The haulage and logistics business is one of the most lucrative businesses. But most people shy away from this business because of its risky and capital intensive nature. Do you want to learn how to start a trucking business from scratch? Do you need a sample trucking business plan template or feasibility study report? Then i advice you read on.
Starting a trucking business has been an idea i have been toying with for some time now. Regardless if you are an entrepreneur or an employee truck driver, starting a trucking business must have caught your imagination also.
Before i get into the nitty gritty of this write up, i want to state the fact that the trucking industry share similar fundamental and technical factors all over the world. So while i will be using Nigeria as a case study in this article, the lessons / information can be applied or replicated anywhere else; whether in the United States, Canada, India, Australia, U.K, etc.
As it stands, the trucking industry is one of the biggest businesses in the world. In fact, in the United States alone, the trucking industry produces over 300 billion dollars of revenue a year. In Nigeria, haulage business and even logistics is a billion dollar business with an insatiable market. This is because transporting goods across long distances has become an important industry.
No matter the industry you find yourself, you must transport bulk goods to and fro (both raw and finished goods). That makes the haulage industry a very lucrative one.
How to Start a Trucking business – Sample Business Plan Template
Now if you are interested in knowing how to start a trucking business; you have come to the right place because I will be sharing some tips to help you succeed in this field. Your journey to starting a trucking business begins here.
But before I go into the details of starting a trucking business, I want to emphatically state that the information provided in this article does not in any way replace the need for you to conduct a feasibility study, write a trucking business plan for your trucking business and do your own due diligence.
1. Your Personality-: Yes, the first thing that should be considered is your personality. First, you have to be certain that this is what you really want to so. Sometimes, it’s not too good to go into a business for the money alone; a passion for the kind of business that you are doing would help you to cope with the challenges and drive you to succeed.
Haulage is profitable alright but filled with a lot of risks and challenges therefore, you need a strong mind and determination to run this business successfully. You must be prepared to deal with dishonest drivers, shady mechanics, accidents and all sorts of challenges that are certain to come up at some point in this business.
The trucking industry is very broad and to succeed in it, you must select a niche. There are different niches in haulage business and the niche you choose would determine the type of vehicles you would need and your start-up costs.
For example, you can check out these business opportunities for truck owners and then take the questionaire below:
- Will you be engaged in transporting bulk goods or would you be leasing trucks to businesses in the transport industry?
- Will you outsource your truck to a trucking company or would you rather put your truck on a hired purchase?
- Are you going to haul short or long distance?
- If you are to go into transportation; will you haul solid or liquid goods?
These are the questions you must answer before setting out to start your own trucking business. If you choose petroleum products haulage for instance, what you would need is a petroleum tanker and you would have to register with an oil company or work as a sub-contractor with an already registered company but if you want to go into building materials haulage like carrying of sand, cement and granite from quarries to construction sites, what you would need is a tipper or a lorry.
3. Start-up Capital
The next thing you will need to begin your journey in the trucking industry is capital and you are going to need lots of it. Trucking is capital intensive and arguably the bloodiest part of starting a trucking business. Your start-up capital will largely depend on the size of the fleet you are intending to own. Therefore, you have to write a business plan and have a clear idea of how much you would need to start the business and look into your savings to see if you can afford it.
Are you going to buy new trucks or used trucks? There are two ways with which you can get your trucks; you can either purchase them outright or get them on lease. Another option is to look for subcontractors. While the initial investment is quite huge, you can easily get it back if you make the right management decisions.
If you do not have enough funds to start and would like to explore other financing options, you should first consider your credit-worthiness and eligibility for borrowed funding and whether you have collateral security for the funds you wish to borrow. You should also look into interest rates on the loan and compare it with your projected earnings from the business to be sure that the business would still be profitable even after paying such interests.
There are some financiers that are ready to finance this project if you can convince them. The major financing option that is available is leasing. Generally, equipment leasing is regarded as a usage agreement between an equipment owner “the lessor” and a user of the equipment “the lessee” whereby the lessee remits to the lessor a periodic rental fee as compensation for the usage of the equipment. How a lease is viewed and utilized varies considerably, although there are two major forms:
- Finance lease
- Operating lease
Finance lease, which is the most common type of lease in Nigeria and the rest of the world substantially, transfers all risks and benefits of ownership to the lessee while the lessor still retains title to the equipment, which may eventually be transferred.
In Operating lease, a substantial part of the risks and rewards incident to ownership are not transferred to the lessee. The term operating lease encompasses the short-term hire of equipment such as Trailers, motorcars, barges or boats. Leasing provides the lessees the opportunity of payment over a longer period than with most other forms of financing. This allows the lessee the opportunity of reducing financial commitments particularly in times of stress.
