Many industries rely on trucking to transport goods to and from different destinations on almost every continent. The trucking industry is one that will be around for a long time, which presents an opportunity for business. Starting a trucking business can be quite lucrative once the firm is up and running because it will always be needed.What is the cost of starting a trucking business? Starting a trucking business is very capital intensive and can be quite expensive, with multiple costs associated depending on your business model. Some of these costs include:
- Purchasing trucks and equipment
- Truck maintenance
- Fuel costs
- Paying for permits and certifications
- Paying insurance on trucks and drivers
- Hiring drivers
- Non-trucking specific business expenses
The strategy you take to setting up your trucking business will influence the cost, but there are some standard costs you will have to consider and pay when getting started in this industry. This article will break down the finances associated with starting a trucking business and give you some details before starting a business of your own.
How Much Does It Cost to Start a Trucking Business?
Starting a trucking business will come with a lot of costs related to both trucking specifically and the costs that any business will incur with operations. Our goal is to cover both so you are aware of what you could be getting into if you decide to start your own trucking business.
Let’s first dive into the trucking-specific costs because those are going to be the most important and decisive in determining if a trucking business should be your next career move. Truckers may consider this so they can have some independence and step into more of a management role as opposed to only collecting income from their own driving.
Across the entire trucking industry, it costs $1.38 per mile to operate a semi-truck, averaging $180,000 per year, according to The Trucking Report. This can be incredibly high for someone just getting into the business, but can be much lower depending on the type of trucking you plan to do.
The costs we will be covering in this section are related to:
- Purchasing Trucking Equipment
- Truck Maintenance
- Fuel Costs
- Permits and Licenses
- Hiring Drivers
These are the largest expense categories that are unique to the trucking industry versus starting other types of businesses. They are also the first costs you should be concerned with paying when you set up the business. Having the trucks, the permits, and the proper coverage are necessary to carry out business.
The trucking industry is incredibly capital intensive because you need the physical trucks in order to complete the job. The cost of your trucking equipment is largely dependent on the business strategy you choose. There are two primary choices that impact equipment and the way you operate your trucking company.
One option is to purchase all the trucks yourself and hire employees to drive them. The other is to hire drivers that must provide their own trucks. The first option can be more lucrative, but it requires much higher upfront costs to purchase all the equipment. The types of hauls (short vs. long) will also dictate the size of truck you need.
The cost of purchasing a truck will depend on the size, age, and mileage:
- New Semi Truck: This will cost you anywhere from $80,000 to $150,000. The more expensive cabs will not only have more features, but they also difference between purpose. A day cab is for shorter trips and is much more basic than a sleeper cab semi truck that is designed for longer hauls.
- Used Semi Truck: Miles and size of truck vary, but you can find a heavy duty semi truck with a decent amount of miles on it for $30,000-$80,000.
- Leasing Equipment: You can also rent trucks, which will cost you around $1,000 for a used truck and up to $2,500 for a new truck. This is inexpensive in the short-run but can be costly over time.
The truck will be the largest cost you incur for your business, and this only multiplies with a larger fleet of trucks. In addition to the truck itself, there is some necessary equipment that fleets need to do business most effectively. Offering these additions to your drivers and trucks will make business more efficient and drive profits.
These are some of the technologies and equipment that are crucial for trucking business success:
- Dynamic Routing: This technology helps you optimize the best routes and get you to and from your destination successfully. This eliminates wasted time and additional fuel costs, which are both valuable in this business. This results in more business in a shorter period.
- Logging Device Technology: Drivers are required to take a certain number of stops and rest for a mandated time period for worker safety. Logging technology is a way to keep this data concrete and stay within regulations. These are required to operate a trucking business.
- Cameras: To help drivers to see and drive more safely and efficiently, camera technology can be very important. It can record potential accidents and provide evidence in insurance disputes.
- Temperature Tracking and Recording: If you are transporting food, regulations are tightening on the technology that dictates and records these temperatures ensure food and similar products remain safe. Shipping companies are more likely to work with trucking companies that have this technology.
