We’ll be covering the basics of starting and maintaining a long-term shipping and logistics company. First, let’s look at the business model.
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What does a logistics company do?
There are many types of logistics and transport businesses. They can range from a small moving company with two people to a large trucking business. They all share one thing: they transport goods and people from one place to the next.
This category includes three types of businesses:
- Transport by personal: One-to-1 services such as taxi, ride-sharing, and limousine services. Individuals or small groups can use personal transport.
- Transport local: Transports materials within one region. This could be anything, from livestock to construction materials.
- Transport worldwide: This is the international contact for either one of these categories. This could be an airline that carries people or a shipping company that carries cargo.
- The category you fall into depends on your resources, the number of people you are able to hire, and how much funding you have.
Start a business in transport and logistics
The barrier to entry for a local business is low if you are just starting out. You only need a safe, appropriate vehicle to get started in this business.
Internationally, the situation becomes more complicated because there are many laws and regulations. It will be necessary to acquire and maintain a fleet of vehicles as well as to hire staff to manage your business at that scale.
You need to plan and make sure you consider all aspects before you start. First, decide what type of transport business you want to start.
You can be a local courier or an international shipping mogol. The first step in starting a business in transport and logistics is to choose the type of business you want.
1. Find your niche
First, you need to decide what role your company will play. You have the option to choose one or more transport niches. To minimize overhead costs, it may be better to pick one niche at the beginning.
You don’t have to be boring! Transport can be any activity that involves moving people or goods between two places. It can take many forms.
If you are unsure of where to begin, it is worth researching the different healthcare logistics companies in your local area. Find out the local supply and demand dynamics. Is there a large number of hospitals close to you? Start a business in medical transportation. Are you located in a popular tourist area? Perhaps a bicycle rental business is the best.
Your job is to fulfill a need, just like any other business. You don’t need to have an idea of what niche you want to be in, but you should look for a gap in the market that you can fill. Start by determining the most in-demand type of transportation in your area. Then work backward.
Entrepreneurs in the transport industry make a common mistake: they start too soon, thinking that their customers will cover any overhead costs. If you have to pay unexpected expenses, this approach could get you in trouble.
Instead, make a detailed plan of your business finances before you begin. Ask yourself these questions:
How you will secure startup capital
- What are the expenses you will have to pay for transport/logistics (fees and tolls, etc.)?
- What the operating and maintenance costs will be for your vehicle or vehicles
- How much your marketing costs will rise with your business’ growth.
- How much it will cost for your vehicle to be stored in a safe place when not in use
- How much you will pay your staff
- What amount you will need to spend on training your staff, if any
- How much revenue you must generate to cover the expenses you have calculated
- How much will ongoing vehicle maintenance and recertifications cost?
It will save you money and help you estimate the amount of startup capital required to launch your business. A plan will help you appear more professional when applying for capital.
Now that you have an idea of the cost of your transport business, it’s time to come up with your image. That includes your business’s name, logo, colors, and message.
What image do you want to project about your business? Have fun! Professionalism? You can be tough! Name and image are important. From the very first contact, people should be able to tell you what you stand for.
Your choice of business entity can also impact the name you choose, so it is a good idea to start with one. Your business will fall under one of these three categories:
- Sole proprietorship: This is the best option if you are a single person or married couple, and you keep things small. This is the most popular type of business entity in America. This model has a downside: you are responsible for all losses due to lawsuits or debts.
- Limited or general liability partnership (LLP).The partners will take on different risk levels in each type of partnership. A general partnership may expose you to greater legal liability than a limited liability partnership. Each partner takes on equal risk. An LLP protects both you and your business partners from personal liability for the obligations and debts of the business.
- Limited Liability Company (LLC).The owners of anLLCYou are not personally responsible for company debts or obligations. This type of business entity has the option to choose whether or not they want to be taxed like a corporation.
- If you decide to be sole proprietor, you will need to register a “doing company as (DBA).” name. You can also use your name.
4. Your business plan should be written
Although this step requires some extra research and effort it is well worth it. A business plan can help you to narrow down your venture details and make it easier for you to apply later for funding.
