Comment: Tips on starting a trucking business

By: David Boyce

Running your own trucking business can be a tough game in a competitive industry where margins can be tight and days long and unpredictable

More than 90% of all freight in New Zealand is carried by trucks. Freight demand is continuing to grow, meaning more trucks will be required to meet the growing freight task.

So now is a good time to consider starting your own trucking business.

Do you have what it takes to succeed? You will need to be:

  • Passionate about the industry, that is not just liking shiny trucks but having the drive to succeed.
  • Prepared to make sacrifices. You will have less money to spend and may have to give up some of your leisure time activities. Make sure your family is on-board, as this will affect them as well.
  • Good at managing risk, as it will take you time to build up your profitable income.
  • Persistent, as things do not always go
  • to plan.
  • Able to learn a whole new range of skills and knowledge. You will need to be the CEO, the administrator, the finance manager, maintenance manager, scheduler, and HR manager until you get established.

For every new trucking business that starts today, within five years, more than 50% of them would have failed. So, it’s critical that you do your homework first and get the best advice before taking the first steps into your new trucking business.

Starting a new trucking business requires a lot of planning and preparation to ensure success. Having a good business and financial plan is critical; it will be your roadmap to success.

The first decision you need to make is to get the best advice from people who are experienced in the trucking industry. The NZ Trucking Association team should be your first point of contact. The association team has more than 50 years of combined experience in the trucking industry. We’re specialists in providing the best advice to new entrants into the trucking industry and can help you develop your business and financial plans. Our experience is earned the hard way, by running our own businesses.

The trucking industry is heavily regulated, so before you start, talk to us, as we can help you to understand what’s required: Transport Service Licence, Delivery Rates, Contractual Agreements, Capital Equipment, Finance, Insurances, Regulations, Obtaining supplier credit agreements, Servicing, Fuel, Tyres, RUC, GST, Income Tax, and ACC Levies to name a few.

You will need a Transport Service Licence (TSL), if you intend to operate a vehicle that has a gross laden weight exceeding 6000kg. To obtain a TSL, you must first apply through Waka Kotahi (NZTA), where you will be required to pay a fee and pass a knowledge-based test. You will also need to meet the ‘Fit and Proper Person’ criteria. To pass these criteria, NZTA will consider any criminal history, fraud, dishonesty, evasion of RUC, bankruptcy, driving offences, and other considerations. It’s illegal to operate a transport service using another person’s or business’ TSL.

As a member, you will have free access to our industry-respected cost modelling service where we can quickly work out if your new trucking business is going to be profitable and sustainable. The association team will help you to understand all the costs involved in running your business. Sometimes, the difference of a few cents on a kilometre rate can be the difference between success and failure.

Not all businesses are reputable. Does the business that you’re going to contract to have a good history of prompt payment? If you’re waiting 90 days or more for payment, it will not matter how good the rates are, if you cannot afford to make the payments on the truck, or fuel account.

Many owner-driver contracts appear to be for long terms but are in effect only 30-day contracts because of the termination clauses they contain. Contracts can contain restraint of trade clauses that will restrict your ability to earn an income if you decide to leave.

Buying trucks can be an expensive exercise that requires research and the right advice. As a new business, money will be tight until you get established. So, concentrate on getting what you need for the job rather than what you would like. Do you really need that flash new truck with all the extras, or can you make do with something more modest or even second-hand?

Securing funding and setting up the right finance structure is important. We can help you with this. Have you got any equity of your own? If so, it certainly helps to reduce your monthly commitments. Although finance rates have come down a little recently, lenders have become much tougher in ensuring the viability of your new business. Some lenders will loan you 100% of the purchase costs, but you will be paying a much higher interest rate for this privilege. With the right advice, your monthly payments can be structured to suit your budget.

As a trucking business, you need the right insurance policies to cover any potential risks. Motor vehicle insurance, Carriers Liability, and Public Liability are necessities. Worth considering is a loss of use extension on your motor vehicle policy, which provides cover for a rental vehicle if yours is off the road due to an accident. Accident and Illness or Income Protection Insurance will help cover the cost of your commitments if you’re unable to work for an extended period due to health issues. We can guide you to trucking industry-specific insurance at very competitive rates.

NZ Trucking Association members enjoy substantial discounts on fuel, tyres, insurance, oil, finance, and a range of business support services. This gives your business a competitive advantage.

Take time to set up your administration. Do you have a partner who can help with tasks such as paying invoices, GST, wages, PAYE, budget the finances, and arrange the servicing among other things? If not, then you will need the services of a good accountant or bookkeeper who understands the trucking industry. We can guide you in the right direction for the best advice.

Running your own trucking business can be profitable if you get the right advice at the start. 

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