The transition from a company driver to an owner-operator is often a great way to increase your earnings. Owner-operators have the flexibility and freedom to pursue new possibilities and increase productivity. But just how much does it cost to establish a trucking company?
The cost of starting a trucking company, excluding equipment, ranges from about $6,000 to $15,000. This figure includes the fees of license registration and paperwork and state-specific taxes. By including equipment, the cost of a trucking company could start from about $100,000 and rise to as high as $5 million.
When setting up a trucking company, it’s critical to understand the financial aspects of the business and all of the major expenses associated with starting one.
Starting A Trucking Company – Cost Breakdown
The business scale determines the startup capital necessary to establish a trucking company. A large-scale firm would incur greater expenditures than a small-scale owner-operator business since more cash would be invested in extra licenses, maintenance, and procurement.
Nevertheless, the processes for establishing both firms are comparable. The following is a list of essential expenditures for all truck business startups.
1. Commercial Drivers License
Truckers who switch from business employees to owner-operators will already have a CDL. However, obtaining a commercial driver’s license is required to operate large trucks for new truckers without one.
In the U.S, this license is issued by the state government upon completion of the CDL training school course, which incorporates a written exam, supervised driving, and skills test. While the cost of securing a CDL may differ from state to state, it generally costs anything from $3,000 to $10,000.
Additional costs may also piggyback on the CDL. For example, a HAZMAT endorsement, which allows the shipment of hazardous chemicals, typically costs $100, plus an extra $87 for a transport security administration (TSA) check. Other endorsements often cost an average of $14.
2. Business Registration
Your trucking business needs to be registered before you can start operations. You must file the appropriate documentation with the state where you wish to operate and select an available business name.
Furthermore, your business entity is also very important. It is recommended that new enterprises be formed as a Limited Liability Company (LLC) to segregate personal assets from corporate obligations better. The average fee for a business entity filed under a state is around $127.
Overall, the average cost of fully registering your firm is $500.
3. USDOT and MC Number
The USDOT and MC numbers are unique identifiers the Federal Motor Carrier Administration assigns to enterprises that conduct interstate commerce. You can obtain these numbers on the FMCSA website. It costs $300 and takes around six weeks to get approved.
4. Procurement
Considering procurement plans is critical in effectively running a trucking business. You should make the following considerations in developing procurement plans.
● Trucks
The heart of a trucking company is its trucks. When starting your own business, you must decide on the type and number of trucks you need. You must also choose how you wish to procure this asset. You could buy your trucks new or used, or lease them.
On average, a straight-up purchase would set you back between $125,000 and $150,000 for a new truck. Used trucks typically go for about $45,000 to $100,000. The average cost of leasing a truck is about $1,600 to $2,000 monthly.
● Trailer
You also need a trailer before you can begin operations. And just like the trucks, trailers have various procurement options. For owner-operators on a lease, the leasing company could offer a trailer as part of the contract.
Purchasing a trailer would, however, incur a cost of about $25,000 to $50,000
5. Insurance
Insurance coverage is one of the most significant costs incurred in starting a trucking company. Insurance costs are determined by considering several factors.
- Your procurement option; purchased or leased
- The age of your equipment
- Type of cargo
- Truck’s location.
From this list, procurement options are critical considerations. Leasing companies usually offer primary liability insurance on leased trucks. This is only active when you’re found guilty in an accident, and it covers injuries and damages to victims and properties. To insure yourself and your properties, you would want to include physical damage coverage and non-trucking insurance, which cost about $3,000 to $5,000 yearly.
Also, owning your own truck increases the average annual insurance cost to about $8,000 to $12,500. The high cost results from you having to bear all the financial responsibilities of different insurance options.
Additional Costs of Starting A Trucking Company
Aside from those compulsory costs, other additional charges could also be induced, depending on how your company would be operating. Some of these costs include;
1. BOC-3 Forms
This form proves that you’re legally permitted to operate commercially in each state you currently drive. It is an essential permit for interstate business and typically costs about $20 to $40.
2. IRP Registration
You should file the International Registration Plan if you intend to carry out cross-country operations. Based on your mileage percent in each state, the average annual cost of an IRP is $1,700.
3. HVUT
To operate a heavy vehicle of about 55,000 pounds on public highways, you must pay a heavy vehicle use tax. Your HVUT is evaluated annually by computing the weight of your truck, trailer and cargo. The highest HVUT fee is $550 annually.
Conclusion
There are many costs associated with starting a trucking business. Nevertheless, the freedom, flexibility and productivity that come with running your business make it a worthwhile investment.
By identifying the foremost costs of a truck business, this article prepares you for the financial aspect of setting up your own company. It is, however, important to know that these are average costs and would vary depending on different conditions.