7 Steps To Starting A Transport And Logistics Business

Logistics is a big game both locally and internationally, because everything we use daily has been shipped and delivered across various destinations before it's sold and put to use. This is where you can cash in.
7 Steps To Starting A Transport And Logistics Business
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Entrepreneur Staff
Sales Enablement: Content Developer
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Thinking of starting your own transport and logistics company? While getting into the industry is not difficult, staying successful as a trucking company can be challenging if your business plan, finances and recruitment strategy aren’t solid from day one.

Whether you’re starting off with a bakkie or a minibus, you need to ensure you’re prepared for high competition because of the transport and logistics industry’s low barrier to entry. 

Why should I start a transport and logistics company?

Aside from the ease of access into the industry, you don’t need much capital to start off with – but you will need to do your homework. This is the only way you’ll build a sustainable business.

“In many instances the entrepreneur starts these businesses with little to no capital, relying instead on revenue derived from the business to cover all overheads from day one,” according to BizConnect. “Seek out customers and contracts before you start the business because transport contracts don’t magically appear later on.”

Related: Driving Profits In Transport

Now that you’ve established the kind of market you’ll be entering into, how do you go about starting your own logistics company? These are some of the top questions you should be asking before starting a freight company:

1. What costs do I need to consider when starting a transport company?

You don’t need to be a numbers genius, but a basic understanding of finances is helpful when launching any kind of start-up.

  • First, you’ll need to establish where you’re going to source capital to get your transport business started. There are multiple options including the bank, investors and bootstrapping.
  • Next, you need to consider the specific expenses associated with the logistics industry, for example the licence and toll expenses, aside from maintenance, fuel and driver skills development training costs.
  • Although you haven’t started running your transport and logistics company yet, you need to consider operating costs and maintenance expenses when drawing up your budget.  The latter is crucial for providing reliable service to customers as you must deliver the excellence you will market to them. While marketing may not seem important at this stage, it’s important to budget for this expense as your company grows.
  • Remember that besides all the above costs, you’ll require money to keep your vehicles safe when they aren’t in use and when they are on the road. Invest in a secure location and other security features, such as trackers.
  • Lastly, you’re going to need to pay your drivers and other staff salaries on a monthly basis, so factor in that expense when budgeting for your transport and logistics business.

2. What should I look out for when buying my first fleet of trucks?

Choosing the right vehicles for your transport and logistics company means your drivers will have the right vehicle for the job. This leads to efficiency and speed of service.

Related: Benji Coetzee Never Worked In Logistics, Find Out How She Launched Empty Trips A Successful Logistics Marketplace

“Seeing someone driving a small van to deliver a huge load will make your company look unprofessional, as will using large bus trailers to carry minimal cargo,” say experts in the truck and trailer industry.

Establishing what vehicles you need now will help you have a clearer idea of how much truck finance to apply for when you approach banks for transport financing options. This information helps structure your repayment plan and set your interest rate more accurately. You will be able to budget your finance accordingly.

Experts recommend investing in a long-haul truck for larger cargo and longer trips. Babcock International, for example, has vehicles that will meet this need, although the cost is slightly higher than an average-sized truck.

If you’re already considering new vehicles instead of preowned trucks for your business, you’ll benefit from a full warranty and service plans.

Related: 10 South African Entrepreneurs Who Landed Funding – And How They Did It

Once you’ve established how much you’re able to spend on your fleet, start considering the available models for your business’s specific needs.

“An important aspect to consider is what the vehicle will be used for. Now, this might sound simple, but it is an aspect that is often overlooked by many fleet owners. You need to have an idea in mind about what the vehicle will be used for before you can go to a dealership.” – Truck & Freight

There vital aspects to consider when choosing your logistics vehicles are:

  • What types of supplies you will be carrying
  • The volume of supplies you will be carrying
  • The types of terrains you will be driving over.

Courier companies will require different vehicles from moving companies, for example. Your idea of the ideal vehicle for your type of transport and logistics company may have to be adjusted based on the amount of finance you qualify for or how much capital you have managed to allocate to purchasing of vehicles for your fleet. 

Related: How To Keep The Wheels Turning For Your Transport Business

You may need consider viable alternatives to find the right vehicle. So, list features like safety, comfort and condition instead of looking for brand names and the latest models. “Being open to different vehicles is the key to a successful fleet vehicle purchase,” experts advise.

3. How can I get truck finance for my transport and logistics company?

Regardless of how vehicles are paid for, the cost of financing a transport and logistics business is the biggest expense you will have to manage.

