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How to Start a Hot Shot Trucking Business
Hot shot trucking is growing fast because it addresses a market gap, helping out shippers who want to move small freight loads quickly and would rather not pay for a large truck. The freight is carried in a standard pick-up truck or trailer attached to the truck.
Hot shot businesses specialise in shipping small, time sensitive loads such as farm goods and building materials, commercial equipment, and so on. When done right, it can be a highly lucrative business with good profit margins. And like all shipping services, the work is varied, taking you to new places and interacting with new people every day.
In addition to hard work, getting started will also require a good deal of planning and preparation. Lucky for you, this step-by-step guide lays out all you need to know to put yourself on the road to being a hot shot entrepreneur.
Time to build
Step 1: Decide if the Business Is Right for You
Pros and Cons
While a hot shot business can be a great earner, it’s not for everyone. We’ve put a list of pros and cons together to help you decide whether it’s right for you.
- Low startup costs, besides truck
- Profitable, flexible side hustle
- Simple and easy to manage
- Work can be inconsistent and unpredictable
- High insurance premiums may reduce profit margin
Hot shot trucking is a small segment of US trucking and transport, but it’s also the fastest growing segment. Demand is being driven by shippers increasingly seeking a cost-effective, fast and reliable solution for their freight transport needs.
The US trucking industry was worth about $732 billion in 2020, following a pandemic-driven downturn.https://www.statista.com/topics/4912/trucking-industry-in-the-us/#dossierKeyfigures The less-than-truckload (LTL) market, meanwhile, was worth about $80 billion in 2021 after recording steady growth for several years.https://www.statista.com/statistics/1171549/less-than-truckload-market-size-us/
How much does it cost to start a hot shot business?
The start-up costs for a hot shot business range from $28,000 to $75,000, with an average of $51,500. The bulk of this cost is of course for the pick-up truck and trailer, so if you already own these items, your costs will be reduced by up to 80%.
While the costs may seem high, the overall risk of investing in a hot shot business is low, as more than 80% of the investment is for purchasing assets with great resalable value. So if the business fails to meet your expectations, you can sell the truck and trailer to recoup most of your investment.
|LLC incorporation, licenses and permits||$500||$1,000||$750|
|Marketing and advertising||$500||$2,000||$1,250|
|Other Tools and Equipment||$200||$1,000||$600|
How much can you earn from a hot shot business?
The average revenue for a hot shot service is $2 per mile1https://www.dat.com/resources/hot-shot-trucking-startup-guide, whereas the average cost is $0.78 per mile, resulting in a gross profit of $1.22 per mile. Each driver is allowed to work for 11 hours, followed by 10 hours of uninterrupted break.2https://www.fmcsa.dot.gov/regulations/hours-service/summary-hours-service-regulations.
If you drive for a quarter of the available driving time, you can expect to do 124 miles a day. This would generate about $90,000 in annual revenue and a profit of $55,000. Once you establish a reputation, you could be making shipments for half the possible time and drive nearly 250 miles a day. This will generate more than $180,000 in annual revenue and $110,000 in profit.
What barriers to entry are there?
Overall the industry has low barriers to entry, and there are no strict regulations and compliance requirements.
A hot shot driver is required to hold a basic Class D License if they haul less than 10,000 pounds of cargo loads. To carry a bigger load, the driver is required to hold a Class A Commercial Driving License, which may serve as a barrier to entry.
The other major barrier to entry comes from a growing number of hot shot businesses, all of which offer essentially the same service. This may make it difficult to stand from your competitors and draw business.
Step 2: Hone Your Idea
Why? Identify an opportunity
As a delivery business, your work will be tied to a particular geographical area, so do your research to find out where the best opportunities are in your location.
Start by looking into who your competitors are locally, how many there are, what services they offer, and at what price. You’re looking for a market gap to fill. For instance, maybe the local market is missing a hot shot trucking firm that is eco-friendly or offers long distance transport.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as partnering with developers and construction firms to haul away loads of junk and material from building sites. This could jumpstart your word-of-mouth marketing and attract clients right away.
Keep in mind, a hot shot business can be a profitable side hustle for people who already own a pick-up truck and trailer. If you already run a business, consider how you might incorporate hot shot services to make it even more profitable.
What? Determine your products or services
Hot shot drivers deliver small cargo loads quickly and efficiently. The main advantage to the customer is cost as big trucks are expensive. With lower overheads, hot shot carriers charge less for their services. You’ll need to decide the size of your driving range, your various cargo possibilities, and you might also perform deliveries for Amazon, when hot shot work is slow.