- Collision Technology: These are additional devices that can be implemented on a truck to increase the safety associated with accidents. Improved sensors can detect cars around trucks to keep the roads safer.
While some of these technologies are required to operate, you should consider the cost versus the payout of these systems. They can help to improve the overall efficiency of your business. You can expect to pay a couple thousand dollars per category depending on the brand and level of support you choose.
In addition to paying for the purchase of a truck, you will also need to account for the maintenance that may be required on a commercial truck. Just like a normal vehicle, it will need to be serviced, and issues can arise more quickly with the sheer number of miles that are put on the vehicle.
You can expect to pay upwards of $15,000 per year in maintenance on a truck if it needs replacement or repair on common parts associated with long haul trucking. Older trucks with more miles may require more maintenance than newer ones. You may have some trucks in your fleet that cost you nothing, while others need many repairs.
Some of the most common maintenance problems for commercial trucks include:
- Brakes: With variable driving conditions, trucks have to rely on their brakes with much heavier loads. This can cause easier wear and tear in a shorter time period.
- Alternators: With lots of energy being needed to power the electrical system and battery in these big vehicles, the alternator may need to be checked sooner.
- Air lines: These are necessary for many driving functions, including emergency braking, electrical lines, and landing gear.
- Wiring: Operating a large machine like this puts more stress on the wiring and you may have trouble with it sooner than other vehicles would.
You may also need to replace tires when they no longer have the proper tread. Taking care of your commercial trucks helps to keep these costs down, but they are another specific cost you will need to consider when operating your trucking company.
One of the factors that drive the cost of operating a trucking company and the cost per mile of a semi truck is the cost of fuel. It takes a lot of gas for these trucks to travel thousands and thousands of miles for a delivery. Diesel fuel accounts for the largest operating expense in a trucking business.
On average, a commercial truck will use upwards of 20,500 gallons of diesel gas per year. This could cost upwards of $70,000 per vehicle per year. The cost of fuel and its fluctuations have an impact from year to year as well as state to state, but across the country these are the greatest expenses incurred by trucking companies.
Permits and Licenses
There is a lot of paperwork that someone who starts a trucking business will need to fill out. This will include applications for permits, licenses, and other fees to allow you to operate a trucking business and allow those trucks to move goods from one place to another. Making sure you have all these will prevent you from paying fines.
Here are the different requirements you must take care of in order to operate your trucking business legally in the United States. There are different fees associated with each of these applications:
|Commercial Driver’s License||This is the most basic thing any driver of a commercial truck will need in order to operate a vehicle for your company. Make sure all drivers are licensed before hiring. If your company carries specific materials, your drivers may also need to obtain specific endorsements with their license.||$75-$100 (depending on state) and $5-$10 for additional endorsements.|
|US DOT Number||This number allows the company to be tracked for adhering to safety laws and all trucking regulations.||$300 per authority|
|Motor Carrier Authority Numbers||MC numbers identify the type of business you run and the contents of the cargo you carry.||This is included in the $300 for the US DOT number.|
|Unified Carrier Registration (UCR)||Registration ensures that your vehicles are insured.||This number fluctuates based on the number of trucks you operate. 1-2 trucks is $68, 3-5 is $204, 6-20 is $407, 21-100 is $1,420.|
|International Registration Plan (IRP)||Allows for operation of trucks in all states and requires an annual renewal.||This cost is dependent on your state and truck weight. An 80k lb. truck will cost $1,500-$2,000 per year.|
|International Fuel Tax Agreement (IFTA)||This makes it easier for the government to track fuel use for semi-trucks. You may owe taxes to specific states based on fuel consumption.||Fuel Tax Required in State X – Fuel Tax Paid in State X = Fuel Tax Owed to State X|
|Heavy Use Tax||Because heavy trucks put wear and tear on the roads, heavy trucks are subject to additional taxes.||No cost under 55k lbs., $100 plus $22 for additional 1k over 55k (55k-75k lbs.), $550 over 75k lbs.|
|BOC-3||If operating in multiple states, this form is required to assist in legal proceedings if issues arise. Must be filled out in each state.||This will cost $20-$40, depending on the state.|
As you can see, there are many costs associated with forms and permits, and these will be driven higher for the greater number of trucks in a fleet. You can expect to pay at least $2,000 for one large truck when you get the business started. This will increase with more trucks but some fees are only one-time requirements.
