How to Start a Trucking Company: A Detailed Guide

Management Team

This is subject to the legal structure of your trucking company. If it’s a sole proprietorship or owner-operator, in which you manage all operations yourself, highlight the skills and experience that make you a competent manager. If it’s a partnership, LLC, or corporation, include all management personnel, their niche skills, and individual roles in the company. You may also want to set up and include an advisory board comprised of members with extensive managerial experience in the trucking industry.

Financial Projections

This section details the existing and projected financial state of your trucking company. It should outline crucial details such as:

• Revenue forecasts: Project how much income you expect to generate across a specific period. You’ll need to leverage various metrics like past sales data of similar-sized companies, projected market demand, price-setting strategies, and purchasing power of your target customers.
• Break-even analysis: This outlines the point where your total revenues equal your total costs, meaning you’re neither making profits nor incurring losses. This metric helps you assess the viability of your services in the trucking industry and helps you establish the volume of sales you need to turn a profit.
• Cash flow projections: This forecasts the future cash inflow and outflow of your trucking company over a specified period, like monthly, quarterly, biannually, or annually. These projections help you and relevant stakeholders to foretell the financial health of your company and make prudent decisions like planning for cash shortfalls.
• Profit margin: Indicate how much income you stand to gain from your operations. Calculate your profit margin by dividing your gross profit by the revenue and multiplying it by 100 to express it as a percentage.

Budgeting & Startup Costs

These expenses include machinery and truck purchase, licensing and permits costs, insurance downpayments, administrative setup fees, initial maintenance costs, and costs of purchasing pertinent trucking technology like Transportation Management Systems (TMS), and Electronic Logging Devices (ELDs).

These initial expenses vary depending on various factors. For instance, you'll pay $1,500 to $2,500 for an IRP tag, and $300 to $500 for an MC and USDOT number. Additionally, new semi-haul trucks range from $120,000 to $200,000, while used ones range from $30,000 to $150,000, depending on condition.

Thus, the average cost of starting a trucking company varies substantially based on your preferences for new or used trucks, and the licenses you need to operate in the jurisdictions in which you operate.

Financing Your Venture

This section details the existing and projected financial state of your trucking company. It should outline crucial details such as:

• Revenue forecasts: Project how much income you expect to generate across a specific period. You’ll need to leverage various metrics like past sales data of similar-sized companies, projected market demand, price-setting strategies, and purchasing power of your target customers.
• Break-even analysis: This outlines the point where your total revenues equal your total costs, meaning you’re neither making profits nor incurring losses. This metric helps you assess the viability of your services in the trucking industry and helps you establish the volume of sales you need to turn a profit.
• Cash flow projections: This forecasts the future cash inflow and outflow of your trucking company over a specified period, like monthly, quarterly, biannually, or annually. These projections help you and relevant stakeholders to foretell the financial health of your company and make prudent decisions like planning for cash shortfalls.
• Profit margin: Indicate how much income you stand to gain from your operations. Calculate your profit margin by dividing your gross profit by the revenue and multiplying it by 100 to express it as a percentage.

Budgeting & Startup Costs

These expenses include machinery and truck purchase, licensing and permits costs, insurance downpayments, administrative setup fees, initial maintenance costs, and costs of purchasing pertinent trucking technology like Transportation Management Systems (TMS), and Electronic Logging Devices (ELDs).

These initial expenses vary depending on various factors. For instance, you'll pay $1,500 to $2,500 for an IRP tag, and $300 to $500 for an MC and USDOT number. Additionally, new semi-haul trucks range from $120,000 to $200,000, while used ones range from $30,000 to $150,000, depending on condition.

Thus, the average cost of starting a trucking company varies substantially based on your preferences for new or used trucks, and the licenses you need to operate in the jurisdictions in which you operate.

Financing Your Venture

Search for financing options you can leverage to finance your trucking company. Common options for financing a trucking company that most owners leverage include, U.S. Small Business Administration (SBA) loans, equipment financing, merchant cash advances, traditional bank loans, or invoice factoring.

