Starting a Hot Shot Trucking Business? Read This
Venturing into the hot shot trucking arena can be a pathway to independence and financial stability. However, like any business, it requires thorough planning and understanding of the industry's intricacies.
This guide is tailored to provide budding entrepreneurs a clear roadmap to kickstarting a successful hot shot trucking business. From selecting a distinct niche, making informed decisions on business structures, to efficiently managing operational costs, this comprehensive guide covers it all.
By the end of this article, you'll be equipped with the essential knowledge and actionable steps to navigate the early stages of your hot shot trucking business journey.
What Do Hot Shot Truckers Do?
Hot shot trucking in the United States involves transporting smaller, time-sensitive loads quickly to specific destinations. This is commonly used for project-critical loads like agricultural and construction equipment, and heavy machinery.
Hot shot truckers typically use super-duty pickups with trailers (instead of heavy-duty semis).
There are two main ways to engage in hot shot trucking:
- As an owner-operator with your own business
- By leasing on with another company.
The hot shot trucking business can be lucrative, especially when finding freight on load boards, which allows independent owner-operators to make extra cash.
This type of trucking can also be a stepping stone into the trucking industry, providing a glimpse into life on the road before fully committing to a career change.
Professional CDL drivers sometimes start as hot shot drivers, hauling small, time-sensitive loads with a pickup before transitioning to semi trucks.
For a summary of what a hot shot driver is, check out our infographic.
Hot Shot Trucking
Hot shot trucking is when your medium-duty truck pulls cargo on a flatbed trailer. Get all the hot shot tips you need get you started in this lucrative trucking business.
Three Benefits of Hot Shot Trucking
1. Build experience for lower insurance premiums
The government agency that oversees truck drivers, the Federal Motor Carrier Safety Administration (FMCSA), is telling new drivers not to buy a big semi truck right after they get their CDL license.
Instead, they suggest that new drivers should first gain experience by driving a smaller hot shot truck with a trailer. This way, when they're ready to drive a big semi truck, it will be easier and cheaper for them to get insurance.
Insurance premiums for new CDL drivers with a big semi truck can be significantly higher than those for drivers with hot shot trucks. This is because semi trucks are larger and more expensive, and new drivers are considered to be higher risk. Premiums for new CDL drivers with a semi truck can range from $12,000 to $16,000 per year, or approximately $1,000 to $1,333 per month.
On the other hand, insurance premiums for hot shot truckers are generally lower because the vehicles are smaller and less expensive. Premiums for hot shot truckers can range from $6,000 to $10,000 per year, or approximately $500 to $833 per month.
These are rough estimates and the actual premiums may vary depending on a number of factors such as the driver's age, location, driving record, and the specific insurance company's rates. It is recommended that you consult with an insurance provider to get an accurate quote based on your specific situation.
|Semi Truck Insurance||Hot Shot Truck Insurance|
|Per Year||$12,000 - $16,000||$6,000 - $10,000|
|Per Month||$1,000 - $1,333||$500 - $833|
2. Strong Earnings Potential
The demand for transporting hotshot freight, such as heavy machinery and less-than-truckload (LTL) loads, is consistent. These types of deliveries frequently require expedited shipping, which can command higher payment rates. The compensation for hotshot trucking typically falls between $1 and $2 per mile.
Here are a few questions to ask yourself to help you set your hot shot trucking rates:
|Monthly Expenses||Determine the costs associated with your truck and trailer on a monthly basis including payments, insurance, and maintenance. Divide total monthly payments and financial obligations by the estimated number of miles to be driven per month.|
|Fuel Costs||Estimate the cost of fuel per mile by dividing the average fuel price per gallon by your average fuel mileage when hauling a load. For instance, with a fuel price of $2.50 per gallon and mileage of 15 miles per gallon, the fuel cost per mile would be $0.17.|
|Personal Salary Requirement||Calculate the total amount of money needed for personal expenses like mortgage, household costs, childcare, etc., and divide this amount by the estimated number of miles to be driven in an average month.|
|Load Type||Identify the type of load as hot shot drivers typically receive higher rates for full-truckload, oversized, or HAZMAT loads and lower rates for smaller loads.|
|Home Base Competition and Demand||Evaluate the level of competition and demand in your area. A higher concentration of hot shot truckers may lead to lower rates, while high demand with few truckers could allow for higher rates.|
|Trip Characteristics||Consider the characteristics of the trip including the number of miles, tolls, difficult roads, and other factors that could affect the journey.|
|Urgency of Shipment||Determine the urgency of the shipment as hot shot trucking often involves urgent deliveries. Some shipments may be more urgent than others, with shippers usually willing to pay a premium for more urgent deliveries.|
3. Less expensive startup costs
Starting a hotshot trucking business is cheaper than starting a traditional trucking business. Here's why: the big trucks you see on the highway (those are called semi-trucks or Class 8 semis) cost more to buy and maintain than smaller pickup trucks used in hotshot trucking. Imagine you're buying a giant pizza for a party versus a smaller one for yourself; the bigger one is going to cost more, right? Let’s break down the comparison between Hotshot Trucking and Traditional Trucking (using Semi-trucks):
|Aspect||Hotshot Trucking (using Pickup Trucks)||Traditional Trucking (using Semi-trucks)|
|Initial Costs||Less expensive to start up||More expensive to start up|
|Monthly Payments||Around $1,000||Around $2,500 to $3,000|
|Fuel Efficiency||Better fuel economy||Lower fuel economy|
|Earnings||Comparable or even higher||Might be less due to higher expenses|
|Cost to Customers||Often lower due to lower operating costs||Potentially higher due to higher operating costs|
- Affordability: Starting a hotshot trucking business is like buying a smaller pizza for yourself, while starting a traditional trucking business is like buying a giant pizza for a party - the bigger one costs more.
