Seven Steps To Start A Logistics Company

Starting a logistics and transport company is undoubtedly an amazingly lucrative and excellent business idea. However, initiating the business isn’t the difficult part of the process. The challenge is staying on top and maintaining your success for a long time. That said, ensuring your success will depend on three things- adequate finances, a sound recruitment strategy, and a foolproof business plan.

Whether it’s a business model plan related to road transportation or a cargo plane, cut-throat and intense competition is the unwritten name of the game. In the past few years, we have seen remarkable growth in the economy, which increased the number of job openings and opportunities in the logistics sector. After all, it is a fact that supply chain and transport are two integral parts of any business out there. A business’s operations will run more efficiently and smoothly by establishing logistics networks that reduce delivery times and cut down costs.

Suppose you are looking to launch a logistics and transport business of your own. In that case, the following steps will guide you to kick-start your company, ensuring profitable returns and long-lasting success.

Decide on a particular logistics niche

As you begin your logistics business, the first step is to decide what and who you will serve. You’ll need an answer to ‘what niche will I go for?’ there are various categories you can consider, including personal, local, and global logistics and transport. And, you’ll have to choose only one initially to be successful.

The best thing about the first step is there are endless possibilities. You can go international by partnering with suitable suppliers and acquiring shipping containers by performing a search on the internet for ‘shipping container for sale.’ Or you could establish a medical transport service in your local area. The vital thing is that you choose a niche and learn as much as you can about it.

If you aren’t sure what you should go for, do some research about the demand and supply in your locality. When you provide a solution for a specific need, you’ll have a client base well before you decide to open your doors for business.

Choose a business model

Once you’ve decided on a niche and studied it as much as possible, it is now time to move into the business model stage. Now, you need to choose a business structure and start filling in your business’s operational information. When it comes to a business model, you have various options.

  • Sole proprietorship allows you to work as an individual or a couple. However, you cannot incorporate others. Such a business model is flexible, but you might have to assume business losses on a personal level.
  • Limited Liability Company allows your business to function in a manner where the company and personal information remain entirely separate. While this can change with your tax status, an LLC will protect you from personal losses.
  • General or Limited Liability Partnership allows you to partner up with others. The difference between LLCs and general partnerships is how partners assume business risks, actions, and debt as a whole.

Obtain a federal tax ID

The next step in your logistics journey is to obtain a federal tax ID. It means that you’ll have to acquire licensure from your state or local government authorities. As rules can vary from location to location, you’ll need to consult your government to know the steps you need to take to obtain a business license. You’ll have to apply for an Employee Identification Number (EID) or a Federal Tax ID when it comes to the federal standpoint.

The employee identification number process is relatively standard, and acquiring one;

  • Allows you to establish business credit early
  • Protects your business from identity theft
  • Speeds up the loan process
  • Makes it less challenging to file yearly or quarterly taxes

Create a budget and set financial expectations

Based on the type of logistics business you choose, costs could be high or low. For instance, a one-vehicle taxi service will be cheaper than a fleet of moving trucks. However, business owners can plan accordingly and set a budget for every type of logistics business. Will you have to acquire a loan to get started? Government lenders such as the SBA or standalone private lenders are perfect options. Ensure that you have your business plan in writing since many loan lenders will ask for a copy before reviewing your loan application.

It is also vital to set financial expectations and benchmarks early on in the process. You must consider;

  • The debt your business can handle
  • The amount of investment you’re willing to splurge in equipment, supplies, and staffing
  • The amount of cash you’re willing to invest in advertising and marketing
  • The revenue you need to pay for operating costs

Build your fleet

Purchasing the appropriate equipment will set your business up for profitability and give it a professional look from the get-go. Vehicle quality and size will matter a lot, especially if you want to transport items and materials on other people’s behalf. Reaching a job site with an inadequately sized vehicle or equipment will give your company a bad name in the market.

Listed below are a few things you need to ponder on to make the right vehicle and equipment purchase decisions;

  • Will you have to transport people?
  • What is the weight of the material(s) you’re transporting?
  • What is the ground or terrain type you need to cover?
  • What wear and tear should you expect on your journeys?
  • Are there any sustainable and fuel-efficient options available?

Setting up a solid recruitment process

Your business’s recruitment process will evolve as it grows, but incorporating standard hiring procedures into your business plan is necessary. Doing so will help formalize the hiring process and ensure that you follow state, national, and international rules. Although, in the beginning, your workforce will only consist of you and a handful of employees, imagine the ways your business can grow. In addition to service providers and on-site drivers, what other employees will you require down the road? These might include;

  • Seasonal or part-time employees
  • Maintenance technicians
  • HR staff
  • Marketing and sales professionals
  • Administrative staff

Starting your company and the first contract

Reliability is critical in the logistics and transport business. Someone hiring a logistics company needs to know that the logistics business they’re hiring is genuine and trustworthy in delivering their promises of timely deliveries. Dependable services lead to satisfied customers. Hence, it is of utmost importance to deliver on your promises if you want loyal customers. Learn more about the 3PL process and how it can help your order fulfillment operations run more smoothly.

Your first contract is vital to establish your value and trustworthiness in the logistics and transport market. A customer always looks for quality, consistency, and reliability. So, ensure that you carry out your first contract with due diligence and offer the best logistics and transport service you can.

Conclusion

The challenges you’ll face with running a logistics and transport business may be many. Still, the solution to all your problems is reliability and trust. It is a perfect idea to take a page out of other logistic company’s books and see what you need to add or subtract from the services you provide. After all, it will take some time for your logistics start-up to build up solid relationships with your customers, and today is the day to start doing so!