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Automotive

4 Common Reasons Why New Trucking Businesses Fail

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If you know anything about the trucking business, you know that it’s a very competitive one, but one with lots of demand as well. The barrier to entry is moderately high, and many successful major trucking businesses started with only one driver and a truck. Being ready for the challenges of the business is essential if you want to avoid unpleasant surprises and be able to survive in your first years or months. Let’s take a look at some of the most common reasons new trucking businesses fail.

Bad or No Business Plan

One of the biggest reasons why new trucking businesses fail is because the owners don’t treat them as businesses. You need to have a solid plan to figure out your operating costs, potential profit and have a road map for expansion.

The very first thing you will have to figure out is your overhead. Then, you will need to look at what the ceiling for revenue is for the type of freight you’ll be hauling. If you don’t have this information when starting, you won’t be able to keep track of your finances. You will not be able to know how much you can afford to spend while still being profitable, for instance, or you may not know if your objectives are unrealistic when considering your setup and market.

Cash Flow Issues

Small trucking companies are more vulnerable to cash flow issues. They usually have lower cash reserves, to begin with. They might not have enough clients to cover operating costs. Or they might have too many outstanding invoices. Since these are new, they also don’t have the time to establish the credit needed to get financing in many cases.

One way to counter this is to go with a broker and one that is specialised in truck loans. A truck finance broker will be more familiar with the trucking business and the challenges they have to face. They will be able to use other metrics other than your credit score, making it more likely for you to be approved.

Poor Collection Strategy

Another reason why so many trucking businesses experience cash flow issues is that they have a poor collection strategy. Simply put, a collection strategy is a process through which you get paid. If you don’t pay enough attention to this part, you could be setting yourself up for failure. This is why we suggest you consider looking for outside help here. A factoring company will be able to take that weight off your shoulders and allow you to focus on your operation.

Unrealistic Expectations

Too many get in this business without understanding how tough it can be on a person. They assume that they could do easy routes part-time and still be profitable. In reality, you’ll have to be prepared to work long hours and run tough routes if you’re doing this alone and want to be able to turn a profit, so that’s something you’ll need to be prepared for.

Running a trucking business can be tough when getting started. However, how much you plan and how you follow through will make a world of difference when it comes to your chances of success.

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