Truck and Company Insurance
Working with these large pieces of equipment requires insurance for the protection of your equipment, drivers, and others on the road. Insurance is required on every vehicle and this can be one of the largest costs in starting a trucking business besides the initial investment in the trucks themselves.
There are two primary insurances you are putting on you vehicles:
- Auto insurance: Commercial auto insurance is required for any company that wishes to operate vehicles for business purposes. This helps to protect businesses from both first and third-party damage. There are a variety of companies that offer these services with multiple package options based on your needs.
- Liability insurance: In addition to the driving, having liability insurance protects your company and its assets from being taken by claims made against the company. This helps if lawsuits are filed against your trucking company. This can include accidents related to cargo, parking, and driving.
It is required that you have auto insurance, but it also really important to protect your company, trucks, and drivers with liability insurance. Without it, you can put yourself at great risk for the well-being of your company. While insurance can be expensive, it is definitely less money than the value of your entire business.
Insurance costs are high and are typically paid on a yearly basis. Similar to standard car insurance, the price is dependent on a variety of factors. Let’s break down the costs and what these factors are.
Insurance pricing for commercial semi trucks:
- Experienced driving authorities with good records: $9,000-$15,000 per truck
- New authorities: $12,000-$18,000 per truck (but can be even higher)
- Leased trucks to owner operators: $2,000 – $4,000 (on the end of the driver for their own operation) — this may not be applicable to your business
These are the costs associated with paying insurance on a single truck per year. The overall costs are increased with the larger fleet that you have.
Here are the factors that influence your insurance costs:
- Years in Operation: The amount of time your company has been in business will dictate the price. This takes in to account the driving records and safety of your drivers and the trucks you are operating. Building a good reputation will help to lower the costs over time.
- Cargo Type: What you carry will have an impact on the insurance price. Goods that may be dangerous if dumped by truck in an accident, such as chemicals, may cost more to cover.
- Driver Experience: The driver in charge of the truck will also impact the truck’s insurance. How long they have been driving, their driving record and other relevant information could drive costs up or down.
- Haul distances: Longer drives put the truck at greater risk for accidents and damages.
- Truck Value: More expensive trucks will cost more to cover as damages will result in larger bills for repair. A smaller or older truck is typically less expensive to cover.
- Insurance companies: Different companies will charge different rates, so you should shop around to get the policy that works best for your budget and the coverage you will need.
Hiring employees is a cost that almost any business will incur, but the trucking industry relies heavily on its drivers to carry out business. If you are operating a fleet of a couple trucks, you will need to hire some drivers. They are the heart and soul of your business because they are responsible for every delivery and its details.
Depending on the strategy you choose for operation, you can hire drivers to operate your vehicles, or you can hire drivers with their own trucks. Costs are lower for drivers with their own trucks, but overall profits and control are also restricted. We will go over the costs of hiring drivers in both categories.
Hiring drivers is another one of the highest operating costs in this industry. The median yearly salary for a driver is $40,000 in the United States, according to CNN. Turnover rates are very high in the industry, so offering higher salaries is one of the ways trucking companies try to keep their drivers with them.
There are different payment strategies for paying truck drivers that will dictate your costs associated with hiring:
- Hourly: This is a good strategy if the driver is traveling less than 150 miles in a single haul. These typically are not used for large semi truck driving.
- Per mile: This is one of the most common ways trucking companies pay their drivers. It can be paid in different ways, including using routing technology to determine distance, the shortest possible route, and actual miles traveled.
