Truckers keep America’s economy moving, and more people than ever are becoming aware of the essential role that trucking businesses play in maintaining supply chains. Though the average consumer tends to believe that there’s no more to running a trucking business than picking up goods at point A and bringing them to point B, things can actually get complicated quickly and even seemingly minor delays or inefficiencies can eat into profits. Instead of accepting this as unavoidable, read on to find out how to make a trucking business more profitable.
Understand the Cost vs. Expense Distinction
To increase profitability, business owners need to understand the difference between costs and expenses. In simple terms, the cost is an investment made into a company’s product or service, while an expense refers to the money required to maintain operations. In the trucking industry, the distinction between these two ideas can get a little blurred.
The service provided by trucking companies is the safe and legal transport of cargo, which means costs are usually related to maintaining equipment and paying drivers. Expenses generally consist of things like fuel, truck maintenance, and insurance payments to maintain legal status. Business owners can visit garrity-insurance.com to learn more about how to manage expenses.
Know the Break-Even Point
A company’s break-even point is the point at which it is making enough money to generate neither losses nor profits. Determining in advance where this point is can make it easier to manage finances to increase profitability. Once the business reaches its break-even point, its profits will steadily increase if both income and expenditures remain even.
Set Appropriate Rates
Determining the break-even point allows business owners to set prices that are competitive but still allow the business to increase in profitability. To attract more clients, trucking companies must offer lower prices than their competitors, so it’s important to measure the business against others in the industry.
Don’t forget to consider driver salaries when setting rates. Attracting better drivers requires offering better pay, especially in today’s competitive landscape, but it pays off in the form of safer driving practices and on-time deliveries. This sometimes requires a little extra flexibility in terms of how the company’s funds are used.
Optimize Routes and Loaded Miles
In an ideal situation, every mile of every truck’s route is a loaded mile. While this standard would be impossible to uphold, trying to achieve something close to it is a good way to increase profitability. There are a few ways to optimize loaded miles, including:
• Working in niche markets
• Hiring a broker
• Making use of load boards
• Registering as a government contractors
• Plan Ahead
As trucking companies become more profitable, they must scale up to support additional growth. Paying attention to things like a company’s break-even point can make it easier to be prepared. Consider taking out loans as necessary while the company is scaling up to pay for things like increasing the fleet size and rewarding good drivers.
Remember That It Takes Time
Building a profitable trucking business takes some time. Follow the tips above, keep an eye on the bottom line, and plan ahead to make sure that all the hard work that goes into making a trucking business more profitable doesn’t go to waste. It may take some time, and often a loan, to make serious improvements, but it’s worth the effort.