Many companies enter the trucking industry with hopes of achieving unbound profit margins. The trucking industry is a highly elusive one, with demand for truckers and trucking companies increasing consistently, even during the pandemic times.
Truckers are an integral part of American society too. In 2020, truckers and trucking companies worked around the clock to deliver essential supplies and functioned as mobile morgues for hospitals overwhelmed by COVID-19 deaths.
What makes the trucking industry highly profitable?
- Truckers move 71% of all the freight in America, and employ nearly 6% of the population in the country.
- Truckers move more than 10 billion tons of freight in the US. Majority of freight in the country is transported from one place to another using trucks.
- According to the FMCSA, the number of for-hire carriers in the US as of April 2020 totaled 928,647, out of which private carriers totaled 799,342 and interstate motor carriers totaled 84,763.
- Trucks transported 67.7% of goods between the U.S. and Canada and 83.1% goods between the U.S. and Mexico in 2019.
- Trucking revenue increased to nearly $800 billion in 2018 and is projected to grow 75% by 2026.
- Trucking business is one of the fastest-growing small business industries in the United States.
- Roughly 8 million people were employed in trucking-related jobs as of 2019, with 3.6 million of those being truck drivers.
What are the major industries relying on truckers?
While trucking businesses serve a broad range of businesses, below are the industries that heavily rely on trucking:
- Grocery stores
- Retail stores
- Construction companies
- Water treatment
- Sewage disposal
- Gas station
- Chemical businesses
- Appliance delivery
Steering towards success
If you plan to start a trucking business in today’s market, you need to be mindful of certain factors that will help you stay afloat. The below information will help you to set a minimum amount per mile and stay profitable:
- Cut fuel cost
Fuel cost is a major expense that trucking companies need to tackle efficiently. Eighteen-wheel trucks consume approximately 200 gallons of gas which costs over $1500. This is a steep price to pay.
You must train your drivers to operate in a fuel efficient manner. By reducing idling time, using proper tyres, and instructing them to use smoother roads, you can cut down fuel cost to an extent.
A significant way to reduce fuel costs is to purchase fuel from a Avoid looking at pump prices and instead refill gas in a state that offers fuel at low tax rates. This might mean that the cheapest fuel is in the next state even though the pump price is higher.
- Routine preventive maintenance
Unexpected breakdowns and engine issues can cost you a lot of money. To avoid such issues, always carry out routine preventive maintenance to ensure that the trucks are well-tuned for long-haul drives.
Vehicle breakdowns not only cost money but also time. Always carry out inspection, lubrication, adjustment, cleaning, testing, repair, and/or worn parts replacement before embarking on a long trip. A well maintained vehicle also consumes less fuel and keeps other road users safe.
Businesses no doubt know the importance of complying with federal and state laws. Always stay updated on important tax deadlines like form 2290 and IFTA tax. Timely tax filing and HVUT payment is important to avoid IRS penalties and late payment charges.
Always e-file your form 2290 with an IRS authorized e-filing service provider like eForm2290.com for a fast, safe and highly secure tax filing experience. eForm2290.com also offers free VIN correction, tax calculation and retransmission of rejected returns.
The IRS is quite strict about filing taxes on time. Tax evasion is a crime and your business license could be suspended and you could be prosecuted if you fail to comply with tax legislation.
- Know your cost per mile (CPM)
Fixed costs like truck payments, insurance, and permits cannot be changed. So the best way to improve profit would be to lower your variable costs as much as possible. Your variable costs depend on the number of miles you drive.
Ensure that you take the shortest route and reduce truck idle time. Check your trucks regularly and fix any maintenance issues before they lead to unexpected expenses.
Think of the below equation every time you want to keep your costs in check:
Revenue per mile - Cost per mile = Gross revenue - Tax = Net profit
- Maintain an efficient back office
Build an efficient back office with seasoned administration, and support personnel will help you streamline and manage your business efficiently. When you supervise fleet routes, manage fuel cost and dispatch tools regularly, you can improve your profit margin and control costs.
You can also hire a dispatcher to run your back office for you. Spend ample time researching different dispatchers available and choose a dispatcher who can grow your business. So be extra careful when you choose your dispatcher.
Revenue per mile: Amount you earn for every mile on the road
Cost per mile: Amount you spend per mile
Gross revenue: Remaining amount when you subtract your expenditure from your earnings per mile
Net profit: Money you make after all your tax deductions from the gross revenue
Like any other industry, the trucking industry in the US goes through its own ups and downs. But being a multimillion dollar sector, you can easily make profit given the fact that you have a strong strategy and planning in place. For tax compliance, you can always rely on eForm2290.com to ensure that you are on the safe side of the law.