4. Rules and regulations
Another important factor that has to be given serious consideration is the legal requirements required for starting haulage business. You would be required to obtain various licenses and permits and you would also be presented with a set of rules and regulations that must be adhered to. You should do an extensive research on what these rules are and ensure that you comply with them.
5. Insurance-: Haulage business is filled with lots of risks. You would be carrying expensive merchandize which do not belong to you and would have to be conveyed to its destination safely. Considering the fact that you would be traveling over long distances to deliver these goods; it is impossible to predict the things that may or may not happen along the way.
Sometimes accidents may occur, cases of thefts may arise, dishonest drivers may even divert the goods elsewhere and this would lead to a huge debt on the part of the haulage company. This is why obtaining insurance for your haulage business is very important and you must consider the costs of obtaining insurance policies, and the premiums you would be required to pay and compare it with your projected earnings to determine viability of the business.
The next important to look into when starting a trucking business is your management strategy to handling payload and clients. A good management team is very essential to running a successful trucking company. If you are inexperienced, you may need to employ a manager who is experienced to oversee the day to day affairs of the business and run the business profitably.
Your management team must be experienced in the transport industry; especially with truck management. Another important aspect of running a trucking business is your accounting process. You can buy an accounting software your business to make things easier. As an alternative, you could place your vehicles under fleet management companies who would manage the vehicles for you and pay you an agreed sum monthly.
7. Employees-: This is very important as well. First, you have to think about the drivers because they are the life wires of haulage businesses. Your driver can make or mar your business therefore, it is important to first consider how and where to get professional drivers who would be interested in working with you to promote the business.
Next, you must think of the marketing and administrative staff too. If you are planning to start a small-sized haulage business, you may be able to handle the administrative and marketing functions yourself but for larger sized companies, you may have to employ staff to support with administrative and clerical duties as well as marketing and promotion of the business.
8. Your services to client
Lastly, you must get a grip on who your clients would be, what their needs are and how you would reach them. First you need to choose a niche, then write down a list of companies or prospective clients in that niche and devise strategies which you would use to reach them.
What types of goods are you planning to transport? Will you haul solid, liquid or gaseous substance? Are you going to haul durable goods or perishable goods? Each type of freight has their set of requirements, so it would be best that you decide on this before you even open shop. The types of cargo you will be able to carry will determine the type of clients you will work with. And speaking of clients, you will need to present yourself well to get the hauling contracts you need.
Then, you should also think of ways to beat your competitors and brand your business so that it can stand out from others in the industry. No matter how big or small your business is; your outlook matters, so don’t neglect working on image and brand. Present your services, the cost of providing the services, and other added advantages or benefits that you think can make them sign up with you. Once you get the contract, give them quality service so that they will be enticed to keep coming back.
9. Work out your Contractual agreement
Depending on the agreement you have with the haulage company, some of them would manage your Truck for you, employ the Driver and a motor boy and help you do all the major and minor repairs.
All you need to do is to go to their office and collect your money at the end of the month. The Trailers can conveniently make as much as N500,000 to N600,000 in a month, but all the expenses listed above has reduced the monthly take home of the Truck owner to between N350,000 to N400,000 in a month.
10. Maintenance-: When maintenance issues arise (and they certainly would), you would need the right maintenance services to put the vehicle back in order again. You would need a very good mechanic to handle repairs of your vehicle.
This is especially important because the level of maintenance and quality of servicing your car receives would go a long way to promote the life span of your vehicles. You should look around you for competent automobile repair companies or technicians who can handle repairs of your vehicles.
These must be people who would be willing and able to provide 24/7 services and who would be willing to travel over long distances in case your vehicle breaks down on a trip. For people who own fleet of vehicles, it is more economical and advisable to employ an in-house mechanic or team of mechanics to handle maintenance and repairs of your vehicles.
Starting a Trucking Company (Haulage) – Nigeria as a Case Study
Transport business in Nigeria is as old as the nation itself and there is no doubt that those in the business have been known to have contributed in no small way to the economic development of the country. Transport plays an important role in most business activities. Efficient transport is an essential component in the production and distribution process – commonly referred to as supply chain logistics.
Nigeria has the largest road network in West Africa and the second largest south of the Sahara, with roughly 108,000 km of surfaced roads. The present paralysis of the rail system in Nigeria has made road transport the only effective means of conveying heavy goods from one point to another within the country. The population is there and the environment is good. This explains why the road haulage business is one of the most lucrative businesses to start in Nigeria today.
Haulage (or road haulage more specifically) involves the transportation of manufactured consumer goods, raw materials, machinery, petroleum products, and natural resources from one point to another using heavy duty vehicles such as trailers, tankers, tippers, and cranes.
3 Distinct Ways to Make Money in the Haulage Industry
Starting a haulage business is just like starting a wild fire. The returns are enormous, but it greatly depends on what your truck will be doing. Haulage is a broad area and all spheres of haulage have its specific intricacies, the good news is that it is not so difficult to learn.
a. Running the business an independent contractor
This involves starting your own haulage company, operating your truck, hiring your drivers, and hunting for contracts from companies that may require your services. This is the most profitable option, the most capital intensive, and the riskiest.
