This is the most asked question which we usually get from the people who are starting out with their hotshot trucking business. So, to be honest it is almost impossible to give an appropriate answer.
If you ask this same question from hotshot owners, I bet you will see two different sides of the question. So to cut short, it mainly depends on the individual running the hotshot trucking business.
It’s not about the gun. It’s the man behind the gun
Talking of numbers, the gross is $150,000 to $180,000 annually per average for best hotshot trucking setups. Low end setups fall in the lower end of the spectrum.
In this guide, You’ll learn:
- The demand for hotshot trucking
- How much hotshot loads pays
- Operating costs in hotshot trucking
- What is the cost of Hot Shot Truck Insurances
- Poor Business Management
- Tips for starting and growing a profitable hotshot trucking business
Hotshots are in high demand
The transportation of freight is an important industry in the USA. It is also a vital part of the economy. You can google the trucking industry outlook or truck driver outlook. You will see that freight volume is increasing and that the driver shortage continues to grow.
The hotshot trucking industry is one of the most lucrative and profitable in the United States. U.S. $732.3 billion in gross freight revenue (primary shipment only) from trucking. This represents 80.4% of 2020’s freight bill.
So fairly looking at the stats, we can see a demand for hotshots
What is the demand for your area?
To find out the load ratio/density for your area, you can look at several places. The rates can also be found. Let’s spy! Check out the DAT statistics. It is important to live in an area where the truck loads are at least 18 for each truck. You will have the most negotiating power by paying higher rates.
What is the average salary for hotshot loads?
Hotshots move what is known as LTL (less than a truckload). Most of you have an open-deck trailer or a flatbed. We’ll be focusing on that type of equipment.
The average LTL load is $1.47 per mile, according to the ballpark rate.
“Rates can vary depending on the season and region”
Hotshots are paid a % of semi-rate
The freight season affects the RPM (rates-per-mile). Rates will fluctuate between $1.40 and $2.00+ throughout the year.
This is an estimation. Let’s not go overboard. To calculate your profits, estimate your revenue at $1.50 per mile. (profits!)
How many miles would you like to be paid?
If you are serious about your work and don’t just dream about it, you can calculate your weekly mileage at 2,500.
According to the HOS regulations (hours of service), you can drive up to 55 hours per week, and at 60 MPH you would drive 3300 miles per week.
Let’s not forget to add some cushion. Do not count chickens before they hatch. Spend 2,500 miles. Anything beyond that is a problem.
Rate per miles x Miles driven per week
If you drive 2,500 miles per week at $1.50/mile, your gross revenue is $3,750
What are the operating costs?
It is important to understand your fuel consumption. Our carriers drive Ram 3500’s with a gooseneck measuring 40 feet in length. They can carry up to 16,000lbs. In areas without mountains, they get about 10 MPG when loaded. It will drop to 8 MPG if you are in mountain areas.
Your truck’s characteristics and how you drive will determine your MPG.
Let’s say you get 9 MPG. Now let’s see the average diesel price in your freight lane. We will factor in fuel surcharges. But let’s reduce the cost. It’s $2.75 per gallon for 9MPG, and you drive 2,500 miles per week. That’s a cost of around $750 per week.
“We are talking about $750 per week for fuel.”
How many days will you live in your truck for?
The lifestyle is not for everyone, let’s be honest. There is no place to sleep, cook, or wash your clothes, unlike semi-tractors. You will park at the truck stops right next to big-brother semi trucks.
Also, you will shower at the truck stop. Make sure to brush your teeth. Take a deep breath and get out of the truck.
Test out your endurance if you can. I am not trying to convince you. You need to be honest with yourself. Truck drivers are in high demand, but there is a turnover. It doesn’t matter if you earn $16,000 per month. You’ll feel it.
What is the cost of Hot Shot Trucking Insurance?
Hotshot trucker typically have insurance policies that cost between $7,000 and $12,000 annually. Hotshot insurance costs an average of $10,284. This price is based upon 1 truck and 1 trailer, and the fact that you are new to the business.
The premium you pay will vary depending on many factors. You should shop around as quotes can differ by thousands.
There are many factors that affect the cost of insurance for hotshot truckers:
- Your truck and trailer’s value
- Your CDL experience
- What are you hauling?
- Limits and deductible
- What coverages do you require?
- It all depends on the insurance agent you use and the companies they work with.
To lower your trucking insurance costs, it is a good idea to talk to several agents before you choose the agent who provides the coverage that you require to protect your livelihood.