- Monthly Costs: Owning a semi-truck is like paying for a brand-new gaming console every month, while owning a pickup is like buying a couple of video games.
- Fuel Efficiency: Pickup trucks are the scooters of the trucking world, using less gas to travel the same distance compared to semi-trucks.
- Earnings: Despite lower costs, hotshot truckers can earn as much as or even more than traditional truckers, making it a potentially more profitable option.
- Savings for Customers: Hotshot truckers often share their savings with customers by charging less for shipping, making it a cost-effective choice for both the trucker and the customer.
How Much Do Hot Shot Truckers Make?
According to Trinity3Logistics, Hot Shot Truck drivers in the US can earn around $160,000 per year. The calculation hinges on a few key assumptions and figures:
|Miles Driven Per Week||Estimated miles driven weekly based on the text||2,500 miles|
|Rate Per Mile||Rate charged per mile driven||$1.50|
|Weekly Revenue||Calculated by multiplying miles driven per week by rate per mile||$3,750 (2,500 miles x $1.50)|
|Annual Revenue (Gross)||Calculated by multiplying weekly revenue by 52 weeks||$195,000 ($3,750 x 52 weeks)|
|Desired Annual Revenue (Net)||The annual revenue figure provided in the text||$160,000|
|Implied Weekly Mileage for Desired Annual Revenue||Calculated by dividing the desired annual revenue by the product of rate per mile and 52 weeks||Approx. 2,051 miles ([$160,000 / ($1.50 x 52 weeks)])|
How to Start your Hot Shot Trucking Business
Starting a Hot Shot Trucking Business might seem like a long and complex process, but let's break it down into simpler steps and key points for better understanding:
1. Pre-Start Checks:
- Just like athletes need to be physically fit, hot shot truckers need to pass certain health checks to ensure they're fit for the job.
- You'll need to get a DOT (Department of Transportation) medical card by passing a physical exam that checks basic health metrics like your medical history, vision, and hearing.
- This exam typically costs around $120 and if you pass, you can operate commercial vehicles for 24 months before needing a new exam.
- Insurance is like a safety net for your trucking business, covering unexpected costs that might arise.
- Get a commercial insurance quote using your Vehicle Identification Number (VIN) to have an idea of your insurance costs.
- Your driving experience and record will affect your insurance premiums; if they're high, leasing might be a better option than owning at first.
|Health Check||Physical examination for DOT medical card||$120 (approx.)|
|Insurance Quote||Estimate of insurance premiums||Varies|
2. Establishing Your Business:
- Register your business on your state's website to get an Employer Identification Number (EIN), which is like a social security number but for your business.
- This allows you to open a business bank account and receive payments from customers.
- Apply for a Motor Carrier (MC) number from FMCSA (Federal Motor Carrier Safety Administration) to legally operate across state lines and designate legal representatives in the states you operate.
|Business Registration||Register business, obtain EIN||Legal business entity|
|Operating Authority||Apply for MC number from FMCSA||Legal authority to operate|
3. Financial Commitments:
- Commercial Insurance:
- Required to activate your MC number with brokers typically requiring $1 million liability and $100,000 cargo insurance policies.
- Monthly premiums could range between $1,000 and $2,500 depending on various factors.
- Startup Costs:
- The initial investment could range from $15,000 to $30,000, varying based on personal circumstances like whether you already own a truck or not.
