Minor errors can have major repercussions in any business. For a trucking business owner, money errors or wrong calculations can spell disasters in your new business, slowing down your profitability and overall growth.
We know how important it is for you to dodge these avoidable blunders and level up your business game. Therefore, in no particular order, we have assembled building blocks, focusing on five key areas to help you steer a self-sustainable, efficient, and profitable business.
1. Not Having The Mindset of a Business Owner
Most trucking companies are founded by former truck drivers or are owner operated. If that’s the case for you, you’re already familiar with the business contingencies and basic operational requirements. If not, there are many things to consider to obtain the best business entity for a trucker.
Before we span out the stumbling block in this section, you should acknowledge the difference between being a carrier driver and owning a business. You could be a master truck driver with years of experience, know all the ins and outs of operations, and still fail to generate income from your trucking business.
Your inability to think like a business owner is most likely to retaliate and keep you from achieving your business goals. This is where it all crashes down; most business owners get preoccupied with operational management and overlook the bigger picture of driving a profitable and sustainable business.
2. Money/Cash Flow Errors
Next in line is money management. When you decide to own a business, you must pay attention to your business funds or capital, as we call it. The easiest part of any business is set up, and by the time you check the balance of your capital, your trucking business is already sinking due to poor money decisions.
To give you the real scenario of a carrier business, customers have a period of 45-60 days to pay after the delivery date. And then there are hidden operational costs on top of wages and other overhead expenses, such as insurance, maintenance, and fuel, that keep sneaking up every week, and by the time you clear out payables, you’re left with nothing. This is a sign that your cash flow is not well-managed, solely because you are paying more than you are receiving.
A payable cash flow of seven days does not fit a sixty-day receivable flow. Many trucking companies resort to factoring firms who purchase their invoices to solve short-term cash flow issues, which sucks up the margin even more. And this keeps rolling over months, leaving your trucking company and entrepreneurial dreams completely dry.
3. Disregarding Compliance
This brings us back to the first point, not having a business mindset! As a business owner, you should never push back maintenance, mainly if your business relies on it. If your trucks are fueled by diesel engines, you can prevent breakdowns by diagnosing them.
Ignoring routine maintenance is a bad business practice for trucking companies. If you ask any successful entrepreneur, they’ll happily explain the importance of regular maintenance of machinery, equipment, vehicles, etc. Plus, it has proven to be cost-effective in the long run, as a well-maintained vehicle will award you 50% better mileage.
Similar to equipment maintenance, you should also assess your workforce, the truck drivers. As a business owner, it’s your responsibility to ensure that your workforce is functioning properly and, most importantly, if they are legally qualified to drive your company truck.
A golden rule before employing drivers is to take them out for a road test. Your future self will be thankful for this useful tip!
4. Miscalculating Your Actual Cost Per Mile
Work on your quotations, and make sure they are based on your real cost per mile. It’s basic math – identify what your actual cost per mile is, add your driver’s hourly cost to it (miles per hour it takes on average), and just simply calculate an estimated margin you wish to make per job. Charge an amount that covers all the expenses of your business. Make sure you do the breakdown carefully.
Many times, small trucking companies calculate their cost per mile based on incomplete information, and that’s when they lose their chance of making their business profitable. We highly recommend you integrate trucking software for your business to avoid human errors.
5. Year-End Financial Reports
The last mistake to avoid is to wait until the end of the year to look at your numbers. As a new owner-operated trucking company, you must closely monitor your cash flow, profit, expenses, and losses. There’s no shortcut to this, trust us.
It’s better to monitor where your business stands monthly/quarterly than to wait it out for the end of the year. You don’t want to deal with big numbers out of the blue, especially if they are recurring losses that you could’ve anchored. You must practice running monthly financial reports to ensure that your business is growing in the right direction.
While potholes for entrepreneurs of trucking companies exist, these are the five major ones to have on your radar for sure. It’s always nice to have the advantage of jet-setting your entrepreneurial career by acquiring more knowledge on avoiding mistakes. And before you go, we hope your business grows at lightning speed and brings you prosperity.