Starting a trucking company can be a good investment for a budding entrepreneur. Unlike many industries, trucking is an industry that is in constant demand, so it can weather most economic storms. But what if you do not hold a Commercial Driver’s License (CDL)? Will this be just a pipe dream?
Can you own a trucking company without a CDL? Yes, you can. However, this does mean that you will need to employ CDL drivers rather than operating the business alone. While this may not add much to your start-up costs, it can have an impact on your business over time.
Trucking companies move just over 70% of the freight in the U.S., with over 90% of the companies operating 6 or fewer trucks. The industry does not require a college or vocational degree. This means that starting your own trucking company, even without a CDL, can be an attainable goal as well as a good investment. It just takes careful planning.
What You Need to Know
As with any business, there are many things that you must consider before you get started. Some of these may impact whether or not you should move forward if you do not have a CDL or are not able to get one.
Start-Up Costs
Before you make any decisions on how to proceed with licensing, it is good to work through your costs. To start a trucking company, you will need:
Money. Starting any business requires money. Are you planning to purchase a truck? Will you have a physical office? Also, without a CDL, you will need to have enough funds to cover your drivers’ pay until your clients pay their invoice.
Forms, forms, and more forms. I hope you like paperwork. From the US Department of Transportation (USDOT) to insurance to acquiring your trucking authority. You will be filling out a good amount of paperwork.
Insurance. Speaking of insurance, you will need it and not just for the vehicles. You will also need insurance to cover the cargo that you move to. Just like with auto insurance, you will need liability insurance to cover potential damage to and made by the vehicles in your fleet. In addition, you will need general liability, which will cover your business as well. While most truck drivers are professional both in license and in work ethic, transporters account for 2.4% of auto accidents. Which leads to the next cost.
Administrative support. Do you really want to deal with all of the regulating bodies, insurance processing, and any potential court issues on your own? What about payroll, invoicing, payment processing, taxes, etc? These parts aren’t fun! It would be in your best interest to find a professional who can assist with some of this. Or not, if you like to live dangerously. It is best to submit everything right the first time than to have to go back to fix mistakes. And some mistakes can cost you your business.
Hiring. If you do not plan to have your own CDL, you will need to find contract drivers. If you hire contract drivers, you will need to pay for drug tests as well. Hiring can be a significant cost if you do not already have connections to competent drivers. Good hiring can save you insurance costs as experienced drivers are less likely to cause accidents.
The costs above are pretty static. You will pay them whether or not you have a CDL. If you have your own CDL, the only cost that would be optional cost would be hiring contract drivers.
Think that you can handle all of this? Great! There are a few more things that you need to know before you decide to start a trucking company without a CDL.
Trucking Authority
Luckily this isn’t Mad Max. The trucks aren’t taking over positions of authority. Trucking authority is proof that you have complied with all federal and state requirements in order to be paid to haul cargo. This includes being issued the MC Number, USDOT number, BOC 3 process agent, holding the proper liability insurance, etc. GL Authority has a good breakdown of what this all means, so I am not going to bore you with the details here.
Owner Operator vs Subcontracting
If you hold a CDL and you run the trucking company, you are an Owner Operator. This means that you hold the trucking authority and drive the cargo with your CDL license. This is great for someone who wants to operate completely on their own.
Someone who holds a CDL and drives for another person is a subcontractor. They do not hold their own trucking authority but drives under someone else’s. This allows someone to own a trucking company without a CDL. Remember that you have to pay these people, so it takes away from your bottom line.
Insurance
As mentioned above, insurance is a requirement in order to be approved for your trucking authority. As with auto insurance, most insurance companies require the insurance to be tied to a VIN number. If you don’t own your own truck, this can present issues for obtaining insurance. You are able to overcome such issues, you can start recruiting potential drivers before applying for your operating authority. This can be difficult if you do not have contacts within the industry.
CDL Licensing
If you decide that you want to operate the business as an owner-operator, you will have additional expenses to what is listed above. The cost of a CDL license varies by state. It can be anywhere from $8 in Montana to $105 in New Hampshire. You must receive training in order to qualify for your CDL. The training requires 150+ hours and can cost in the thousands of dollars.
To CDL or Not To CDL
That is the question that brought you here. It is time to weigh the pros and cons of both avenues.
If you do not have your CDL and subcontract, you are taking on someone you may not know well to be the face of your company on deliveries. If you make a poor hiring decision, they may not display the level of professionalism that you expect when making the delivery. Worst case scenario, they may cause an accident, which can lead to bad press and increased insurance cost for your company.
Or, the hire may be perfect, and you are free to focus on all the other aspects that come with running your own business. Good drivers allow you to focus on building your client base and handling some of the administrative work that comes with running a business. Let’s face it; it is hard to balance checkbooks when you are trying to make a deadline to deliver cargo. You don’t want to make mistakes with your money.
If you do have your CDL, you are able to have more control over all aspects of your business, from securing clients to making the delivery on time. You won’t have to deal with supervising others and worrying about whether your clients will pay their invoice in time for you to issue payroll checks.
Can I Start a Trucking Company Without a CDL?
This brings us back to the initial question; can you start a trucking company without a CDL. While the answer is yes, you should weigh your costs and benefits to make sure this is the best route for you. Now that you have an outline of what expenses to expect, you can make a better-informed decision.