Either you can create your business plan from scratch or use a template. The Small Business Association (SBA) has a detailed template page with examples, and that’s just one of many resources available to you.
Include these elements in your business plan:
- A complete overview of your business
- Market analysis
- Your marketing plan
- Financial projections and a financial plan
Planning ahead will save you money and allow you to manage your budget. An extensive market analysis will help you determine if your transport business is needed.
5. Be aware of red tape
Once you have your business plan ready to go, and you have an idea of how your company will look like, it’s time to apply for all licenses and permits necessary to run it. You will need different rules depending on where you live, so make sure to check with your local government for the right paperwork.
Federal tax ID, or EIN
When you set up your business, you will need a federal tax ID (or employer ID number) to do so. The IRS has a rundown of the process on its page and links to start. Before you open your doors, make sure to get one.
A business’ EIN can provide benefits beyond just making it official.
- Easy quarterly and annual tax filing
- Protecting you and your business against identity theft
- Accelerating the process of applying for a loan for business
- Credit for business establishment
- Permits and licenses
Transport and logistics companies transport people and valuable cargo. This industry requires a lot of licensing and permits. Depending on the type of cargo you intend to transport, which licenses and permits you will need will vary.
For example, if you plan to haul freight, you’ll need to be sure you abide by the Department of Transportation’s requirements. These permitting rules are for cargo and focus on the weight and size of what you will be transporting.
Commercial vehicle registration is required for all fleet vehicles that you purchase. Your drivers will also need to have their commercial driver’s license (CDL), in order to fly them. You might also need the following permits:
- Liquid fuel carrier licenses
- Permits for heavy loads
- You can get insurance coverage for passengers, drivers, and cargo.
- Because requirements vary depending on location and industry, it is a good idea to speak with a specialist in your field to ensure you have covered everything.
After you have cleared through the legal hoops, it is time to get your finances moving.
A separate bank account and credit line for your business can help you better manage your finances and make it easier when it comes to filing taxes. It will also build credit.
You may be able to start your own one-vehicle company if you have the necessary resources. You may just need to save enough money to buy what you want.
You’ll need more capital if you plan to go bigger. You have several options to obtain funding in this situation.
- A small business loan from an entity like the SBA
- A bank will lend you a business loan
- Use your business credit card
- No matter which option you choose to go with, be sure to have a plan for how you will pay it back.
7. Your fleet is built
Your fleet can now be built, whether it is cars, vans, or scooters. Your vehicles should be in good shape and professional looking. They are an extension of your brand, and will likely be the first thing that people see when they deal with you. Don’t skimp on quality.
You should also make sure you get the right vehicle for your job. If you are renting to mountain bikers, don’t purchase a fleet of streetcars or street cruisers. You should ensure that you have the right vehicle to transport your cargo if you need it.
Ask questions when buying your vehicle
- This will need to be able to transport passengers.
- What is the weight limit?
- What terrain can these vehicles be driven on regularly?
- How much wear and tear can you expect?
- What eco-friendly options are there?
Two options are usually available for buying fleet vehicles: installment sales or financial lease/extended rentals.
8. Hire staff
It will be easier to hire people if you establish a standard hiring process early. While your hiring process might evolve as you grow, it is important to establish a consistent foundation.
When deciding who to hire, consider where you are now and where you want to go. As you grow, ask yourself what jobs you might need. You might consider HR staff, maintenance techs, or marketers in addition to more drivers.
Hire only qualified people who have the right training and license to work with you. You must have sufficient funds to pay them well as cover any expenses such as taxes and benefits. You should take the time to find people qualified for your company.
9. Promote your business
Once you have everything in place, it’s time to get the word out. Market yourself via social media, build a proper website, and complete your business listings on sites like Google and Yellow Pages.
If you are offered opportunities, ensure they’re worthwhile. Do not accept every job you are offered. Instead, choose the right opportunities.
Communicate well with others and let them know if they have any packages. If they are satisfied, encourage them to leave positive reviews. Your business will be promoted by word of mouth if you provide great customer service.