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How To Start A Hot Shot Trucking Business

How To Start A Hot Shot Trucking Business

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How To Start A Hot Shot Trucking Business

How To Start A Hot Shot Trucking Business

Starting a hot shot trucking business can be a lucrative opportunity, but it does require some upfront work and planning.

With the right preparation and knowledge, you can get your own hot shot business up and running and on the road to success. To help, this guide will provide an overview of the hot shot trucking business and a step-by-step guide to launching your own hot shot trucking business.

Business Description

Hotshot trucking is a specialized form of freight transportation. It refers to hauling smaller LTL (less-than-truckload) cargo to a customer as soon as possible. Goods are usually high priority; their transport is time-sensitive and often last minute. Due to these factors, businesses commonly operate with pickup trucks and trailers and locally within a defined area. That said, long-haul hotshot trucks are sometimes used to ensure goods get from A to B within the timeframe. 

Industry Summary

The hot shot industry is a subsector of the broader transportation and logistics field and centers around time-sensitive, high-priority shipments. Businesses and individuals are willing to pay a premium for quick, specialized delivery services, particularly when traditional options fall short. It’s an industry with various niches, allowing you room to specialize based on your interests or regional demand. Hot shot loads may include automotive parts, medical supplies, manufacturing components, or other freight that needs rapid transport even across relatively short distances of 1-600 miles.

While most hot shot truckers are independent owner-operators, larger fleets are increasingly offering hot shot services. The industry relies heavily on brokers who connect truckers to shippers needing urgent deliveries.

Steps To Start A Hot Shot Trucking Business

Step 1: Market Research

Starting a hot shot business requires more than just a sturdy truck and a valid driver’s license. A thorough market assessment is essential to understand the demand, competition, regulations, and potential profitability of your venture.

Your first task is to decide what you’ll specialize in. The hot shot business has several niches, such as general freight, the oil industry, and automotive parts. Your choice sets the tone for the rest of your market research. It’ll determine who your competitors are, what your price points may be, and what regulations you’ll need to comply with.

Once you’ve got your niche down, it’s time to assess the demand. Do you plan to operate locally, extend to regional areas, or even go national? Depending on your scope, the research methods will differ. You can use load boards and freight brokers to gauge the volume and pricing of hot shot jobs in your area. The more you know about demand, the better you can tailor your services.

Every industry has its regulations, and the hot shot business is no different. Research the regulatory environment for hot shot trucking in your state, including any special licensing requirements. Transport laws, safety guidelines, and even special licensing requirements are some of the regulatory elements you’ll have to contend with. Be sure you understand and can comply with these regulations to avoid legal complications down the line.

Step 2: Create a Business Plan

A business plan is a fundamental part of starting any venture, including a hot shot business. The thing about entrepreneurship is that it’s easy to get carried away by the thrill of starting something new. That’s where a business plan serves as a reality check. It forces you to put your dreams under the microscope. You’ll have to think hard about the nuts and bolts of your hot shot operation, from licensing and compliance to staffing and equipment.

One of the key benefits of a business plan is the ability to project income and expenses. This financial forecast is used to analyze whether your hot shot business is feasible and profitable. By estimating your revenue from jobs and subtracting your expected costs, such as vehicle maintenance, fuel, insurance, and licensing fees, you can predict your net income.

Related: How to write a business plan

Step 3: Secure Funding

Finding the money to kick off your hot shot business can be a journey of its own, equal parts exciting and nerve-wracking. Here are some common sources of funding that entrepreneurs can use to start a hot shot trucking company:

  • Personal savings: Using your own savings is the first place to start when funding a new business. This allows you to retain full control and avoid interest payments.
  • Business loans: Banks and other lenders offer small business loans that can help cover startup costs like purchasing a truck. If the lender sees the loan as too risky, Small Business Administration (SBA) loan guarantees take some of the risk off the bank.
  • Leasing equipment: Leasing a truck through a commercial finance company can preserve capital in the early stages. You pay monthly installments instead of a large upfront cost.
  • Factoring receivables: Factoring involves selling your accounts receivables to a third party at a small discount to obtain working capital. This provides funds faster than waiting for customer payments.

