintenance
- Daily operating expenses (food, fuel, etc.)
- Commercial Truck Insurance
- and more
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.