How to set up a transport company in 5 easy steps?

The transport industry is one of the key elements of the European economy. Regular growth in both the increasing number of start-ups and transports has not even been stopped by the coronavirus pandemic. The sector is going from strength to strength and is still insatiable.

Setting up a transport company has potential and can be profitable, but the key issue is to plan it properly and meet the relevant formal requirements. It's worth creating a plan to stick to, and our article can help you create such a plan. Check out our practical guide that discusses how to start your own transport business in 5 easy steps and make an informed decision.

Step 1: how to start a transport business - research and planning, or building the foundations

The first step before opening a business, whether it be a transport company or any other type of business, is to do quality research. First and foremost, we need to identify our options and consider whether our business idea is likely to work in the transport business. In carrying out research, it is worth focusing on several aspects, such as:

• market analysis - it is worth looking for information on how freight transport in the UK is at present, what size it is, whether growth trends can be observed, who the key players are and what the competitive picture looks like. Such information can be obtained from market research companies (e.g. Statista, IBISWorld, Mordor Intelligence); it is also worth looking at CSO data, government websites and EU regulations.
• mandatory regulations - we need to find out about the formalities and research the legal and regulatory requirements to start and grow a transport company.
• demand analysis - we can also think about who our potential customers are and what their needs might be; at this stage, it is good to at least establish the sector we are interested in, i.e. what we will be transporting (there are many possibilities, from agriculture to electronics to retail)
• economic factors - another useful aspect is to analyse economic indicators that have a direct impact on the transport business, such as current fuel prices, inflation rates or GDP growth.

Such preliminary research helps to understand market trends and to create a proper business plan for the transport company that takes into account financial estimation issues. Indeed, a good understanding of the market is the basis for a clear strategic direction.

Step 2 Secure funding for a transport company - where to get the funds from?

To be honest, funding the transport industry is not an inexpensive endeavor. When deciding to enter this business, it is important to be aware of this. The transport business, especially at the very beginning, can be heavily capital intensive, as it requires investment in vehicles and equipment, or covering operating costs. However, there are several options for obtaining financing:

• bank credit - this most popular form of raising additional funds can help finance a transport business. Banks offer various types of business loans, and small and medium-sized enterprises can often count on preferential terms. This is a good way to cover initial operating costs or vehicle purchase costs, but obtaining a loan requires a lot of paperwork and largely depends on one's creditworthiness. Financial institutions see the transport industry as sensitive and therefore risky when it comes to lending.
• leasing - when thinking of a transport company, the word ‘leasing’ automatically springs to mind. It's a popular option for gaining access to modern vehicles without incurring too much upfront cost. Leasing is easier to obtain than a loan, but there is often an upfront fee to be paid, and not everyone is prepared to pay this. However, we can benefit from tax advantages (leasing instalments are tax deductible).
• fuel card - this is a popular solution for monitoring fleet finances. The Eurowag fuel card provides a source of cheaper fuel and enables road tolls to be paid - importantly from one supplier with simple invoicing and reimbursement of VAT and excise duties.
• government grants and subsidies - government offers of various types of grants or subsidies for new businesses can be an interesting option. Such offers are often aimed specifically at the logistics and transport industry, as their overriding objective is economic and employment growth. 
• EU grants - it is also worth keeping an eye on EU programmes, which often focus on providing support for small and medium-sized enterprises (an example would be the European Regional Development Fund programme). Although most often the funds are granted quite strictly and the process involves a lot of bureaucracy, it is worth following EU programmes. The funding granted is usually partly or fully non-refundable and can be used for a variety of purposes.
• factoring - is based on the sale of receivables to a factoring company at a discount. This guarantees us an immediate cash flow so that we gain liquidity and can cover even our current operating costs. Factoring involves high costs and may not be possible for a company that has just entered the market. 

Taking advantage of one or more of the above financing options can help us to grow our business faster, but it is worth thinking carefully about our strategy beforehand, including financial strategy.