Make sure you do your homework and understand the different options available when it comes to paying for vehicles. You can consider the following options:

  • Financial lease and extended rental agreements, where the use of vehicles is funded from revenue, no upfront payment is required, but the ownership remains with the lessor;
  • Instalment sale where a small amount relative to the total purchase price is paid as a deposit, your instalments are fixed, and you own the vehicle at the end of the term.

Related: How To Service Customers Through Reverse Logistics

Remember to factor in the running costs of operating a logistics company, such as maintenance and wear-and-tear. These expenses should be included when considering the amount of finance needed to launch and sustain your transport and logistics company.

Before approaching a financial institution for financing, devise a budget and calculate your affordability.

4. Where can I find training to help me start a transport and logistics business?

The Road Traffic Management Corporation provides regulated, professional training courses such as a National Certificate in Freight Handling. Contact TETA for a list of accredited training institutions.

The Department of Public Transport, Roads and Works is responsible for the issuing of operating licenses.

Related: A Free Business Plan Example to Launch Your South African Business

A National Certificate in Professional Driving is a valuable qualification that equips owners and managers with a variety of capabilities. It’s advisable to look for a qualification that has been accredited by the Transportation and Training Authority.

Remember that according to South African law, any vehicle on public roads needs to be deemed roadworthy by an official testing station. The roadworthiness test checks the following aspects of the vehicle:

  • Identification and documentation
  • Electrical systems
  • Fittings and equipment (including mirrors, safety belts etc)
  • Braking system
  • Wheels (including tyre condition)
  • Suspension and undercarriage
  • The steering mechanism is in order
  • The engine
  • Exhaust system
  • Transmission
  • Instruments
  • Vehicle dimensions.

5. How do I employ drivers to work for my transport business?

The key components of your business, besides your vehicles, are your drivers. Your drivers need to obtain the relevant licenses before they can be considered legal to operate vehicles in your transport and logistics business.

Related: 5 Different Types Of South African Business Structures

Avoid issues later on, with the law and your customers, by ensuring you’re recruiting qualified and experienced drivers at launch and as your business needs grow. Not only do quality drivers boost productivity, but your reputation is elevated when your clients know they can rely on your staff.

Invest in excellent employees and avoid setting the bar as low as the ability to drive and follow directions. Your drivers will need the relevant driver’s licences for different trucks and require training to handle driving in hazardous situations, like storms and heatwaves.

“Know how to deal with staff, and understand all of the shortcuts in the areas they’ll be delivering to,” advises Business South Africa. “They will also require excellent communication skills to relay messages about their whereabouts.”

6. Where do I find customers for my logistics company?

As mentioned earlier, everything around us needs to be delivered from point A, to point B. So, while it may seem that jobs are scarce and getting business is difficult in the beginning, avoid grabbing the first opportunity to get your first client.

Related: Seed Capital Funding For South African Start-Up Businesses

It may sound counterintuitive to let chances at getting the wheels turning pass by, but, it’s important to assess whether it’s worth your while or not. Proper planning is essential so it’s advisable to avoid ad-hoc business.

Remember that all you need to get customers’ attention is a computer, a smartphone and an Internet connection.

“Technology centred around cargo has advanced dramatically over the years, and as have the expectations of customers. Most large companies allow clients to book and track all of their parcels or deliveries online.” – Business South Africa

The best part is that, not only is getting word about your transport and logistics coming out there inexpensive, it’s also relatively easy and quick.

Related: Your Free Business Idea Evaluation SWOT Analysis Template

Embracing technology doesn’t mean setting up an elaborate website, but you do need to ensure that your customers can track their deliveries and reach you quickly if they need to. Perhaps you should implement an SMS notification system so clients can track their orders at the touch of a button.

Ensure your system is accurate when it comes to ETA for deliveries and any delays on delivery, giving clients peace of mind about using your service and the confidence to recommend you to others.

Your service needs to be as simple and convenient to use as possible.

7. How do I get suppliers to add my logistics company to their books?

The best way to get noticed and acquire regular business is by being reliable from day one. People like that. They notice and appreciate good service and when you start your transport business, it’s a good reputation to have.

Related: 2 Simple Ways to Keep Your Startup Growing

When a business decides to make use of your transport services, they need to be sure that you won’t let them down. Satisfied customers value trustworthy service and it’s easier to retain existing clients when you offer quality service. It also helps that good customers can encourage new business through recommendations.

Despite the many challenges that come with running a successful transport and logistics business, customers like to know that you’re giving of your best and consistency is key to build loyalty from these companies. 

It’s advisable to start out with logistics you’re best qualified to handle and work your way from there.

If you have experience with smaller items, start there, but if you intend to eventually expand your portfolio to include other specialised services, acquire as much comprehensive knowledge as you can, while building a strong set of connections in relevant regions across the industry, and possibly the country as well.

Related: Treat Yourself as a Client for Startup Success

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