Reasons Why Hotshot Trucking Business Fail To Make Profit
This includes those with the authority to make decisions on their own and those who lease to businesses. Why do they fail in the first year? We’ll give you five major reasons. When you look at the reasons for failing to make profit, you can adopt a different more proactive strategy and improve your chances of being successful.
1. They don’t have cash to cover emergency expenses
A few hotshots have entered this field by purchasing new trailers and trucks however they have no money left in their accounts. This is a huge error. You must be prepared for any emergency situation because you never know when something will happen to you. There will come occasions when you’ll need additional cash, particularly to pay for maintenance. What happens if you head out on the road without money when two tires go out? Then you’re out of commission and you’re not able to earn any profits since you don’t have enough funds to buy new tires.
Do yourself do yourself a favor. When you begin your own business or lease it to a business, you should have at least $5,000 to $10,000 in money reserves on your bank account. The money you have will provide an extra cushion to get through the rough times when bad things happen. You’ll be able fix the issue and continue to move forward, so you can continue to drop off loads and earn those profits back.
2. The road isn’t ROAD FOR ENOUGH LONG
A few hotshots prefer to stay home on weekends. It’s great when you’re looking to earn enough. However, if you’re looking to earn a lot of money it’s not going to be successful. You must be in the field for three or four weeks at an period of time. You may know people who are able to go home every week, but that number is minuscule. It is important to be flexible and travel for at least three or four weeks to be able to travel wherever your money will take you. There could be a time when you are living in New York one day, you could find yourself in Texas on the following day and the next day, you could be in Alabama someplace. This could make it very difficult to return home each weekend. Make sure you are prepared prior to the time. It is possible to start by committing to two weeks. Don’t return home every weekend in this field. This isn’t going to work.
3. They pick the wrong freight (CHEAP LOADS)
Some truckers who are hot are able to run load for $1.20 to $1.30 for a mile. They believe that’s fine because they still earn some profit. However, if you wish to stay afloat and even prosper in this industry it is essential to stop selling loads that are so low. You should aim to get $2.00, $2.50, or $3.00 per mile. Whatever the amount you want to keep it above $2.00. Therefore, stop buying cheap freight from us. Don’t sell loads for less than $1.20 for a mile, when you are able to. You’ll have to figure it out and join to some reliable brokers. There are many consistent brokers who transport the same type of freight each day. As long as you’re able to stick to them, you’ll to earn profits.
4. They don’t track and control Their Spending
If you’re not careful with your finances, you’ll be in the red quickly. You must know the flow of money and what’s being taken out from your company. If you’re not able to control your costs, then you’ll be in the red very quickly. This is the most likely reason that businesses fail, and this includes the hotshot trucking industry. A lot of truckers will close their doors within their first year due to the fact that they aren’t able to manage their money.
5. Poor Business Management In Hotshot Trucking
Many truckers with high-profile careers are finding it difficult to maintain their businesses. Poor Business Management can have many negative consequences for the company and its employees.
Financial problems, new regulations, and other consequences are just a few of the many. Other than a lack of funds, poor reputation and employment problems can also impact.
Hotshot trucking companies need to stay at the top of their game and always be prepared for new challenges. The industry is constantly changing. This changing environment requires that hotshot truckers adapt. They must know how to start a trucking company. They will have no business if they don’t.
Read more on poor business management in hotshot trucking
Tips For Starting And Growing A Profitable Hotshot Trucking Business
1. FIND YOUR NICHE
You should choose a niche you are able to dominate. It will help you to position yourself as an authority in your niche and virtually eliminate the competition. Choose your niche well, as it will affect the rates you charge, equipment you buy, and freight lanes that you use.
2. DECIDE ON YOUR BUSINESS STRUCTURE
For owner-operators, there are three main types of business structures: a sole proprietorship (limited liability company), an LLC (limited liability corporation) and an S corp. Be mindful of income tax and owner liability before you decide on the business structure that is best for your company. Each structure can have different tax and liability implications.
3. CREATE A BUSINESS PLANNING
A business plan can be described as a roadmap. While your business may change over time it is still useful to have the basics written down.
What should you include? These are some suggestions: Decide what type of trucking business you want. Do you plan to specialize in specialized loads? Or do you plan to operate a dry van business? Your plan to distinguish your business from the rest
4. OBTAIN TRUCKING AUTHORITIES
The FMCSA (Federal Motor Carrier Safety Administration) has several requirements for starting a trucking business. You will need a valid CDL (commercial drivers licence) as well as a United States Department of Transportation Number (USDOT Number), a Motor Carrier operating authority number (MC Number), stickers for the International Fuel Tax Agreement and an International Registration Plan.