Step 3 Developing a transport company - building up a fleet

Building a fleet requires careful planning and strategic decision-making. Here is a sample process to follow:

1. Assess your needs 

Clarify the types of trucks you need and the number of trucks you need, based on loads, routes and distances. 

2. Plan your budget 

Estimate the budget you need to purchase or lease the necessary vehicles. Remember that the price of the vehicle is not the only cost. Also consider operating costs such as maintenance, fuel and insurance. 

3. Choose the form of entry into vehicle ownership 

Most often, fleet management comes down to choosing one of two options:

- Purchase - in this case, you take possession of the full value of the vehicle and gain complete control over it. However, only a company with a lot of capital and long-term plans can afford this option. Buying a fleet is a huge investment at the start, which entails depreciation costs. 

- Leasing/rental - these are the two similar forms that entrepreneurs are most likely to opt for these days. We incur significantly lower initial costs and the possibility to regularly upgrade our vehicle models to newer versions. Leasing often includes maintenance and repair services, but contracts are occasionally restrictive and the total cost incurred over time can be higher. 

4. Choose a fleet 

We recommend opting for brands known for their durability and fuel efficiency. It is worth evaluating new and used trucks based on our budget and operational needs. Used trucks should always be thoroughly inspected to avoid hidden costs. 

5. Purchase 

Always negotiate with dealers for the best price and financing options. When buying a larger number of vehicles, opt for a bulk purchase, which usually leads to discounts. Check that the cars meet local and EU regulations.

Step 4 Fleet management solutions - planning operations 

In addition to fundamentals such as a solid business plan that defines our services, and targets and includes financial projections, choosing the right type of business and registering it, or taking care of any mandatory licences and permits. We must plan our logistics operations with great care. 

This is because their efficiency is crucial for a transport company. In addition to investing in a fleet and a qualified team of drivers, it is worth thinking about implementing a transport management system (TMS). The system is designed to streamline the logistics process. It allows us to manage our resources and operations wisely and efficiently. Modern transport management using this type of technology helps to plan the most efficient routes (and therefore save time and fuel), manage loads, track cargo in real-time and obtain comprehensive reports. 

TMS solutions are the future of the transport industry. We know this and that is why we have developed Eurowag transport solutions - we offer Fleet management software, which allows you to track fleet information in real-time. The fireTMS programme, dedicated to hauliers and freight forwarders, is also worth a try. Both tools will work great for operational planning and bring all the benefits of a TMS mentioned here. The best results will come from integrating telematics (i.e. Fleet management) with TMS systems - i.e. the automation of processes and data exchange between systems that optimise and improve the work of the forwarder and transport manager.

Step 5 Promoting the transport company - building a customer base 

Building a sustainable customer base takes time. It is a long and demanding process that depends heavily on our reliability and nurturing of relationships. It is important to give it proper attention from the beginning. The basis for gaining and retaining customers these days is, of course, marketing. In this aspect, it is worth taking care of a qualitative web presence, i.e. primarily a professional website (with effective SEO), social media and so on. Industry events, trade fairs and local company meetings are still a good way to gain new customers.

Focus on solid marketing strategies and maintaining strong relationships with shippers. Look after wholesalers and manufacturers, too - approach companies that often need transport services directly. Offer competitive rates and excellent service to secure contracts. Effective marketing combined with reliable service builds a strong reputation, helping to attract and retain customers.

Summary

We hope our tips for starting a transport business given in 5 concrete steps have helped you decide on your future transport business. This growth industry demands a solid plan and a significant investment from anyone looking to enter it. Once you have made it through the initial stage, it is worth remembering the importance of having the right tools and solutions to help you manage your business, which we at Eurowag have developed to help those who dare to enter the transport industry get the most out of it and grow. With Eurowag, you can ensure quality customer service and punctuality thanks to telematics equipped with ETA mechanisms that alert you to potential delays in advance.