Playing with your toy trucks as a kid may very well be your favourite childhood memory. Organising them by colours and size, racing them around the living room and chucking them at your sibling’s head may have led you to start your own trucking business. Adopting the role of owner-operator, however, and being in charge of managing the transportation of goods to customers can be more difficult than you may think.
Your toy trucks were most likely easy to move, easy to afford and had the ability to dodge any unwanted traffic jams. In the real world, however, with an abundance of other freight trucks carrying precious cargo on the road, weather unpredictability and unsafe driving, your travels may be less manageable.
Overseeing the loading and unloading process, organising the safest routes for you and your drivers, communicating with dispatching and monitoring and documenting all activity associated with your company, are just a handful of the responsibilities you’ll need to tackle. One of the most crucial, however, is understanding and effectively managing your business’ expenses.
Like any business, knowing how to juggle and prioritise your finances is essential. That’s especially true when you’re self-employed. If not properly managed, your company could fall victim to financial crisis which may in turn affect not only your own job security but also your employees.
The extent of your trucking business’s expenses may range depending on your company’s specific makeup, but the basic costs you’d be looking to manage include:
- the price of the trucks themselves
- the fuel you power them with
- the general market and also weather considerations
- obstacles that may slow you down on the road.
Fortunately for you there are several tips and guidelines available to aid you in cutting costs where appropriate and acquiring helpful management tools where needed. These ideas will be explored below.
It shouldn’t come as a surprise that proper truck maintenance can aid in cutting unnecessary servicing and repair costs. If your trucks are being used frequently and expected to run in good shape for a long time, then it’s vital for you to keep an eye on any small issues that could potentially turn into a big headache.
The following areas should be frequently monitored and optimized:
- Tyres: If your tyres aren’t inflated properly, this will directly impact your vehicle’s fuel efficiency.
- Oil levels: If you don’t lubricate your truck properly, the engine could overheat and lead to costly replacement or repair.
- Fluid levels (Radiator)
- Exterior features: If you refuse to acknowledge even the smallest of dents and scratches, you may be forced to spend a hefty amount on replacing a large external piece of the truck’s body.
2. Fuel-saving methods
Fuel can understandably be expensive, which is unfortunate considering that it’s an essential component of your business. You may, therefore, wish to find ways of reducing your spending on fuel where possible.
Some techniques may include:
- A discount fuel card: These cards can aid trucking businesses in reducing fuel costs by reducing the cash price at the pump, as well as offering other beneficial management features for owner-operators.
- Drive at a reasonable speed: Driving too fast can lead to increased fuel consumption.
- Monitor and limit your truck’s idle time: It may be cold without the heater on when you’re waiting for your drive-thru takeaway food to be ready, but this can chug away at your fuel.
- Use the right fuel for your truck.
- Consider investing in roof fairing.
- Improve your truck’s aerodynamics: A lot of fuel can be wasted if your truck is battling air resistance.
- Only use your air conditioner when it’s essential.
3. Invest in a Transport Management System (TMS)
The logistical operations behind a business can be confusing and overwhelming at times. It may, therefore, be wise to invest in a TMS. In simple terms, this platform allows you to track and monitor all logistical components of your business through the provided analytical data. This service aids you in appropriately organizing functions such as drop-off times and safe, timely travel that’s cost-effective.
Other benefits and features include:
- Supply and freight costs
- Real-time cargo location tracking
- Route-schedule creation
- Invoice production
- Optimised supply chain network (travel time estimations, status updates)
- Business statistics and reporting.
According to Truckstop.com, carriers who use this type of system average an increase of 12% in profits due to the strengthened efficiency and productivity they’ve obtained.
4. Ensure you understand your expenses
Understanding your truck’s operating costs is crucial in order to be able to determine where you can cut expenses. Some costs may be fixed – such as permits, licenses, labour costs and insurance – whereas other expenditures may fluctuate depending on your usage. The latter costs may include fuel, tolls and maintenance requirements.
It’s not uncommon for drivers to need a little pick me up throughout a lengthy drive. It’s, therefore, also wise to factor in coffee and food breaks and expenses.
Once you better understand your operating expenditures, you’ll be able to budget more effectively. Through proper, monthly budgeting you should be able to allocate money to each and every relevant business area more appropriately. If you choose to ignore budgeting, you may end up pouring money down the drain or ticking off your employees by not spending enough on essential management procedures.
Staying on top of budgeting can also allow you to see what subscriptions you’re signed up for and which ones you’re no longer using.
6. Route planning
Mapping out the best route for your drivers will come in handy when aiming to avoid unnecessary spending. Using the appropriate apps and internet searches, you should be able to find (and avoid) the following elements:
- Stations with higher fuel prices
- Expected detours and accidents
- Traffic jams
- Alternate routes
- Weather conditions
- Construction and road work delays.
7. Protect your cargo from theft
Stolen cargo goods and trailers remain a major concern for trucking companies, and the results can be costly. Thieves are crafty in finding ways to steal from your freights. It’s therefore important for not only business owners, but also their drivers, to be made aware of the possible preventative actions to be taken.
Methods of prevention and protection may include:
- Determine the most common goods stolen.
- Review the areas where it’s most likely to occur and at what times during the day.
- Park wisely: Use your surroundings and available objects to block any unwanted entries is wise. Avoiding unsafe areas and parking near security cameras is also recommended.
- Be mindful of any suspicious driving activity: If there’s a chance you’re being followed, you may need to contact your manager for help or attempt to lose them (safely) while driving.
- Use efficient safety gear: This may include padlocks, alarms and other security programs.
- Ensure you’re working with trustworthy people.
- Select transportation partners carefully.
- Provide security training to employees.
- Hire security guards at base locations.
8. Choose your market niche wisely
Depending upon what niche your trucking company occupies, you’ll be required to invest in certain types of equipment and determine your overall rates accordingly. Keeping this in mind, you may choose to work within a niche that theoretically offers more financial reward than others.
Dry van transportation isn’t, for example, considered a profitable trucking niche. The transportation of fresh produce and meats is on the other hand, as it remains relevant all year around, is somewhat immune to recessions and is suggested to be less competitive.
Other profitable markets to consider include:
- Luxury cars
- Hazmat (hazardous materials)
- Over-sized loads
- Mining industry.
9. Know when to outsource and insource business functions
Attempting to manage every and any business function by yourself or within your internal team can be overwhelming (and honestly not very cost-efficient). Time and money are two key areas of concern for many owner-operators. If, therefore, you can outsource certain functions to other companies, such as a Professional Employer Organization (PEO), you may be better off in the long run and have more time to spend on the most important areas of your business.
These companies can take care of the following:
- Employee benefits
- Worker’s compensation
- Health and safety management
- Development programs.
On the other hand, if you choose to outsource too many areas of your company, that you can manage better yourselves, you may be throwing money away. If the time lends itself to the tasks, your employees may be better suited to dealing with specific managerial aspects of the company.
Running your own trucking business can be hard enough without the added pressure of financial management and security. You may think that by pumping your trucks with cheap fuel or outsourcing all of your business functions will solve all of your expense problems.
There are, however, several other methods of cost-reduction (as explored above) that you may choose to consider in order to keep your expenditures as reasonable as possible. Ensuring you understand where you’re pouring most of your money, be it maintenance or anything else, as well as being mindful of even the smallest of actions you and your team could take in order to reduce any unnecessary spending may be wise.