How much should you charge for the service?
The average price for a 9,000-lb cargo load is $2 per mile, while your overhead should cost about $0.78 per mile on average.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
The vast majority of your clients will be B2B – other businesses who require your services to keep their own business running. You can search for local shipping firms, construction contractors, farmers, medical suppliers, auto parts companies and even retailers and developers on LinkedIn as well as on Google Maps and even Yelp.
You will mainly get hot shot jobs through load boards. A load board is an online platform where truck owners-operators meet with shippers and freight brokers that need to move freight. The major load boards are DAT, KeepTruckIn, 123LoadBoard, Convoy and TruckStop.
Most load boards have a subscription-based business model, allowing premium users to login and post their loads or empty trucks. Load boards will also enable you to set up alerts for specific routes so that you shall be notified as a load matching with your route specification is posted.
Where? Choose your business premises
At least initially you will work at home and in your vehicle, but if you do well and expand, at some point you may need to rent out an office space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- Name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords, such as “shipping” or “hot shot trucking”, boosts SEO
- Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
- Avoid location-based names that might hinder future expansion
- Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your offerings in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to hot shot businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your hot shot business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
- Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
- General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
- C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
- S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Step 6: Register for Taxes
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund Your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
- Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities.
- Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
- Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a hot shot business. You might also try crowdfunding if you have an innovative concept.
Step 8: Apply for Licenses/Permits
Starting a hot shot business requires obtaining a number of licenses and permits from local, state, and federal governments. You’ll need to obtain your Operating Authority, also known as an MC number, from the Federal Motor Carrier Safety Administration (FMCSA). Also, liability insurance is mandatory to activate your MC number.
Just like anyone else driving a commercial vehicle, you’ll need a Department of Transportation (DOT) medical card. For this you should book a physical examination with a medical examiner registered with the FMCSA-approved national registry. You’ll also need a USDOT from the FMCSA, which is a unique identifier for commercial vehicles hauling cargo interstate.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Step 9: Open a Business Bank Account
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your hot shot business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
For independent truckers, the DAT One platform provides a host of features including load boards, factoring services, load tracking, fleet compliance, operating authority services and more. They also have a mobile application that takes a lot of manual work from the process.
Airtable can also help you manage your hot shot business. Instead of juggling with multiple apps for loads, expenses and invoices, you can control everything from one program. The app will allow you to integrate third-party apps making it more productive and useful.
Some of your business will come from online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book Now”. This can sharply increase purchases.
- Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your hot shot business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your hot shot business could be:
- Small freight delivered fast!
- Need waste cleared? Pick-up and removal anytime, 24/7
- Best rates on local small freight transport, guaranteed
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
- Signage – Put up eye-catching signage at your store and website
- Flyering – Distribute flyers in your neighborhood and at industry events
- Post a video – Post a video about your services. Use humor and maybe it will go viral!
- Seek out referrals – Offer incentives to generate customer referrals to new clients.
- Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
- Testimonials – Share customer testimonials about how your shipping services saved them
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a trucking business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in shipping for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in hot shot trucking. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
- Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
- If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Step 12: Build Your Team
Most of the hot shot businesses are owner-operated which means you may not need to hire employees to run your business. However, if your business grows beyond your capacity to manage it alone, you may need to hire additional staff, including:
- Marketing Lead
- General Manager
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Start Making Money!
You now have all the business knowledge you need, it’s time to hit the road and launch your hot shot entrepreneurial career! But you might want to bookmark this page, just in case.
Hot Shot Business FAQs
On average, it takes $51,500 to start a hot shot business. The major start-up costs are associated with buying a pick-up truck and trailer. If you already have a pick-up truck, the start-up costs can be reduced by at least 50%.
Hot shot trucking is indeed a profitable business. The average revenue is estimated at $2 per mile while the direct cost is $0.78 per mile, resulting in a 61% gross margin. During peak times, you may expect to make $2,000 to $3,000 per week.
It depends upon your location, load and distance. However, the average pay rate is from $1.50 to $2.50 per mile, averaging at $2.0 per mile.
There is a shortage of truck drivers in the U.S. trucking industry. Trucks are also not feasible to transport freight swiftly in a local area. The only available solution is hot shot trucks. As a result, the demand for hot shot trucks is rampant across the U.S.
If you want to pursue a career in the transportation industry, hot shot trucking could be a great starting point. It is a lucrative business opportunity which usually pays more than a traditional trucking job. If you are based in an ideal location, you can easily scale your business to generate above $100k annually.