8 Steps to Starting a Successful Transport Business
Modern transportation businesses run the gamut from personal dispatch and moving and storage services, to large scale freight operations. Depending on your level of interest as a future new business owner, you have plenty of options on the table. In this guide, we’ll illustrate how to plan for and start a transporting company from the ground up.
The category of transportation businesses is broad, which means that you can specialize in one type of business or key area. If you have a specific interest in starting a trucking company, don’t miss our recent post on how to start a truck business.
What Does a Transporting Business Do?
Transport businesses are a type of business that transports goods or passengers from one location to another. They can provide services to individual passengers, other companies or global trade partners. A transport business could specialize in a number of activities, including individual rideshare services, hauling of consumer goods, or international shipping of supplies and products.
Most commonly, a transportation business is categorized by the type of customer base they serve or the type of routine service they provide.
Types of Transport Businesses
For the purpose of this guide, we’ll divide transport businesses into three main categories.
The types of transport businesses are:
- Personal transport: This includes one-on-one services catered to individuals or small groups, including things like taxi services, rideshare opportunities and limousines.
- Local transport: This category serves regional markets by transporting things like livestock, materials, consumer goods and more. The opportunities might be commercial or private, depending on the distributed materials.
- Global transport: Global transport companies encompass aspects of the other categories but on an international scale. International providers may offer sea shipping or air-based delivery of cargo.
Each category might require a unique knowledge of state, federal or even international laws to comply. Based on your interest and expertise, you can plan your next steps accordingly.
8 Steps to Launching Your Transport Company
As you begin to plan how to start a transport business, make sure you pay attention to the things you will need to learn, study and acquire before you launch.
Neglecting any of these important pieces could lead to stress and challenges later on, so it’s important to prioritize setting a strong foundation. Below are eight steps you can take to start your transportation service company.
1. Decide on a Specific Transport Niche
As you begin your transportation business, the first step involves who and what you will serve. You'll need to answer the question, “What niche will I choose?” As mentioned above, there are different categories of transport companies, and you may need to select only one in order to be successful.
The best part about step one is that the possibilities are nearly endless! You can start anything from a bicycle rental company to a logistics corporation, or a medical transport service. The critical element is that you choose one area and learn all that you can about it.
If you’re not sure what to choose, do some research about the supply and demand in your local area. Providing the solution to a specific and relevant need or problem ensures that you’ll have a steady client base when it’s time to open.
2. Establish Your Preferred Business Model
Once you’ve chosen a niche and learned all that you can about it, you’ll need to move into the business model stage. This is the time when you’ll set up your business structure and begin to fill in the operational information about your business.
When it comes to having a specialized business model in place, you have several options.
- Sole proprietorship: In this model, you work as an individual or married couple, but you do not incorporate. Although this offers flexibility, the downside is that any business losses may be assumed on a personal level.
- General or limited liability partnership: In a partnership, you have the opportunity to go into business with others. The differences between general and limited liability partnerships are the ways that each partner assumes the risks, debts or actions of the business as a whole.
- Limited liability company (LLC): If you operate as an LLC, your personal and company information is entirely separate. While this changes your tax status, it does protect you from personal losses based on the company’s performance.
3. Secure a Federal Tax ID Number
One of the first steps in your transportation service journey is setting up as an actual business. This means you need to secure a license from your local or state authorities. Because rules vary by location, you also need to consult your local government to find out how to apply for a business license.
From a federal standpoint, you need to apply for a federal tax ID number, or employer identification number (EIN), before you open for business.
The EIN process is fairly standard, and having this identification number:
- Makes it easier to file quarterly and yearly taxes
- Can protect you or your business from identity theft
- Speeds up the business loan application process
- Establishes business credit early on
4. Apply for Licenses and Permits
When you begin your transportation service, you need to have the right licensure. Why would transport businesses require more permits than other types of companies? The answer is that in many scenarios, you’ll be working with passengers, people and other types of precious cargo.
If you specialize in freight management or operations, the Department of Transportation has a specific list of requirements that you need to follow. This list is mostly based on the weight and size of what you’re hauling.