The requirements for accessing different funding options vary depending on the lender, your financial history, and the loan amount you're after. For instance, SBA 7(a) Loan and SBA Microloan, the two most common SBA loans for trucking companies, have the following eligibility criteria:

• High personal and business credit scores of at least 620
• A detailed business plan with key sections such as financial projections, operational plans, and market analysis
• Updated business documentation, including balance sheets, tax returns, and profit and loss statements
• Financial statements, such as cash flow and revenue projections

Top SBA lenders you can work with include:

• Huntington Bank
• Wells Fargo
• TD Bank
• Lendistry SBLC
• Northeast Bank

Phase 2: Legal & Regulatory Compliance

Before you start operations, you must understand the regulatory landscape of the trucking industry so you operate smoothly without endangering your expensive trucks and equipment, the public, your employees, or yourself. Compliance rules and regulations aren't a bottleneck to your trucking operations, but a safety enabler. Thus, achieving compliance should be among the first steps you take to open a trucking company.

Licenses and Permits

You need the following licenses and permits to open and run your trucking company without attracting trouble from your local or federal authorities.

Commercial Driver’s License (CDL)

Getting a CDL for a trucking business is a mandatory requirement set by the Federal Motor Carrier Safety Administration (FMCSA). You should obtain your CDL from only your home state to be legally allowed to drive a commercial motor vehicle (CMV). You can obtain a Class A*, Class B*, or Class C license depending on your truck’s purpose and gross weight.

Additionally, you need separate endorsements if you operate special CMVs such as triple trailers, tank vehicles, trucks carrying hazardous material, or passenger trucks. Check out the detailed licensing requirements stipulated by the FMCSA.

Employer Identification Number (EIN)

If you incorporate your trucking company as an LLC or corporation, you must apply for an EIN from the Internal Revenue Service (IRS). You’ll use the EIN for all your tax purposes and to open bank accounts. If you operate as a sole proprietor, you’re not mandated to get an EIN, but it's recommended to ease the tax filing process.

U.S. Department of Transportation (USDOT) Number

You must have a USDOT number if

• Your CMV transports hazardous materials that require a safety permit for intrastate commerce.
• Your CMV transports over 15 passengers, plus the driver, but not for compensation.
• Your CMV transports over 8 passengers, inclusive of the driver, for compensation.
• Your CMV has or exceeds a gross vehicle weight of 10,001 pounds (4,536 kg).
• Your CMV is involved in interstate commerce.

MC Number

Besides the DOT number, your trucking company needs interstate operating authority (MC Number) if:

• You’re involved in interstate commerce, transporting passengers, or organizing for their transport.
• You’re involved in interstate commerce, transporting federally regulated commodities, or organizing for their transport.
• You’re leasing your trucks for hire for a fee.

You can apply for an MC number for a common or contract carrier. As a common carrier, you transport goods and passengers indiscriminately for any customer. As a contract carrier, you offer trucking services only to specific customers who pre-book your services.

International Fuel Tax Agreement (IFTA)

IFTA is a framework that allows qualifying CMVs operating across multiple states or a territory of a Canadian province to file a consolidated fuel tax report instead of multiple filings. IFTA tax reports are due every quarter, and they cover a variety of motor fuel taxes, including diesel fuel, gasoline, liquefied gas, liquefied natural gas, and compressed natural gas. IFTA tax simplifies fuel tax reporting by facilitating consolidated and electronic reporting.

International Registration Plan (IRP)

The IRP is an agreement between the 48 states and the 10 Canadian provinces. CMVs with a gross vehicle weight exceeding 26,000 pounds and operating across multiple jurisdictions register with IRP and pay fees depending on the percentage of distance travelled per jurisdiction. In return, you get apportioned plates for multi-state operation and a cab card, which facilitates smooth passage and travel across all IRP member territories.

State-Specific Licenses and Permits

Some states impose extra charges on trucks running through their jurisdiction on top of IFTA and IRP charges. Such states typically use weight restriction limits to assess the amount to charge. These extra licenses and permits include:

• Oregon’s Vehicle Trip Permit: For trucks exceeding 26,000 lb in gross weight.
• New Mexico’s Weight Distance Tax Permit: For CMVs over 26,000 lb. The total mileage travelled on New Mexico public highways also influences the charge rate.
• Kentucky Weight Distance (KYU) Permit: Charged to CMVs over 59,999 lb.
• New York’s Heavy Use Tax (HUT) Permit: Applicable to any vehicle with a gross weight of over 18,000 lb.

BOC-3 Filing

You’re required to file a BOC-3 Form with the FMCSA to designate a process agent in every state you operate. This gives the process agent the authority to accept all legal documents served to your company. Process agents help interstate companies avoid legal impasses as they act as the point of contact for legal processes on the carrier’s behalf.

