In the freight and trucking business, no two days are the same. There are constant fluctuations in pricing, shipping, and more that force you to stay on your toes.
Because of the constant changes in this industry, fright business owners tend to neglect business planning, or even making goals.
Although it may seem as if there are no concrete ways to gain profits in this industry, there are a few keys to profitability.
3 Keys to Profitability in the Freight Industry
1. Pricing for Profits
Because the freight industry is constantly changing, it is important to price for profitability. Just as no two days are the same, no two clients are the same – so don’t price them the same. Each assignment or order should be analyzed to assess the likely costs and length of time required for completion.
It is important to play it conservative during your assessment. Although some unexpected expenses can happen, those shouldn’t affect the pricing. Those unexpected expenses should be factored into the profit margin to ensure the company’s liquidity – even if the worst were to occur.
When assessing your expenses, consider the following:
- Labor Costs
- Fuel Costs
- Vehicle Maintenance Costs
- Fees for Licenses
- Administrative Costs
- Lease, Mortgage, or Rental Costs
- Liability and Insurance Costs
- Monthly Vehicle Costs
By considering these costs, this will act as the basis of where your pricing should be for each individual order.
2. Maximize Efficiency
In trucking, there are many ways to increase efficiencies. One of the easiest ways for your freight business to increase profits and efficiencies is to always scour for more jobs. While your drivers are out, check to see if there are any jobs in their path. In some cases, drivers may be able to pick up a load of freight near the drop off or delivery destination and complete a job in a nearby location.
This can increase your efficiencies and bring your business more profits. Just remember, an empty truck is bringing your business zero profits.
It is important that both you and your drivers understand the capacity of their truck. If you send out your driver with a full truck – they must know that they cannot pick up any orders on the way. Overbooking your truck is the easiest way to make customers upset and tarnish the reputation of your business.
3. Stabilize Cash Flow with Freight Factoring
Unfortunately, one thing that is consistent about the freight business is inconsistent cash flow. Clients are notorious for being late on their invoices. Sometimes, it takes clients anywhere from 30, 60, to 90 days to fulfill payments – causing major cash shortages for your business. With poor cash flow, your business is less likely to be able to grow.
Stabilizing your freight business’s cash flow is easier than you might think. One simple solution is freight factoring. With freight factoring, a factoring company will purchase your business’s outstanding invoices and advance you up to 96% of its total with low rates.
Freight factoring shouldn’t be compared to a loan, as you are getting the money that is already owed to your business – not taking on a monetary loan. This helps keep your business’s credit safe, and gives you the ability to quickly build a cash reserve and stabilize your cash flow.