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– So today we’re going to talk about
the pains of small carriers.
Are you familiar with that subject?
– Oh, very, very familiar with that subject.
I once experienced all the pains
that a small carrier goes through.
– Well, great. I’m glad we’ll be able
to have a good conversation then.
So first off,
why is it hard for small carriers to scale?
What are the struggles that they face?
– So, before I jump into that,
I’ll give you a little stat
about the American trucking industry
and how a small carrier or trucking
company fits in there.
So, according to the statistic,
90% of the carriers
in the American trucking industry
operate six trucks or less.
Six trucks or less.
– So, there are a huge, large
amount of companies, but
their capacities of trucks
may be less.
So that gives you, like,
why they stay at only six trucks.
Why are they not growing from there?
So, and then…
how people start a trucking business,
what the transition is.
So, initially most of these small
trucking companies, in our case as well
you start as a truck driver
you become an independent
contractor or owner/operator
maybe get your own
licenses and authorities
and then you
buy another couple of trucks
and start operating
so that’s how
most of the small trucking companies
from my experience.
the real challenges start when they scale up
to like five or six trucks.
So there are three challenges laid out
back office support.
So it is very hard for
a small trucking company to hire
One is the salaries
and second is that quality people
don’t want to work for a smaller
company, you know.
They want to
you know, grow their careers.
Then they have options to work for
a larger company, definitely,
they are going to go there.
There is no structure in the organization
they’re not able to provide good
customer service to their customers.
And the second reason is poor
What I mean with that is
they don’t have proper tools or softwares
that they can use
to manage their trucking company.
they don’t have access to them.
They don’t know about them.
And second is
they could be very expensive.
There’s some that are cheaper,
but they don’t do
entire job that they’re looking for.
And what ends up happening
they keep managing their trucking business
with manual paperwork.
That could be spreadsheets, notebooks
and when it comes to manual paperwork,
it’s very easy to
license or registration deadlines
which can cause a small carrier
huge fines and penalties
and compliance ratings.
And second is, if you
miss out on a reimbursement claim
to your customer,
that can cost hundreds of dollars.
And the third reason is
their capacity of trucks.
Since small trucking companies only manage
you know, anywhere from 1 to 5
to 10 trucks,
it is very hard for them to do business
with the larger customers
because larger customers tend to work with
trucking companies that have
a larger capacity of trucks,
and they know they’re managed with a good,
a good back office staff.
So the larger trucking companies
provide better customer service
and their people are dedicated to
a particular role,
whereas in a small trucking company,
one guy is jack of all trades.
He is doing equipment maintenance,
answering phone calls,
booking loads, billing everything.
So, the customers are well aware of that
so they try to work with the
larger trucking companies.
And, for small trucking companies,
what ends up happening is,
mostly they become subcontractors
of a larger company.
Then the larger trucking companies
are taking another 5-10% of commission
on top of what they are getting from customers.
So what is the solution for these small
carriers? How do they scale up
and grow their business?
– So stats show that 85% of small
trucking companies close within two years.
– Because of the very reasons I pointed out
and of the 15% that scale up, they
have to be really, really good
with their paperwork.
They have to be really involved,
and may not think of too much profit
in the first
couple of years, few years.
Just, you know, spend
have proper guidance
maybe chat with the attorneys
outsource a lot of their work.
Outsource compliance, outsource billing.
And focus in on only what you’re good at.
Maybe, don’t look for higher profit margins.
Ask for outside help and
those are some of the reasons that I can think of
that can help a small trucking
company to scale
and don’t try to expand too much.
Just get five trucks,
manage them well.