- Per diem: Drivers may be given a stipend per day in addition to their driving rate for stops.
- Bonuses: Drivers may be given perks or bonuses if they save the company on fuel costs and time.
Choosing your pay structure will depend on the time and distance that the driver will spend behind the wheel. You will need to calculate the costs associated with your specific equipment and routes to determine which one makes the most sense for your business.
You will want to make sure you are hiring drivers that are well qualified with valid commercial driver’s licenses. How they operate and conduct business will have a direct impact on the time and profit you can put towards your business.
General Business Expenses
We have covered the major costs that are associated with running a trucking business, but there are other costs you will need to consider when operating any business. These become increasingly expensive as you operate a larger business and need more resources to keep your business healthy.
The general business expenses you will incur include:
- Hiring Employees (other than drivers)
- Commercial Space
- Phone, Internet, and Utility
Let’s look more deeply at these expenses because they will likely impact your trucking business even though they are not directly related to trucking.
Beyond your drivers, you may have to hire other employees to run your business, especially if you manage many trucks. Trucking is a logistics-heavy industry, and having people who can easily organize all of these details will make your business run much more efficiently.
You should consider hiring these employees for your business:
- Payroll manager: This is someone who is in charge of paying drivers and all employees correctly and on time. This is important, especially as your number of drivers grows. You can also use software to organize payroll if a physical person isn’t necessary.
- Secretary: You may need someone to manage business affairs, handle and manage client inquiries, and handle miscellaneous business operations.
- Logistics Coordinator: This person oversees the transporting of goods between destinations safely and efficiently. They help to optimize the entire trucking process and derive the most value from each route.
- Dispatch operator: Information may be constantly changing and need to be delivered to drivers. They keep the drivers on track and help them navigate safely to get their cargo to the destination on time.
Many of these are hourly positions that you can set based on the location of your company, the responsibilities you assign to them, and averages in the industry.
If your business grows enough, you may need to rent an office or commercial space for operations. This rent cost will fluctuate based on location. If you do not choose to rent a space, you will need to rent a lot to store the trucks if you own the fleet. Having a lot that is easily accessible for you will help to make business operations easier.
Having your office near the fleet is ideal but not always realistic. You will need to find a solution that works best for you and your budget. If you can purchase a piece of land to park your trucks on, this may be beneficial in the long-run. Otherwise, you can rent space from a landowner with an empty parking lot or land.
Phone, Internet, and Utility
Associated with your office or commercial space, you will want to set aside some money to pay for the internet and phone bill, as well as the utilities on the property. These prices will fluctuate based on the location you live in and your energy use.
Beyond these, you can also consider costs associated with running a website. Having your own website and paying for the domain, as well as its development can be really helpful and lucrative in acquiring new clients. Presenting all your information in a coherent way gives your business a professional impression on potential clients.
It can cost upwards of $1,000 to incorporate your business. There are different ways to operate your business and structure it to make the most sense for tax purposes.
Many trucking companies will operate as a limited liability corporation (LLC) because it takes away the risks associated with lawsuits and gives more protection than a sole proprietorship that makes the owner assume all responsibility. You can easily form an LLC for the company with a point of contact and forms filled out to the IRS.
For larger companies, it may make more sense to be registered as a corporation. This would have to be a very large trucking company and will probably not apply to you when you start your business. If you operate other businesses, you should consider which methods work best for you tax-wise.
The Costs of Starting a Trucking Business
As this article has demonstrated, starting a trucking business is not a cheap endeavor. It requires a lot of equipment, high operating costs to keep your business healthy, and the traditional costs most businesses face to run. One of the easiest ways to start your business is as an owner-operator and grow your fleet from there.
If you are willing to pay the high initial costs and gain a great base of loyal clients, running a trucking business can bring in high revenues that will far exceed these costs. You will need to carefully analyze these factors to see if this industry and business is the right one for you.