Within the transportation industry, other types of licenses and permits might include:
- Commercial driver’s license (CDL)
- Commercial vehicle registration for any fleet vehicle
- Fuel carrier licenses
- Heavy load or cargo permits
- Insurance coverage for drivers, passengers or goods
5. Set a Budget and Financial Expectations
Based on the type of transportation business you choose, costs could be minimal or extensive. Running a one-vehicle taxi service is bound to be much cheaper than a full-fledged logistics fleet, but any type of business owner can plan for these costs.
Do you need to obtain a loan to get started? The Small Business Administration is a great resource, and local banks or credit unions can also help. Make sure to have a solid business plan established and on paper, since many lenders will ask to review this plan before considering a new loan application.
It’s also never too early to set financial goals and benchmarks. You need to consider:
- What revenue you need to maintain to clear operating expenses
- How much to invest in supplies, equipment and manpower
- The specific amount of debt your business has in loans or other expenses
- What amount of money you’re willing to invest in marketing and advertising
6. Make Purchases and Build Your Fleet
Choosing the right equipment can set you up for profitability by giving your new business a professional look from day one. Vehicle size and quality matters, especially when you’re transporting goods and materials on behalf of other people. Showing up to a job with a vehicle that’s too small or inadequate (lacking refrigeration, space, etc.) can reflect poorly on your company.
Here are a few things to ponder as you make vehicle purchasing decisions and build your fleet.
- Will you need to transport any passengers?
- How heavy are the materials you’ll be transporting?
- What kind of ground or terrain do you need to cover on an average trip?
- What wear and tear might you need to expect on a regular basis?
- Are there any fuel-efficient or sustainable options to choose from?
Take your time to research the best options based on quality, price and safety. All of these factors are extremely important as you establish your transportation business.
7. Establish Solid Hiring Practices
Your company’s hiring practices might evolve as your organization grows, but you always need to incorporate standard hiring procedures into your business plan. This helps formalize the process and ensures that you’re following local and state rules regarding employment.
Although your list of employees might include you and only a few others to begin, think about ways that your company could grow. In addition to drivers and service providers in the field, what other positions do you need to think about down the line?
These positions might include:
- Office and administrative staff
- A team of maintenance technicians
- Sales and marketing professionals
- Human resources (HR) staff
- Part-time or seasonal employees
8. Keep up with Maintenance and Recertifications
When you own a transportation business, you need to start with the future in mind. Although your supplies, vehicles and fleet might be brand new, long-term usage can affect both safety and quality. How will you keep up with routine maintenance to ensure that your customers don’t experience any gaps in service?
In addition to regular inspections, your company’s certifications and licenses may require renewal at various intervals. To stay compliant with legal requirements, and to keep your business functioning smoothly, you need to make sure that these are always up-to-date.
While it’s easy for the small details to get lost in the shuffle of everyday operations, setting up recurring reminders or putting a specific employee in charge of routine checks can prevent many problems.
Mistakes to Avoid When Starting a Transportation Business
If you follow the above steps, you’ll be better equipped to start a successful transportation business. As always, it’s a good idea to consult with a business or financial adviser as you make crucial decisions that could impact the health and longevity of your business.
Here are a few mistakes to avoid when starting your transportation business:
- Ignoring the rules of neighboring states and locations: As a transportation business, you may naturally need to cross state lines or operate in other jurisdictions. Be sure that you’re aware of the rules and license requirements in every state or place that you conduct business.
- Forgetting to insure every aspect of your business: While it may sound tedious to cover every item you haul, driver you hire or passenger you help, accidents do happen. General liability insurance can fill in gaps in situations where you don’t have a specific policy requirement.
- Failing to incorporate contracts and waivers: Business contracts can guarantee that you receive payment for services rendered. Additionally, these important documents set the tone for what to expect during a job or project. If you serve passengers, waivers can protect you legally in the event of a misunderstanding or accident.
Start Your Transportation Business with Ease
We hope that this post has allowed you to envision a bigger and brighter future for your transportation business or service. In this industry, it’s entirely possible to start small and scale up—even going so far as to offer global services to customers around the world.
No matter where or how you begin, we invite you to dream up an incredible future for your transportation business. Using some of the tips and practical steps in this guide, you’ll be on your way to establishing a strong foundation. As you use this information, continue to be proactive with new opportunities for growth, learning and leadership.