(This is a contributed post)
If you’re considering starting a small transport business, you stand to make a decent profit. The logistics sector is full of opportunities, especially if you nurture local partnerships and invest in ways to make a big impression on your local community.
That said, the transport business is very competitive, and the high dropout rate for fledgling businesses can be enough to put even the most motivated entrepreneurs off.
But don’t let yourself be intimidated. These tips will help you get your transport business up and running.
The key to launching a successful logistics business is to find the right niche in which to operate. Whether you own a small fleet or operate a single truck, the niche you fill in the market affects the routes you service, as well as your equipment requirements and the rates you charge. Starting from scratch gives you a fantastic opportunity to identify markets larger carriers bypass. Transporting specialised loads means you cut out competition from the biggest, most established companies.
For example, you could invest in refrigeration (you can’t go wrong with Tranzfreeze) and transport fresh fruit and vegetables in your local area. There will always be smaller local producers who can’t fill large shipments, and demand for fresh produce is not especially affected by recessions.
One of the top reasons that new transport businesses fold early on is not having an accurate sense of what it’s going to cost to get the business off the ground and keep it running. Before you take the plunge, it’s crucial to calculate accurate operating costs so you know what you’re in for in the long-term.
Start by calculating your fixed costs. These expenses never change, regardless of the number of miles your vehicle does. These are costs like your permits and insurance premiums. Next, work out your variable costs. These are costs that depend on how many miles you do. Fuel is the obvious example: the more miles you put on the clock, the more fuel you need. Labor is another classic variable cost. Whether you hire drivers or drive the vehicle yourself, those hours on the road will impact your overall expenses.
Your fixed costs and variable costs can now be used to calculate your cost per mile. This the figure you’ll base your pricing structure on, ensuring that you charge enough to make a profit. Check out your potential competitors’ websites to find out what they are charging. If they all seem to be charging less than your average cost per mile, you need to go back to the drawing board. It may be that you won’t be able to compete without securing significant funding upfront. But you may find that you can reduce your costs, for example, by purchasing your fuel more strategically.
The transport industry is full of opportunities for small business owners. But success depends on picking the right niche and knowing what to expect. These tips will help you get up and running.