During the first year of the pandemic, 3,140 trucking companies shut their doors. This was almost triple the number of closures in 2019. The pandemic changed things as shutdowns and quarantines took place.
Still, before the pandemic over 1,000 trucking companies were closing down each year. What are the common reasons that trucking companies fail and how can you prevent it from happening to you?
They Fail to Take On Enough Clients
You need to have a solid list of clients you haul loads for. You’ll run into situations where they may not have as much work as you were expecting. If you have a long enough list of clients, it won’t affect you. It’s easier to hire an additional driver or carefully plan routes to cover everything when you’re too busy than to have to struggle to find work and let your debt get out of control.
They Don’t Charge Enough
How much are you charging? It’s important that you carefully figure out how much to charge. You do not want to charge too little, as that’s not much different than working some hours for free. To make sure you’re charging enough, you need to come up with a cost per mile. To do this, consider these questions.
What is your freight lane, meaning where will you be driving? Figure out your main corridor and how far your drivers will travel. Are they going to do overnight trips or to their destination and back on the same day? Your trucking company is nearest a certain interstate, so it’s likely that that interstate would be the start of your main corridor. What interstates are directly connected? All of that can help you set a boundary on how far you’re willing to haul loads and what cities are in your freight lane.
Calculate the fees you’ll be paying for insurance, licensing, wear and tear on your trucks, business loans, rent, employee wages and benefit costs, and any brokerage or freight factoring fees. You want to consider those and make sure your final cost per mile covers those expenses.
What are the current gas and diesel prices, and how much do your trucks get for miles per gallon?
Once you have calculated your expenses, add on how much revenue you need to make to be able to grow your business. You’ll use that to calculate your minimum cost per mile. Look up loads along your freight lane and see what they pay. Add them together and divide by the number of loads to get the current average price in that area. Is your cost per mile comparable? If it’s too low, go back through your calculations.
They Don’t Pay Attention to DOT and FMCSA Rules
Rules and regulations in the trucking industry are subject to change. It’s up to you to keep up with these changes. Make sure your schedulers and drivers know all the rules regarding how many hours they can drive, how often they must take breaks, inspection rules, and maintenance requirements. Make sure your drivers are licensed and hold the correct certifications for the loads they haul. If you, you face stiff fines. Those fines can be costly.
- Broker/property carrier violations of commercial regulations – $10,932
- Failure to respond to a subpoena – $1,093
- Falsifying records – $12,695
- First offense alcohol violation – $3,176
- Operating after being declared unfit – $81,993
- Second+ offense alcohol violation – $6,348
- Violations of CDLs – $5,732
- Violations of HazMat regulations – $81,993 ($191,316 if death results from violation)
- Violations of HazMat training regulations – $493 to $81,993
They Avoid the Benefits of Technology
Are you using technology to your advantage? It’s time to sign up with a trucking expert that offers technology that helps you grow and manage your trucking company. Some of the technologies you want to embrace include:
- Assign Loads and Track Loads apps
- Automatic invoice generation
- Bill of Lading apps
- Digital payment systems like Google Pay or Apple Pay
- Emergency scanners that help track police, fire, and EMTs that can alert to traffic tie-ups and road closures
- Find Load apps that help you find work to prevent deadheading
- Gas/Diesel pricing apps that help you find the lowest gas prices in a city
- GPS mapping and programs like Waze that alert you to traffic issues
- Instant (and free) business credit checks through an app
- NOAA Radar for current weather forecasts
Of course, your drivers should also have smartphones that allow them to access these apps and helpful mobile services.
The Industry Takes a Downturn
You can’t help what happens due to weather, pandemics, driver shortages, or industry downturns. What you can do is be prepared for the unexpected.
When there’s a driver shortage, you need to do things that entice drivers to work for you over someone else. The best way to do this is by seeing what industry trends are when it comes to employment benefits. If you offer a desirable benefit that other companies don’t provide, you’ll get more drivers.
Attractive wages are only part of the overall employment picture. Many employees today admit that they want on-demand paychecks. If the usual payment schedule in your area is every week or twice a month, you could offer twice-weekly payments and capture attention. To do this, partner with a freight factoring service and have payments coming in to cover your driver’s on-demand wages.
They Experience Cash Flow Problems
One of the biggest reasons for failure as a trucking business is that cash flow problems arise. Avoid this by making sure you always have a steady flow of income. Know exactly what bills you have and make sure you take on enough work to cover those expenses. Lead enough of a buffer to cover unexpected truck repairs. A trucking business line of credit is a good thing to have on your side in case of an emergency.
Make sure you have a fuel card for your trucking business. Every trip your drivers take is going to require fill-ups at some point. The higher you’re paying for fuel, the more you stand to lose. With a fuel discount card, you can save a lot of money with each fill-up. If your drivers get a 14-cent discount off each gallon, you’re saving $14 with every 100 gallons you buy. You’ll also save money if they use sites like GasBuddy to find the lowest prices.
Your clients may not pay on a timely basis, but you shouldn’t have to suffer due to their administrative failures. Freight invoice factoring ensures you get paid on time. Complete the load and send your bill of lading to Saint John Capital using our freight factoring app. Just take a picture and submit it. It’s that easy. We’ll go over the bill of lading and issue your payment immediately. If you submit it before the cut-off time and have a business credit card or fuel card set up with us, we can pay you the same day.
You never have to wait months to get paid. You’ll have a steady income and be able to pay your drivers, pay your bills, and turn a revenue without stress. If you have trustworthy clients who never fail to pay you on time, you can continue billing them on your own. It’s up to you which invoices are factored with us. Sign up at Saint John Capital today.