The trucking business is very profitable. But initially, you might face some challenges to increase profitability as it is a competitive market. However, there are certain steps you can take to increase your profitability.
But before that, you need to understand how your business works and what your customers want. Also, you have to know all the important numbers. Understanding the basics will help you to make better decisions.
Once you know all the necessary things mentioned, you can scale up your business to increase profitability. To do that, the following tips below will help you accordingly.
1. Reduce Idle Duration
Idle time in trucking is nothing but simply burning your money. The truck consumes 0.8 gallons of fuel hourly on average, based on the size.
And with current fuel prices, that is simply ridiculous. There will be some inevitable idle time. This is fine, but optimizing for reducing as much idling as possible will save you money and increase profitability.
2. Change Driving Habits
You can also save money on fuel by adjusting your and your fleet’s driving habits. Aggressive driving can eat up a lot of fuel. Same with frequent braking and speeding. So, if you are driving, ensure you are not certain things that can burn more fuel.
Moreover, if you are hiring drivers, then make sure you are getting the most experienced ones. Highly experienced drivers might charge a bit high, but your truck will be in good hands, and you will save a good amount of money.
3. Save Money on Fuel
Saving fuel by tweaking driving habits and reducing idling time is one thing. But buying fuel cheaper is completely another thing. Use fuel cards! Running a trucking business without a fuel card is a waste.
Moreover, many stops around the country give discounts if you have a fuel card. Make sure you compare the benefits before choosing a fuel card program, though.
4. Offer a Wide Range of Services
Diversifying your revenue streams is another way to increase the profitability of your business. It also allows you to charge more for a really specific niche service depending on the demand for that particular service.
However, you must invest in new equipment to offer new services. And that means more capital costs. Therefore, research whether the service you want to offer is actually viable.
You can get a practical trucking business guide to enhance your knowledge about the necessary tools to manage the finances of your trucking business and more.
5. Do Regular Truck Maintenance
Your trucks are the lifeblood of your business. This is why preventive maintenance will save you money in the long run. Trucks in your fleet will break down less, meaning less idle time and towing.
Modern trucks also come with handy diagnostic tools that let you know there is a problem before it becomes one. Also, do not forget to get insurance for your vehicles. In that case, hotshot truck insurance you can try. With the insurance, you can ensure not to lose money if your truck falls into an accident.
6. Use the Right Tires
High-quality tires can also reduce costs and improve profitability. Tires work optimally when they are inflated properly. It reduces friction. Look up what your tire manufacturer recommends.
Additionally, use low-rolling resistance tires, also known as LRR tires. These produce less friction and can reduce fuel consumption by up to 3%. Over time, the savings can add up.
7. Work Closely With Shippers
Cut down the middleman and work with shippers directly. As a result, you do not have to pay the broker fees.
Brokers help find steady work. However, if you can hunt for clients yourself and do some business development, you do not need them. Cutting out the broker fee is also great for small businesses already tight on cash.
8. Reduce DeadHead Miles
In the trucking business, deadhead miles are your fleet’s time driving without a payload. This time is pure overhead. You are simply burning fuel and costing yourself money without generating revenue.
Reduce deadhead miles by taking up small jobs between other large hauls. To make getting these runs between your main jobs easier, you can also offer services at a lower price.
9. Reach More Customers
The best way to increase profitability is to get more customers. This will get you more cash inflow and increase profitability.
You can use longboards and even brokers to get more customers. To increase your customers, you need to put yourself out there. Also, you can take help from technology, mostly digital marketing. You can simply hire professional SEO experts to market your business.
10. Improve Your Route
Planning your route can also reduce fuel costs by choosing the most efficient path. GPS or routing software lets you do this easily. Moreover, truckers now have a ton of advanced technology that increases efficiency.
Moreover, it will help you deliver the payload faster. Which means you can start the next job quicker.
11. Minimize Turnover
Finding new drivers and training them is very costly. This is why reducing employee turnover is another great way to reduce costs and increase profits.
It is getting harder and harder to reduce driver turnover for trucking companies, though. Here are a few steps to reduce driver turnover:
- Increase pay
- Give more benefits
- Provide opportunities for growth
- Give adequate training
- Create a healthy company culture
- Give them the tools they need to their job properly
12. Increase Your Rate Per Mile
You can only go so far to save costs and increase operational efficiency. As your business grows, you need to consider increasing your cash inflow.
One way of doing this is, of course, by increasing your rates. It will give you more revenue per trip. If you provide a good service, it is also easier to negotiate a more favorable rate from your customers.
13. Do Not Rely on Just Seasonal Work
Always aim to have work through the year. If you have a handful of customers that become very active during specific seasons, that is great. You can rely on this burst of cash inflow in those seasons.
However, what do you do for the rest of the year? Try to pick up both seasonal and non-seasonal work. This way, you will generate revenue throughout the year.
14. Always Follow Regulations
If you have been in the trucking business for a while, you already know how regulated it is. Make sure you strictly follow regulations. If you are unaware of all the regulations, read up and stay up-to-date.
Regulation violations can be very costly. And if you are hit with a fine, the cash flow for that quarter or even year can be ruined.
15. Use Non-recourse Invoice Factoring
Non-recourse invoice factoring reduces the risk of debt. It ensures that you generate cash flow which means your books are positive. Also, this makes it a great strategy for reducing risk and improving profitability.
Debt collection can also be very expensive. And sometimes your customers might delay payment, or worse, outright fail to pay. And that means losses. This burden can be taken care of with non-recourse invoice factoring.
The more efficient you make your business, the more profitable it will be. Therefore, proper management is also crucial.
Other than that, the above tips will come in handy for improving profitability no matter the size of your trucking business.