Creating a fleet is no small task. With careful pre-planning and inside knowledge, drivers can grow a fleet and build a successful business. In order to do so they need to prepare their personal and business finances, arrange loads, prepare for maintenance costs, find the right talent, plan a business structure, and get the right truck(s). By taking the proper steps, you too can start to build your own small fleet trucking company. Here are some of the first steps to take:
Know your credit score
It is important that every business owner understands what their credit score is, especially if they are looking to get a loan to grow their business. Some things that can impact credit scores are the amount of debt you owe, and if your payments have been made in a timely (or not timely) manner. Many businesses have an entity with an Employer Identification Number (EIN) that they have taken time to build credit for the business. One can get a business line of credit or opt to get a business credit card, but keep in mind that the owner’s personal credit will impact the business credit as well. Owners can check credit once a year for free using https://www.annualcreditreport.com, which checks Transunion, Experian, and Equifax. If there is an entity set up, check with Dunn & Bradstreet to see the business credit score. If you need some great tips on how to boost your credit rating, check out this article.
Know where to get loads
Another thing to be prepared for is where to get your loads. Owners either operate under another carrier's authority, or set up their own authority. Loads can be self-brokered from boards online, but be careful of the pay, as it is often times lower on the online boards compared to brokered loads from carriers, etc.
Know how to collect the check
When creating their own authority owners will want to make sure that they have the ability to operate for up to ninety days without payment. Many self-brokered loads can have the potential of lengthy time between receiving pay. There are several payment services that will allow you to be paid for loads after completion, but be careful as many of these services will take a percentage of the payment.
Know what to do when a truck goes down
When operating several trucks, it is a good idea to make sure that fixed costs are covered for the fleet in the event that one or more of the trucks are sidelined due to maintenance or staffing issues. If there are loan or insurance payments, they will have to cover all fixed costs until that truck is back on the road. This is part of the reason that many small fleet owners often decide to have between one and five trucks; because if there are five trucks there is a good chance that any expenses for a downed truck is covered. In order to protect themselves, owners should be sure to plan ahead for covering fixed costs in the case of a sidelined truck.
Know how to find drivers
Owners can't drive more than one truck at a time, so how do they find another driver that they can trust to take the wheel? How do owners make sure that they are taking care of their investment? Often times it’s best to find a driver before finding a truck, and maybe even bring them on as a co-driver first. This gives them a good idea on how they drive, and what working together will be like. It also gives owners the opportunity to teach and correct any issues, before putting someone behind the wheel of one of their trucks.
Know how to pay drivers
It is recommended to decide ahead of time if drivers will be independent contractors or employees for tax purposes. Referring to guidelines set by the IRS can help. Publication 1779 outlines what the IRS looks at to determine whether or not a driver is an employee. You can find some great guidelines for how to set up payroll for employees by reading this article.
If your drivers are employees, owners are required to withhold taxes from their paycheck and pay part of their Social Security, Medicare, and FUTA (unemployment taxes). ATBS can assist with handling payroll needs.
Independent Sub-Contractor Drivers
If the driver is an independent contractor, you will need to issue a Form 1099 and 1096 at the end of the year. Independent contractors will be responsible for their own taxes at the end of the year, and need to pay quarterly tax estimates to avoid penalties. You will want to use voided checks or a handwritten receipt to document payments to these drivers to have accurate records at the end of the year. Consider if you will pay drivers by mile, or percentage of the load – as well as if payment will be calculated before or after truck expenses are taken out.
Know how to create an entity
Many truck stops have signs about forming an entity, but what does that actually mean, and is it really necessary? Every state has different rules as to how an entity is required to run, but owners are typically better off by forming entities where their permanent home and tax address is located. There are several options as to what type of entity can be formed such as a Partnership, S Corporation, C Corporation, or an LLC. ATBS can assist in forming an entity that is right for your business. This article breaks down the different business structures, and goes into more detail about the benefits each type of entity can provide.
Know where to look when buying trucks
There are many places to find trucks such as http://www.truckpaper.com, which lists trucks for sale across the nation. This website provides a good idea of what is currently available in the market, and what current prices are. When considering purchasing additional trucks, check that your credit is in order to ensure you have enough money for a down payment.
Know what to look for when leasing trucks
Often time-leased trucks will come at a premium, but if an owner has poor credit this may be a viable option for expanding their fleet. Be sure to check the terms of the lease, and ask questions. Can you add upgrades to the truck, such as an APU? What type of lease is it? In the event that operations stop, can you walk away from the lease? If so, are there penalties?
Overall, there are many questions that will need to be answered when growing a one-truck business into a fleet. Take the time to learn best practices, and ensure you will be able to run the most efficient and profitable fleet possible. A successful business is built on good planning and education.