Related: Finding the money to start a business

Step 4: Register the Business

Starting a hot shot trucking business involves several legal steps to ensure your venture is properly registered and compliant with state and federal regulations. Here’s a step-by-step guide on how to register your hot shot business:

Choose a business structure: The first step is deciding on a business structure for your hot shot business. The four main types of business structures are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

  • A sole proprietorship is the simplest structure and offers ease of startup and lower cost. However, it does not provide any personal liability protection.
  • A general partnership involves two or more individuals who agree to share in the profits and losses of a business and, like the sole proprietorship, offers no liability protection.
  • A corporation is a complex business structure that provides liability protection but comes with higher costs and more regulatory requirements.
  • An LLC combines the liability protection of a corporation with the tax benefits and simplicity of a sole proprietorship or partnership. Many hot shot businesses opt for an LLC structure due to its balance of protection and simplicity.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular LLC formation services include:

IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

Obtain a DOT number and Operating Authority: If you plan on operating across state lines, you’ll need to apply for a USDOT number from the Federal Motor Carrier Safety Administration (FMCSA). This process usually takes about 2-6 weeks.

To get your motor carrier operating authority number (MC), you’ll need to file OP-1 forms with the FMCSA.

Pass DOT physical exam: Drivers are required to pass a Department of Transportation (DOT) physical to obtain a Commercial Driver’s License (CDL) and motor carrier operating authority number. This exam ensures that you’re physically capable of safely operating a commercial vehicle.

Commercial Driver’s License (CDL): Drivers will need a commercial driver’s license (CDL) if hauling loads over 10,000 lbs. Otherwise, a regular driver’s license will suffice.

Obtain required licenses and permits: Like any business, a hot shot trucking business owner will need to obtain a variety of business licenses and permits. These requirements vary by state and could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 5: Acquire a Truck & Insurance

The next step in setting up your hot shot operations is securing the necessary equipment – primarily a reliable truck and possibly a trailer. You have two options here: purchasing or leasing.

Purchasing a truck outright can be a significant upfront investment, but it gives you full control over your vehicle. Leasing, on the other hand, requires less capital upfront and often includes maintenance packages, but it comes with mileage restrictions, and you won’t own the vehicle at the end of the lease.

Whether you decide to purchase or lease, make sure to choose a vehicle that meets the demands of hot shot trucking. It should be reliable, fuel-efficient, and capable of hauling the loads you plan to transport.

Once you’ve secured your truck and trailer, the next step is to get insured. As a hot shot trucker, you’ll need several types of insurance to fully cover your operations:

  • Commercial auto insurance covers damage to your vehicle in case of an accident.
  • Cargo insurance protects the goods you’re transporting in case they’re damaged or lost during transit.
  • Liability coverage protects you if you’re held responsible for injuries or property damage caused by your operations.

Each state has its own minimum insurance requirements, so make sure to check with your local Department of Transportation or a knowledgeable insurance agent to ensure you’re adequately covered.

Step 6: Prepare to Launch!

As you proceed with setting up your hot shot business, there are several additional steps to consider. Each business will have different needs, but here are some common items:

Setting up bookkeeping: Proper bookkeeping is essential for tracking income, expenses, and overall business performance. You might choose to use accounting software like Wave Accounting (FREE) or Quickbooks or hire a professional accountant.

Business bank account: Open a separate bank account just for your business dealings. It simplifies your finances and makes everything easier to manage.

Set pricing structure: Whether you decide on a fixed rate, per-mile, or hourly charges, be clear on how you’ll be pricing your services. Knowing the going rates in your industry is a good place to start.

Marketing your services: Your marketing should go beyond just word of mouth. A well-designed website, cohesive branding, and active networking are integral to spreading the word about your hot shot business. Platforms like DAT offer specialized hot shot boards that can help you find freight to haul. They’re an invaluable tool for your operations.