For example, if you have a fleet of, say 5 trucks to start with, each truck can fetch you N500,000 or more in profits per week, depending on the capacity of the truck, the number of trips covered per week, and the distance travelled per trip.
For a 40ft truck traveling from Lagos to Onitsha, you will charge about N250,000. After deducting the cost of fueling and other routine measures (which will be around N100,000) you will be left with a whopping N150,000 profit—and that’s just for one trip. If the same truck does 3 to 4 trips per week, that’s a weekly profit of between N450,000 and N600,000. Now you can imagine how much you would make monthly if you have 5 trucks of the same capacity.
You may decide to haul products for oil majors like Total, Oando, Conoil or Telecoms companies like MTN, Airtel, Etisalat, Glo, etc. However, all these companies have stringent entry procedure and requirements, so your option going in as an individual may mean merging with some other persons in the business.
Although the idea of starting your own haulage company is very alluring due to the huge profitability of that option, though there are certain risks involved, just as is the case with any other profitable business. Here are some of the risks and downsides of haulage business:
b. Running the business as a contractor or subcontractor
In this model of haulage business, you will be serving only one client, usually a multinational or big manufacturing company. The company will manage all your trucks as well as the process of hiring and paying drivers. At the end of each month, the company will pay you an agreed amount of money, which ranges between N350,000 and 650,000—depending on the number of trucks you have.
One interesting fact about this business is that if it is properly set up, all you need to do is sit back and wait for your monthly earning which can be up to N800,000k (depending on the type, age and tonnage of your truck).
My research took me to some firms and I discovered how some Nigerians have been consistently collecting money from big haulage contracting companies, I saw a long list of signatures with a corresponding amount. I also noted that even the Trucks in the Country now are not enough to satisfy the need of this sector.
You will need to think twice before adopting this model because you will be subject to certain terms and conditions stipulated by the company you register with (of course, you will be required to register with the company).
c. Leasing your trucks to a haulage company
This model is similar to running the business as contractor or sub-contractor (as described above), but the difference being that you will be sub-contracting with a haulage company. Here, you will also enjoy the benefits that come with sub-contracting with a multinational or manufacturing company.
More Tips for Running a Trucking Business Successfully
Truck driving as a money-spinner
Drivers frequently travel at night, on holidays and weekends to avoid traffic delays and to deliver cargo on time. Truck drivers must cope with a variety of working conditions including variable weather and traffic conditions, boredom, and fatigue. Many truck drivers, however, enjoy the independence and lack of supervision found in long-distance driving .They collect 10% of the money they make in every trip- which makes them earn as much as N100,000 in a month
How to Buy a Truck or Trailer
A brand new Trailer cost between N15m to N20million at Leventis and UAC, while you can get a fairly used Truck for N6 to N7million. Some of the fairly used trucks are imported from Belgium, Germany and United Kingdom. You can also buy a Trailer head and refurbish the engine to standard; in total, it can cost you between N3 to N3.5million. A Trailer Tanker cost between N3 to N3.6million.
Road Haulage is clearly a huge industry with many and varied opportunities for anybody that is interested to invest in it. Almost 90% of the Trailers on our road are second hand and they are still OK. If you don’t want to spend a lot of money, you can decide to rent the back which goes for N30,000 a month, you will need to pay for 4 month which is N120,000.
How to Buy a Tipper
Tippers carry granites from Quarry to different part of the Country. Any investor in this type of business is advised to register with the Quarry, they make 2 trips everyday and they charge between N30K to N35,000 per trip. A good tipper cost between N4Million to N5Million naira and you are entitled to about N400,000 in a month; if you can give your tipper to a manager to manage for you.
4 Challenges of Starting a Trucking Business
Aside the issue of capital, the trucking business is management intensive. Another challenge militating against the success of trucking businesses is bad roads. The issue of bad roads results to unnecessary repairs, maintenance and accidents / hazards. The last but not the least challenge of starting a trucking business is getting good drivers.
The “face” of your company is highly dependent on the type of drivers you employ, so make sure your hire drivers that are fit for the job. Check their references and background; and make sure that they’re not taking any illegal drugs. Hiring a terrible driver or being involved in an accident is going to be a disaster; not only to the finances of your company but also to your brand image, so recruit wisely.
As a final note, this is all the advice I can provide for now on how to start a trucking business. The trucking industry is quite a tough terrain to break into but the reward is worth it. I wish to personally congratulate you on your ambition to join one of the fastest growing businesses in Nigeria and the entire Continent. This dream of yours will definitely ensure a very comfortable living for you and your loved ones…… Guaranteed.