Upwards of 700 trucking companies went under in 2019. That is a staggering 24,000 trucks leaving the road and 24,000 drivers losing their jobs. While this trend has been largely attributed to unfavorable conditions for new companies in the freight industry, the failure of established firms has pointed to other causes. We shall discuss below four reasons trucking companies fail and how to protect your firm.
1. Failure to plan
Business plans help entrepreneurs brace for any possible contingencies. The trucking industry is bound by a plethora of regulations, and failing to factor them in your business plan may come to haunt you later. Many young companies fail because they prepared a shallow plan that left out several important factors. Take your time to create your business blueprint, and, if possible, involve a corporate attorney.
2. Incompetent management
Trucking companies are different from other businesses in that most of the sales activities take place outside the business premises. A lot of managerial effort is required to keep track of all the drivers on the road and ensure cargo arrives in time and perfect condition.
If you want to start a trucking company, ensure personnel recruitment is based on qualifications and experience. That way, you will be surrounded by knowledgeable individuals who have a nodding acquaintance with business success.
3. Cash flow issues
Starting a business without a consideration for financing is one of the biggest mistakes you can make. Many freight clients take up to two months to pay their invoices, and the trucking company may have to cover the transportation costs with its own money. Of course, the invoice will be paid eventually, but in the meantime, your company needs to foot utility bills, pay employees, build inventory, pay suppliers, get more clients, and cover tax expenses.
To ensure business operations go on as usual, partner with a freight factoring company such as tafs.com. Factoring improves a trucking company’s cash flow and keeps young and troubled companies afloat during drawn-out sales cycles.
4. Lack of knowledge of market rates
Trucks are expensive to run and maintain. A high-paying transaction can translate to a loss once all the costs have been deducted. To ensure your expenses don’t exceed your revenue, keep track of your cash-flow statements, and make quote adjustments accordingly.
You can also monitor established competitors and replicate their packages, particularly if you aren’t familiar with certain routes or the transportation of certain cargo. Regardless of the market situation, make sure your revenue is aligned with your business objectives.
The trucking business is becoming crowded with each passing day. You can make good if you have a comprehensive business plan and can identify and exploit available market gaps. No matter the size of your company or how long you have been in the industry, try to avoid the above mistakes as much as you can. Anyone can fail, and business success is partly a product of your ability to stick to your plans and learn from your predecessors.