Join industry associations: Consider becoming a member of organizations like the Owner-Operator Independent Drivers Association (OOIDA), the National Association of Small Trucking Companies (NASTC), or the American Trucking Associations (ATA). They offer networking and professional growth opportunities.

Common Questions When Starting A Hot Shot Business

How much does it cost to start a hot shot trucking business?

One of the advantages of hotshot trucking is its significantly lower barrier to entry compared to the rest of the trucking industry. Its operational costs are typically also far more modest. Still, startup costs can be around $20,000 to $90,000 to cover the key startup costs. This includes:

Truck and trailer: The most significant expense is usually the cost of the truck and trailer. While prices can vary widely depending on the make, model, and condition, buying new equipment could cost anywhere from $40,000 to $80,000. However, you can reduce this cost by purchasing used equipment or leasing.

Licenses and permits: This includes costs for obtaining a USDOT number, Motor Carrier (MC) number, and other necessary permits. These costs can range from $300 to $500.

Insurance: Initial insurance costs can vary significantly depending on factors like your driving history and the type of cargo you plan to haul. However, a ballpark figure for initial deposits on insurance could be around $1,000 to $3,000.

Marketing: Building a website, creating branding materials, and promoting your business can have varying costs. For a basic website and initial marketing materials, you may need to budget around $500 to $1,000.

Other expenses: Additional startup costs like entity formation, ratchet straps, chains, tarps, and office supplies will likely add a few thousand more.

How profitable is a hot shot trucking business?

The profit potential for hot shot businesses can be quite lucrative, though it requires hard work and smart money management.

Industry-wide, hot shot truckers often aim for a per mile profit formula of:
Revenue: $1.60/mile
Expenses: $0.85/mile
Profit: $0.75/mile

Based on this formula, a hot shot trucker running 5,000 miles per month could generate around $8,000 in monthly revenue (5,000 miles x $1.60 per mile). With $4,250 in expenses (5000 miles x $0.85 per mile), that leaves a potential profit of $3,750 per month or $45,000 in annual pre-tax profit.

Expenses of $0.85/mile cover costs like fuel, maintenance, insurance, fees, depreciation savings, and the truck payment. The per-mile profit formula can fluctuate based on freight rates and cost controls. But for many owner-operators running between 3,000-6,000 miles per month, an annual profit in the $25,000 to $60,000 range is realistic after the first year if they operate efficiently and build a strong client base.

Of course, monthly profits can be higher for those running more miles or charging higher rates on niche loads. But following a per-mile profit model is a proven approach to budgeting and planning for steady returns in the hot shot trucking business.

To help boost profits, be sure to take advantage of load boards, which can help find additional work when returning home, so you don’t have to drive with an empty truck.

What skills are needed to run a hot shot trucking business?

Knowledge of mechanics and excellent driving skills: Being a hotshot truck driver is a lifestyle choice for many. You will like being on the road for long hours, and you should be able to lift freight and handle, at times, heavy equipment. 

It goes without saying that you’ll need a clean driving record and excellent driving skills. It will assure your clients that their cargo is secure with you.

You will also save yourself a lot of costs and headaches if you can undertake minor truck and trailer maintenance and keep your fleet in top shape and within regulations.

Time management and organizational skills: Scheduling, speed, and the capability to adapt on the go will be your best friends. Successful deliveries – and happy customers – rely heavily on perfect timing, good planning, and the ability to stick to it. It is a skill to know how to work a shift most effectively. 

Don’t forget to factor in time to network, meet with potential customers, send quotes and invoices, and ensure you stay up to date and within all necessary industry requirements. 

Interpersonal skills: Although you may spend long hours on the road by yourself, good interpersonal skills and a positive can-do attitude will help you build your reputation and grow your customer base. In addition, you will need to be a good listener and communicate well with your clients, so that load requirements and deadlines are very clear and understood. 

What is the NAICS code for a hotshot trucking business?

The NAICS code for a hotshot trucking business depends on the distance typically traveled. For businesses primarily working in their local market, their NAICS code is 484110 and long-distance trucking is 484112.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

How To Start A Hot Shot Trucking Business

How To Start A Hot Shot Trucking Business

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