Money For Lunch – 4 Trucking Industry Challenges and How to Overcome Them

4 Trucking Industry Challenges and How to Overcome Them

July 14, 2017 11:43 AM0 commentsViews: 6

 

It’s quite reasonable to say that there will always be a need for trucking because products will always need to be shipped. This makes the idea of starting a trucking business a good idea. The trucking niche is a lucrative one.

However, like all promising ideas, it’s best to review some of the challenges you’ll encounter before you start a trucking business. This way, they won’t take you by surprise because you’ll have already learned about them and prepared a viable solution in advance.

Here, then, are four of the most common challenges, you’ll need to overcome to be successful in running a trucking business:

Challenge #1: A long turnaround time.

In most businesses, you get paid as soon as you finish a job. In a few, you even get paid a percentage of your fees upfront. However, this is not the case with trucking. In an effort to be more customer-centric, the industry offers a generous credit system to clients, allowing them to pay 30 or 60 days after they have received freight.

This unusually long turnaround time between delivering product and getting paid for it can be difficult to manage for a new company. Essentially, it means that a business owner has to finance the delivery, pay for the driver, the fuel, and all other costs a month or two before they get paid by the client.

The Solution

Should you get a business loan to resolve this negative cash flow issue? While this might seem like an easy way out of the dilemma, it isn’t actually a good idea.

There are three reasons why it’s not advisable to take this route:

First, you may have difficulty in getting a loan approved in a short amount of time. Instead of waiting for you to get the money to manage their project, a customer is more likely to go to another trucking company who can deliver their freight faster.

Second, if you do get the loan, you will probably have to pay a high interest for it. This will cut into your profits.

Third, you may not borrow enough money to fund all your new clients. If your marketing is too successful, then you might acquire multiple clients who all want their freight delivered in the same month. So, you might not be able to do business with them all even if you have a large enough fleet.

Instead of looking for a loan, a far better solution is to consider invoice factoring. A trustworthy financing company like TBS Factoring will buy your invoice directly from you and then wait for the invoice to become due to collect the money from your customer.

Challenge #2: A Heavily Regulated Industry

Government agencies have many strict regulations when it comes to the trucking industry. This is understandable because they are doing their best to make trucking safer.

The Solution

Obviously, there is little you can do to minimize the red tape or avoid the extra expenses for your drivers and your fleets. However, what you can and should do is to be very clear (a) that you understand all the regulations and (b) that you get everybody to comply with all the requirements. By staying abreast of all the regulations, you won’t have to pay any fees for violations, and you will be legally protected if one of your trucks did happen to have an accident.

Challenge #3: Fuel Costs.

Fuel costs go up and down, and while you’ll be doing well when prices are low, things will get rough if there is an unexpected hike in fuel prices.

The Solution:

Have a fuel efficiency plan in place and make sure your drivers stick within its guidelines. Also, apply for fuel card programs to be eligible for discounts on your diesel costs, as well as receive other money saving services.

Challenge #4: Getting enough help

You will need a number of good drivers to keep your fleet active; however, there is a large shortage of truck drivers in the US, which is estimated to be about 48,000. In addition, the turnover rate is high. Another problem is that even if you do get enough drivers, drivers tend to call in sick more often than in other industries because they don’t take proper care of their health. The most common disorders affecting drivers include sleep apnea, drug and alcohol abuse, obesity, and diabetes.

The Solution

  1. The best way to recruit drivers is to offer good salary, benefits, and bonuses.
  2. Retention is a result of providing the drivers with good working conditions. This, in turn, is a question of developing a solid corporate culture.
  3. Enroll your drivers in a trucking association program that promotes better health and fitness for drivers.

Although the trucking industry has its challenges, it can be a highly rewarding business once you take the right steps to overcome these four main issues.

Leave a Reply

You must be logged in to post a comment.