- Costs include truck and trailer purchases, insurance down payments, and legal fees among others.
|Financial Aspect||Description||Cost Range|
|Commercial Insurance||Liability and cargo insurance||$1,000 - $2,500 per month|
|Startup Costs||Initial investment including vehicle purchases, insurance, and legal fees||$15,000 - $30,000|
- Seek help from experts like a CoverWallet insurance agent for handling paperwork and ensuring that your applications are error-free to avoid delays in starting your business.
By following these steps and considering the associated costs, you can work towards starting your own hot shot trucking business.
Five Reasons Why Hot Shot Truckers Fail to Make a Profit
Hotshot trucking can be a lucrative venture, but like any business, it has its challenges. Here’s a simplified breakdown of why some Hotshot Trucking businesses struggle to turn a profit, especially in their initial year:
1. Lack of Emergency Funds:
- Some individuals start by investing in new trucks and trailers but forget to keep aside some cash for emergencies.
- Emergencies like vehicle maintenance or tire replacements can halt operations if not addressed promptly.
- It's wise to have a financial cushion, about $5,000 to $10,000, to cover unexpected expenses.
|Emergency Funds||Money set aside for unexpected expenses||Save $5,000 to $10,000|
2. Limited Time on the Road:
- To earn significantly, spending more time on the road, perhaps three to four weeks at a stretch, is crucial.
- Staying flexible with travel plans and not returning home every weekend can lead to more job opportunities and higher earnings.
|Time on Road||More time on road equals more earnings||Stay flexible with travel plans|
3. Choosing Low-Paying Freight:
- Settling for loads that pay less, say around $1.20 to $1.30 per mile, can affect profitability.
- Aiming for higher-paying loads, at rates above $2.00 per mile, can ensure better financial stability.
|Freight Selection||Avoiding low-paying loads||Target rates above $2.00 per mile|
4. Ineffective Spending Management:
- Keeping a close eye on where the money is going and curtailing unnecessary expenses is crucial to stay in the black.
- Effective financial management is key to avoiding debt and ensuring the sustainability of the business.
|Spending Management||Monitoring and controlling expenses||Practice effective financial management|
5. Poor Business Management:
- Lack of solid management practices can lead to financial woes, tarnished reputation, and operational hurdles.
- Staying updated with industry changes and adapting to new regulations is vital for running a successful Hotshot Trucking business.
|Business Management||Maintaining good business practices||Stay updated and adapt to industry changes|
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Checklist to Start A Hotshot Trucking Business
- FIND YOUR NICHE: Selecting a specific niche helps position oneself as an authority, impacting rates, equipment, and freight lanes used.
- DECIDE ON YOUR BUSINESS STRUCTURE: Choosing between business structures like sole proprietorship, LLC, or S corp, affects tax and liability aspects of the business.
- CREATE A BUSINESS PLAN: A business plan acts as a roadmap for your trucking business, outlining the type of trucking services you wish to provide.
- OBTAIN TRUCKING AUTHORITIES: Acquiring necessary permits and authorizations from FMCSA is crucial for operating a trucking business legally.
- SECURE BUSINESS FUNDING: Capital between $10,000-$30,000 is often needed to cover basic startup expenses like insurance, permits, and down payments.
- CHOOSE THE RIGHT TRUCK / TRAILER: The choice of equipment significantly affects the earning potential and the rates of freight.
- INSURE YOUR TRUCKING: Insurance is essential to cover unforeseen costs related to vehicle damage or road accidents.
- KNOW YOUR EXPENSES & OPERATING COSTS: Understanding fixed and variable costs is key to ensuring financial stability in the trucking business.
- CHARGE THE RIGHT MILE RATE: Setting competitive rates that also cover all operating costs is crucial for profitability.
- USE THE RIGHT FUEL-BUYING STRATEGY: Adopting a smart fuel-buying strategy can help manage a major expense, which is fuel, constituting up to 40% of operating costs.
- MARKET YOUR BUSINESS: Effective marketing helps in attracting customers and is vital for the growth of the business.
- GROW YOUR CLIENT LIST: Diversifying the client list ensures long-term sustainability and profitability of the trucking business.
- CHOOSE THE CARRIER YOU WANT TO DRIVE FOR: Selecting the right carrier based on driving habits, areas of operation, and freight type is important.
- FIND MANY THINGS TO HAUL: Utilizing online load boards initially can help build relationships with shippers and brokers.
- SHIPPERS DIRECTLY WORK: Working directly with shippers instead of through brokers can be more profitable.
- SEEK OUT THEIR CREDIT STANDING: Assessing credit standing of brokers and shippers is vital for ensuring regular payments.
- RUN AN EFFICIENT BACK OFFICE: Managing paperwork efficiently or having support for it ensures smooth operations and allows focus on core trucking activities.