How to Start a Logistics Company? Important Guide
Before starting your project, it is important that you know what the requirements are to start a logistics company, as one of the initial measures to avoid possible unforeseen events during the course of the activity. To start your company you will have to take into account many things that you had not even considered until now.
First of all, we must understand that a transportation company (also considered a logistics company) is a company that stores and delivers the products of other companies to other individuals and companies. Almost 90% of goods are transported by road.
There are different possibilities depending on business objectives, to guide the services provided in one way or another. The company may decide to focus on the import and export of products within the country, on land transportation within the European Union, courier, etc. It is also important to have logistics and transportation management software to simplify certain tasks.
Perhaps the main problem faced by a person who wants to start a business in this sector is none other than the lack of capital to make an investment that, far from being affordable, becomes very expensive. In most cases, it is necessary to have extra financing and capital to be able to maintain the business, which can sometimes fail due to the ups and downs of the market. This is why the company’s financing plan will be essential to ensure the viability of the project.
Today’s logistics/transportation companies run the gamut from parcel services to large-scale freight operations. Depending on your level of interest as a future business owner, you have many options on the table. In this guide, we will enlighten you on how to plan and start a transportation company from scratch.
The question is, is it worth creating a transportation company or is it not a profitable business today?
Is a logistics company profitable?
Creating a logistics or transportation company is a long-term investment. So if your goal is to make quick and effortless profits, this type of business would not be the best fit for you.
Today, with the development of the internet and online shopping possibilities, the logistics and transportation sector has experienced a more than considerable boom, especially in times when the demand for products increases exponentially (such as happens at Christmas, Black Friday, Sales, etc.).
Currently, local sales have been significantly reduced to give way to remote transactions, and the advantages they represent for the transport companies in charge of distributing the merchandise. Instead, read Fred Smith’s biography and discover how he set up FedEx step by step.
Main types of logistics/transport companies
The transportation company category is broad, meaning you can specialize in one type of business or key area.
Full load
This type of transport company have simpler operations in terms of travel management. It translates into fewer uploads and downloads. All merchandise travels unified to a destination. The most difficult thing is to connect the loads and avoid returns and extra mileage.
Parcel
It is the opposite of a full load, there is no longer a single destination or recipient, a truck in a parcel network has multiple clients. The most important thing is to have a wide network of delegations distributed throughout the geography to be able to respond quickly.
Express parcel
Increasingly fashionable, due to the entry of Amazon and large “marketplaces”. In addition to the change in behavior of users or customers who want to receive their orders on the same day. Their processes are increasingly similar to courier services. It is a service that was born to be much more specialized than parcel delivery, since it made deliveries in large commercial areas.
Local Ground Transportation Providers
Their infrastructure does not cover services at a national level, they specialize in very particular clients or regions (local distributions).
Logistic operator
It includes all the above services, in addition to everything related to storage and order preparation. To do this, they have specialized facilities and human resources.
In this way, their main attraction is their transversality, they have the ability to provide solutions to all client needs.
Steps to create a transport company
These are the steps you will need to follow if you want to create your transportation company from scratch.
Step 1: Decide on a specific transportation niche.
When starting your transportation business, the first step involves who and what you are going to transport. You will have to answer the question: “What niche or segment am I going to choose?”. As mentioned above, there are different categories of shipping companies, and you may have to select just one to be successful.
The best thing about the first step is that the possibilities are almost endless. From a bicycle rental company to a logistics corporation, or a medical transportation service. The critical element is that you choose an area and learn everything you can about it.
If you’re not sure what to choose, do some research on supply and demand. Offering the solution to a specific and relevant need or problem guarantees you a stable customer base when the time comes to open.
Step 2: Establish your preferred business model.
Once you’ve chosen a niche and learned everything you can about it, you’ll need to move on to the business plan blueprint phase. This is the time when you will establish the structure of your business and begin to fill out operational information about it.
When it comes to having a specialized business model, you have several options:
Sole proprietorship, partnership or limited liability company and Limited Liability Company.
Step 3: Requirements to create a transport company
Remember that there are a series of requirements to create a transport company: the community license regime applied to international transport of goods by road on routes carried out in the territory of the EU Member States and a goods transport card or card transport operator, among others.
If you decide on the option of being an individual entrepreneur, it is advisable that you know what the requirements are to be a self-employed transporter and know the procedures necessary to be able to do so.
Step 4: Apply for Licenses and Permits
When you start your transportation service, you must have the proper license. Why do transportation companies require more permits than other types of companies? The answer is that, in many scenarios, you will be working with passengers, people, and other very sensitive types of cargo.
Within the transportation industry, other types of licenses and permits may include:
- Commercial Driver’s License
- Commercial vehicle registration for any fleet vehicle
- Fuel transportation licenses
- Cargo or heavy load permits
- Insurance coverage for drivers, passengers or goods
Step 5: Make an expense estimate
It is clear that the offer presented by a transport company must be, on the one hand, low enough to remain competitive in the market, but high enough to be profitable.
To do this, the only way not to make a mistake when presenting the offer to potential clients is to previously analyze what the expenses will be: maintenance, repairs, payments, fuel and the workers’ salaries. To this end, it is very important to make an initial investment plan that accurately details each and every one of the costs of starting the business, so that there are no unforeseen events later.
Do you need to get a loan to get started? Make sure you have a solid and established business plan structure, as many lenders will ask to review this plan before considering a new loan application.
It’s never too early to set financial goals and benchmarks. Must take into account:
- What income do you need to maintain to offset operating expenses?
- How much to invest in supplies, equipment and labor
- The specific amount of debt your company has in loans or other expenses
- The amount of money you are willing to invest in marketing and advertising
Step 6: Acquire the equipment
Obviously, before starting the commercial activity itself, it is essential to acquire the necessary materials, in this case, the transportation equipment.
The decision to buy or rent vehicles depends on the businessman, depending on his business strategy and financial muscle.
Acquiring the fleet is simple. After an advance payment and payment of the rest with the loan, the vehicles will become part of the company’s property. However, renting can be a more complex but more affordable operation, since it will only be necessary to pay a monthly fee for the use of the equipment.
Here are some things to think about when making vehicle purchasing decisions and building your fleet.
- Will you need to transport passengers?
- How heavy are the materials you will transport?
- What type of terrain 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 sustainable or fuel-efficient 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 when establishing your transportation business.
Step 7: Get the first clients
There are companies specialized in connecting carriers and companies that wish to send cargo, ensuring coverage of the process and offering greater guarantees to both parties.
In this way, there are dispatchers or transporters who specialize in partial, full or container loads. Thus, it is possible to take advantage of the space and routes on which the truck is empty, to prepare new shipments.
Step 8. Periodic maintenance and renewal
When you have a transportation business, you have to start thinking about the future. Even if your supplies, vehicles and fleet are new, long-term use can affect both safety and quality. How will you carry out routine maintenance to ensure your customers do not experience any service interruptions?
In addition to regular inspections, your company’s certifications and licenses may need to be renewed at various intervals. To comply with legal requirements and to keep your business running smoothly, you need to ensure they are always up to date.
While it’s easy for small details to get lost in the shuffle of daily operations, setting recurring reminders or putting a specific employee in charge of routine checks can prevent a lot of problems.
Read Also: 10 Profitable Agriculture Business Ideas
To design a strategy that includes all the decisions and steps that we have mentioned above, it is necessary to make a business plan that describes the entire business project in its entirety and serves as a roadmap in the day-to-day business, to achieve the viability of the business in the future.
