Running an owner-operator business is not as easy as a walk to the park. There’s the fact that you are investing your hard-earned cash without knowing if your hard work will ever pay off. There are many regulations you ought to comply with, along with the many costs of running the business. Your competitors are always on your tail, looking for ways to outrun you. Don’t forget about the other hurdles you are likely to face daily.
If you plan to start your own owner-operator business, here are among the top challenges you are likely to face these days.
When you first start your trucking business, it can be tricky to get loads for your brand. Businesses already have their go-to owner-operator. With the amount of competition present in today’s market, it can be difficult to get your first clients and retain their trust.
Many truckers end up reducing their rate to make money. Some clients will only end up using your services for a single job. You might even find that sometimes, the number of businesses needing trucking services is far too few for the amount of competition present.
What you can do is to consider other options, including registering as a government contractor. You can also partner with other business that is already under a government contract to score some loads.
Aside from promotional marketing both online and offline, it helps to create your own customer lead list. Check local industrial parks and look for businesses that may need long or short-term hauls. Seasonal businesses are also a good way to cater to brands that only require your services at certain times of the year.
Negative Cash Flow
Like any other business type, there are many financial risks you may encounter. For one, there’s negative cash flow. This happens when cash goes out faster than it is coming n.
You require cash to pay for both recurring and unexpected expenses. You may have consistent customers needing your services. But unlike other businesses, you don’t get paid immediately after rendering your services.
It is common to give your clients up to 60 days of credit. This means you are essentially providing your services only to receive your payment two months after. To cover the overhead costs, some owner-operators acquire a bank loan.
There are two problems associated with using a bank loan to pay for your overheads. For one, you will be paying a high interest fee which will definitely cost money. Second, you will need to apply and wait for approval before you can access the funds.
One good way to solve negative cash flow issues is through freight factoring. This is a financial tool that involves selling invoices at a discount in exchange for immediate cash. This way, the factoring company will be the one waiting for the payment while you enjoy the funds right away.
It also helps if you invest in trucker accounting services. This way, the pros can help you identify the areas where you are losing and wasting money, reduce expenses, and identify what positive changes you can invest in to turn your cash flow around. You can even optimize your tax relief, enjoy more accurate books, and leverage better financial forecasting to boost your trucking brand’s success.
It also helps you do enough research before allowing a client not to pay in cash. With a customer credit check, you can avoid working with clients who often fail to pay their dues on time. If you ever choose to work for them despite their poor credit history, you can create a payment scheme with a higher interest rate.
The trucking industry faces numerous backlashes due to its continuous environmental impact. Your fossil fuel and gas emissions are among the top causes of greenhouse gases. Even if your services are essential, that is not enough reason to continue embracing practices that are bad for the environment.
Making your operations more eco-friendly can help you entice other businesses that are already into sustainable habits. You can conserve energy, enjoy better savings, and exercise your corporate social responsibility at the same time.
Here are a few ways you can turn your owner-operator business into an eco-friendly one.
- Figure out your route to avoid wasting time and gas
- Fill up your vehicles with fuel early in the morning
- Maintain normal speed when driving
- Reduce your paper wastes
- Encourage drivers to recycle
- Never ignore preventive truck maintenance
Running a trucking business can be a satisfying venture. There will be challenges that will test your resilience. Knowing how to handle these beforehand will enable you to prepare for them in the future.