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.
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. 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 population is there, the environment is good, haulage itself is a good business, and more people are encouraged to come into it as it is a business anybody can do.
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.
Starting a Trucking business – Haulage and Logistics
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. You may decide to haul products for oil majors like TOTAL, OANDO, CONOIL or Telecoms companies like MTN, ZAIN, 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.
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.
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.
Secondly, the information shared in this article is applicable to any locality; be it USA, Canada, UK, Nigeria, Ghana, etc. Without wasting your time, below is a full detail on how to start your own haulage business.
1. Choose a niche
The trucking industry is very broad and to succeed in it, you must select a niche.
- 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. In this article, I will focus on how to start a trucking business with respect to the transport industry; haulage to be precise.
2. 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.
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.
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.
3. Rules, regulations and insurance
Rules and regulations is the second point you must consider when starting a trucking business. There are different licenses and permits that must be filled up, which includes state registration and permits.
To know what rules you’ll have to comply with, it is greatly recommended that you do your research or ask for help from someone familiar with the rules. Another important factor you must consider before starting a haulage business is insurance; which will cover the truck and the goods being transported.
The fourth factor 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. 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.
5. Your services to client
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.
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’ll be enticed to keep coming back.
6. 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.
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.
Author’s Bio: Tunji Afuwape is a small business finance consultant and expert. He is the CEO of 21st Strategies. He provides “how-to” advice on small business and home-based work issues. His organization helps small businesses reach their fullest potential. You can read his full bio here and contact him also for business advice.