Unified Carrier Registration (UCR)

The UCR program is a federal law enforced at the state level that requires all companies operating CMVs in international or interstate commerce to register their companies with the participating state and pay a yearly fee depending on their fleet size. You’ll need your USDOT number to register for UCR.

Heavy Vehicle Use Tax (HVUT - Form 2290)

HVUT is an annual fee charged on heavy commercial vehicles with a taxable gross weight of 55,000 pounds and above. Trucking companies pay this tax annually to the IRS by filing Form 2290. The HVUT amount you pay varies depending on the taxable gross weight of your truck. Calculate your truck’s gross weight by:

• Weigh the truck using a certified weight when it's fully serviced and equipped for work.
• Add the total load weight that the truck carries to the truck's weight to get the gross weight.

Trucking Insurance Requirements

You need the following insurance coverage to operate CMVs:

Mandatory FMCSA Minimum Liability Coverage

The coverage amount breakdown is as follows:

• $5,000,000 liability coverage for CMVs transporting hazardous materials, with the exception of oil.
• $1,000,000 liability coverage for CMVs transporting oil.
• $750,000 liability coverage for trucks over 10,001 lbs that don’t transport hazardous materials.
• $300,000 liability coverage for trucks below 10,001 lbs that don’t transport hazardous materials.

Cargo Insurance

It covers the freight you’re transporting. The coverage amount depends on the nature and amount of freight you’re carrying.

Physical Damage Insurance

This covers your truck and trailer. It’s structured into two categories: collision coverage and comprehensive coverage. Collision cover damages caused by truck accidents or overturning. Comprehensive coverage covers truck damages or equipment losses caused by non-collision incidents like truck burglary or theft.

Bobtail or Non-Trucking Liability

It covers the truck driver and the truck when not under dispatch and after they’ve delivered a load.

Other optional insurance coverages you may want to carry to fortify your operational efficiency in various circumstances include:

• Trailer interchange
• Reefer breakdown
• Occupational accident if you’re an owner-operator
• Workers’ compensation when you’ve hired several employees
• General liability

Insurance premiums vary substantially depending on various factors such as operation location, type of cargo ferried, fleet size, truck conditions, and driver’s record and experience level. Another smart and convenient option for covering your trucking fleet from unexpected repairs is by leveraging commercial truck warranty coverage plans from a reputable dealer like ATW. You enjoy peace of mind knowing any unplanned repairs, from engine and transmission repairs to all mechanical components, are covered by your customized ATW plan that covers all trucking warranty requirements.

FMCSA Compliance

FMCSA is the agency under the U.S. Department of Transportation (DOT) responsible for establishing and enforcing safety best practices and regulations for trucking companies and their relevant stakeholders. Ensuring FMCSA compliance for new trucking companies is mandatory, whether you’re an owner-operator or a corporation. FMCSA provisions that you must comply with include:

Hours of Service (HOS) Rules

• May only drive for 11 hrs maximum after resting for 10 consecutive hours off duty
• May only drive for a maximum of 14 consecutive hours, even after 10 hours off duty
• Must break for 30 minutes after driving for 8 consecutive hours

Rules for passenger-carrying drivers are:

• May only drive for 10 hrs max after 8 cumulative hours off duty
• Can’t exceed the 15-hour drive limit even after 8 consecutive hours off duty

Electronic Logging Devices (ELDs)

FMCSA requires CMVs to track and record their hours of service using ELDs. CMVs that are mandated to keep records of duty status (RODS) must use ELDs to track driving time. This ELD mandate is FMCSA’s way of curbing motor accidents triggered by driver fatigue. It also helps FMCSA to better enforce compliance, as it can access and review the recorded HOS data from the ELDs.

Drug & Alcohol Testing Program

CDL drivers operating a CMV in intrastate or interstate commerce are mandated by the DOT to participate in a drug & alcohol testing program. This program tests for substances like phencyclidine (PCP), marijuana, opiates, amphetamines, and cocaine. Drivers are tested randomly and also at specific times, such as:

• Before hiring new drivers
• After a truck accident or incident
• When there’s reasonable suspicion of drug use and abuse
• Follow-up tests when a driver returns to duty after a drug violation

All drivers, including owner-operators, are subject to drug & alcohol testing.