5. SECURE BUSINESS FUNDING
You will need capital just like any other business to start a trucking company. How much capital would you require? It is common to cite a range of $10,000-$30,000. This amount should cover basic expenses such as insurance, permits, down payments and so on. How do you get this amount? There are many ways to finance your trucking business.
6. CHOOSE THE RIGHT TRUCK / TRAILER
The right equipment can make a huge difference in your earning potential and trucking business. Although freight rates fluctuate from week-to-week, a reefer, van or step deck load may pay a higher rate.
7. INSURE YOUR TRUCKING
Carriers need insurance to cover unexpected financial costs due to damage to their vehicles or injuries from road accidents. Check out online forums for truckers and social media groups to find recommendations on insurance products. Before you make a decision on an insurance provider, be sure to compare quotes and shop around.
8. KNOW YOUR EXPENSES & OPERATING COSTS
This is necessary to ensure your business is financially sound. It is important to establish a minimum cost per mile. This will ensure that you don’t run out of money when it comes to loading a load. This requires you to know your operating costs.
First determine your fixed costs, like truck payments, insurance, permits, etc. These numbers will remain constant regardless of how much you drive. Next, determine your variable costs, like fuel. These costs will vary depending on how many miles you drive.
9.CHARGE THE RIGHT MILE RATE
Your rates must be competitive with brokers’ rates, but high enough to make a profit and cover all operating costs. Before you call shippers to make sales, it is important to understand your rates.
10. Use the RIGHT FUEL-BUYING STRATEGY
Owner-operators face the greatest expense in fuel. Fuel can make up as much as 40% of trucking companies’ operating costs. However, the most economical fuel is not always the lowest price. Why? Mostly because of taxes.
Regular drivers pay fuel taxes in their state of purchase, but truck drivers should consider IFTA (International Fuel Tax Agreement). Taxes are based on the fuel they use as they travel through states, regardless if it is from a fuel source. Therefore, it is important to buy fuel at the lowest price (fuel price MINUS taxes) regardless of pump price.
11.MARKET YOUR BUSINESS
Marketing is the lifeblood of any business. Marketing is an essential function that you must perform in order to attract customers. A marketing plan is a way to let potential clients know all about you. This can be done via social media, direct mail or email. A well-designed marketing plan will allow you to reach your potential customers and help you get work.
12. GROW YOUR CLIENT LIST
Long-term sustainability is impossible if you have one loyal customer. To be profitable, you need to diversify regardless of the financial situation of each client. This is a great guideline: No client should account for more than 20% of your revenues. You should have at least five clients who send you loads of load every day.
13. CHOOSE THE CARRIER YOU WANT TO DRIVE FOR
It is important to know where you are going to drive and what type you will run. Most carriers will list the areas you will operate in and the type of freight you will haul. First, narrow down your choices based on your driving habits. Next, find out about the reputation of each fleet. Find out how much they charge per mile and whether they always have loads. Important: Find out if drivers are paid on time.
14. FIND MANY THINGS TO HAUL
How do you find freight if you are new to the trucking business? Use online load boards. It is an easy way to get started with hauling. These people can help you build relationships with shippers and brokers. Once you have established a customer base, you can build on these relationships. You can even begin hauling for your customers directly and create your own lanes. This could provide a steady and regular income.
15. SHIPPERS DIRECTLY WORK
Load boards and brokers are useful when you have an empty truck but they can also be costly. Brokers usually keep 10% to 20% of the load price. Avoid load boards and brokers. Instead, build a list of reliable and direct shippers to keep you busy. They should be charged a rate that is comparable to the brokerage’s.
16. SEEK OUT THEIR CREDIT STANDING
This is a crucial step if you want to get paid on a regular basis. It is a great habit to form, such as evaluating brokers and shippers before you haul a load. Credit services can also be subscribed to, but they can be costly. If you really want to maximize your efforts, select loads that pay more per mile and not necessarily faster.
17. RUN A EFFICIENT BACK OFFICE
Truckers, like many entrepreneurs, hate paperwork. You cannot ignore paperwork. You must make sure you have the time to contact customers and pay them for payments if you are a small-carrier or owner-operator of a trucking business. If you don’t have good systems, these can take a lot out of your business time. Find a partner to help you simplify billing and collection so that you can focus on your operations.
A good plan is essential for any endeavor worth its salt. But you must also work on the plan. You can build a successful hotshot trucking business if you are persistent and consistent and make a profitable business model.
More Useful Resources on Hot Shot Trucking: