Many truck owner-operators likely started the business because they saw it as an opportunity to make more money while having more freedom. And while this can work out, there is no doubt that many owner-operators must learn a lot more about the business side of operations.
Without understanding your finances and how to boost profits, there is a big chance your company won’t make it. The National Association of Small Trucking Companies has found that only 15% of new trucking companies survive beyond their first year.
Therefore, learning to boost profitability is one of your best strategies for ensuring long-term success. Some of the best ways for truck owner-operators to increase their profits include:
Determining your operating costs
While running a trucking business may sound as simple as hauling a load, then getting paid for it; you must also understand your profits in terms of your operating costs. This is the starting point for determining how much you must make to make ends meet and, more importantly, provide an owner-operator salary after expenses.
You will want to develop a budget that includes your fixed costs, or those that remain the same no matter how many miles are driven, and variable expenses, or those that will vary depending upon how many miles are driven.
Charge a sufficient rate per mile
Increasing what you charge shippers is a great way to increase your profits. But increasing this too much means you won’t get as many driver jobs. Therefore, you must keep your rates competitive but still profitable.
In addition, you can use a trusted load board to identify high-value loads, which can also increase your per-mile fees. These practices can help you position your business in a competitive but profitable position.
Negotiate rates frequently
The trucking industry relies on variable costs, such as fuel and meal expenses, to determine its cost per mile. Despite these fluctuations, you should always know your cost per mile for any given load. Having a sufficient cost-per-mile charge is the key to ensuring profitability. But since this figure relies on expenses that change, such as fuel rates, you will want to negotiate your rates to ensure they are aligned with current costs. This strategy is vital, especially during turbulent economic conditions.
Increase your CDL endorsements
The Federal Motor Carrier Safety Administration governs licensure for the trucking industry. Most owner-operators and truck drivers have a commercial driver's license (CDL). However, you can get certified to haul specialized loads, which often pay more. Generally, you must pass an exam to get these certifications. Certification options include:
- Hazardous materials
- Double or triple trailers
Expand into a new line
In addition to increasing your licensure options, you can also consider getting into different lines (which may also require CDL endorsements). This strategy reduces your competition and justifies charging higher rates. However, you may have to purchase additional equipment with some of these options, so you should consider your return on investment. Options for a new line may include:
- Oversized loads
- Car hauling
Greater profitability is achieved by either increasing revenue or decreasing costs. Achieving greater efficiency can ensure you increase your revenue while incurring fewer expenses. You can get greater efficiency by:
- Planning routes better - shaving off even a few miles on your route can give you more time throughout the year while reducing your expenses per mile.
- Limiting deadhead miles - deadhead miles are inevitable as you move from load to load. But limiting the number of miles you travel with an empty trailer can boost your revenue. Therefore, look to schedule back-to-back loads with the second pickup close to the first dropoff.
- Streamline administrative tasks - Administrative tasks for trucking company operations take time. It can be tedious to create and track invoices, ensure your maintenance files are current, and organize everything. And time spent on these duties takes away from your time on the road. By streamlining your back-end administrative work, you can keep yourself and your drivers on the road more, which translates into more significant revenue. Outsourcing operational tasks is one way to maximize your time on the road.
Stay on top of maintenance
Failing to keep your trucks in peak operational mode can result in required repairs, which are both costly and can take time - time when your truck isn’t on the road earning a profit. Adhering to the manufacturer’s guidelines for maintenance is one great way to keep your truck operating well and reduce the risk of costly and time-consuming repairs.
Similar to costly repairs, compliance violations can be expensive and can impact your ability to drive. This can strain your budget significantly and wipe out much of your profits. Therefore, ensuring compliance is crucial to ensuring your owner-operator trucking business succeeds.
Schedule short hauls or urgent loads
It’s no secret that shorter hauls and those that must be delivered on a tight schedule are often more profitable. As a result, you can boost your revenue by taking on these jobs. Additionally, short hauls result in less wear and tear on your vehicle, meaning that you can also reduce maintenance costs over the long run.
Focus on customer service
As an owner-operator of a trucking company, you face tough competition. Many new trucking businesses are entering the industry every year. To stay ahead of the competition, you must focus on customer service, particularly for repeat customers. They provide a steady income stream for your business and help ensure your continued success.
Diversify your clients
While it is good to have many repeat customers, relying on them too much can threaten your company’s success. If one or two stop operating, your business may not cover the gap until you fill your schedule again. Therefore, keeping a diverse range of customers is one way to mitigate this risk. It insulates your company from falling victim to boom and bust cycles.
Being an owner-operator for a trucking company can be incredibly rewarding. However, it can also be highly profitable with sound business strategies that maximize profitability. These techniques provide a few options for boosting your profits or reducing expenses to ensure long-term success!