Driver Qualification Files

All trucking companies are mandated to keep crucial records of all their commercial driver employees to prove they’re compliant with the requisite FMCSA regulations pertaining to safety, competence, and fitness. Some key details in these files include:

• Employment application
• Driving history
• Medical certificate
• Drug and alcohol test results
• Updated CDL

Vehicle Maintenance & Inspection Records

FMCSA requires trucking companies to keep maintenance, repair, and inspection records for all vehicles for as long as they’re in service and hold them for six months after the vehicle is out of service. Benefits of proper record keeping include:

• Boosts your compliance, safety, accountability (CSA) score
• Enhances overall safety
• Facilitates compliance with FMCSA regulations

Phase 3: Setting Up Operations

The most expensive part of financing a trucking company is purchasing trucks and associated equipment to build your fleet. If you’re starting out as an owner-operator, one truck may be enough to kickstart operations. But if you’re running large-scale operations, you’ll need a fleet of trucks to sustain operational efficiency. This means you must make savvy decisions aligning with your startup budget. Consider the following elements:

Acquiring Your Fleet

Consider the pros and cons of buying new or used trucks. New trucks will cost you a tidy sum upfront, but you’ll enjoy a longer service life and fewer repair and maintenance costs. Used trucks cost less, but you may have to pay more for part replacement and maintenance. For instance, with used trucks, you’re more likely to deal with common mechanical problems like brake problems that need immediate replacement.

Also consider the net cost effect of leasing versus purchasing new or used trucks. There are several commercial truck leasing companies that can offer you affordable rates. This can be a viable alternative, especially if you’re new to the trucking business and don’t want to tie up your seed capital in trucks.

Lastly, evaluate what truck and trailer type will serve you best according to your niche and the nature of your operations. If you’re getting into over-the-road trucking, prioritize sleeper trucks over day-cab trucks.

Hiring Drivers

Not unless you’re an owner-operator, you’ll need to hire drivers to operate your fleet of trucks. Follow these tips to get it right:

• Prepare a well-grounded recruitment strategy
• Design a fair compensation structure based on factors such as percentage of load or per mile
• Invest in a payroll system to ease operations, even when operations scale
• Weigh the pros and cons of hiring contract vs full-time employees
• Review trends like how Trump’s new Executive Order mandating English literacy can influence your hiring decisions

Technology & Software

The right trucking technology enhances efficiency and boosts your bottom line in the long run. Set up your trucking company for success by investing in these technologies:

• Transportation Management Systems (TMS): It helps streamline invoicing, accounting, load booking, and dispatch.
• Route optimization software: Helps you find the smartest path for each trip. You optimize fuel consumption and transit time.
• Load matching platforms: Helps you reduce deadhead trips by matching your return trips with available loads.
• Trucking fleet management and maintenance software: Helps you track your truck’s mechanical health, so you avoid unplanned breakdowns.
• Fuel card programs: Help you enjoy fuel discounts, consolidate your billings, and streamline your expense management.

Finding Freight

You need consistent freight volume to run sustainable operations. This calls for serious networking to market your company’s services to the world and get many freight opportunities. Some techniques to find freight include leveraging free or paid load boards, networking with brokers and shippers, and seeking direct freight jobs from customers.

Phase 4: Ongoing Management & Growth

Researching how to start a commercial trucking company is just the first step in the right direction. The last phase is all about sustaining and scaling operations. It means perfecting and keeping up your achieved operational efficiency and finding opportunities to expand operations to the next level. Some growth management strategies you should practice include:

• Financial management: Make it routine to practice sound financial habits like tracking income and expenses, budgeting, tax planning, and analyzing/reviewing profit margins.
• Maintenance & repairs schedule: Plan for regular maintenance and emergency repairs to avoid lengthy unplanned downtimes.
• Build a culture of customer service excellence: Get customer service right from the get-go by polishing your employees’ customer service skills, such as communication and resourcefulness.
• Design a business scaling blueprint: Have a dynamic growth strategy that you reference when planning to expand your fleet or acquire other companies.

Fortify Your Operational Security By Getting a Warranty from ATW

Even with the best operations strategy, the trucking business will often throw curveballs you cannot avoid. From minor issues like truck tire blowouts to major ones like engine transmission problems, you can never be 100% prepared. That’s why it pays to get a truck warranty from ATW for your fleet, so you have a resourceful partner at your beck and call anytime you’re dealing with unexpected truck repairs.