The logistics business (aka transportation business) is a very profitable business that is always in demand. But it is competitive nonetheless, with many transportation companies vying for your attention. Still, the quantum of the overall industry is vast, and it keeps all of them going. Building a logistics company from scratch requires expertise, dedication, and a lot of hard work. We will share some basic guidelines on how you can start your logistics company with ease and the process for doing that. After reading this you will know how to manage the logistics business. So, start reading.
What Is a Logistics Company?
First, let us understand what is a logistics business? In simple words, building a logistics company transports goods or passengers from one place to another.
They form a vital link in the overall supply chain of goods and services.
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And while transportation constitutes their core activity, modern logistics businesses provide other benefits as well. These include packaging, warehousing, shipping, inspection, security, and disposal of goods.
Starting a Logistics Company Business
We will now discuss various steps explaining how to open or a logistics company. So, let’s start on it.
Naming Your Organization:
What is in a name? You might ask. Our response would be everything. The title should reflect the nature of your business and its intended functions. It should be simple, catchy, and short.
While naming your company, please do not give it a name that strictly defines its operations.
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You might want to add more services to it besides transportation as the firm grows; in that scenario, your name might sound redundant as it won’t describe its new services.
Therefore, always finalize a name that is representative of the industry you are representing but in a generic sort of way.
Determining the Type of Your Logistics Business:
Logistics businesses have evolved with time, and there are different types of them.
A bicycle rental service, in essence, is a logistics company, and so is a big corporation transporting containers between one continent to the other.
To decide the niche of your enterprise, do some research and try to assess in which direction they are heading. You might be able to come up with an entirely new type of idea for your venture.
You can also analyze the demand and supply gap of logistics in your area and try to fit in the niche where the demand is high, but the supply is low.
Arrange Finances:
Finance is the lifeline of any commercial venture. And a logistics business is no exception to the rule.
Also, there are examples where entrepreneurs established transportation firms with zero investment. They paid all the expenses from the revenues they generated from their clients.
But this business model is fraught with risks and not worth following. You should estimate the financial needs of your enterprise and start arranging for it.
There can be several sources for financing your business. Therefore, you can take a bank loan, arrange investor funding, boot financing, crowdfunding, etc.
Prudence demands that you arrange as much finance as to cover six months of your transportation business’s operations.
These expenses can be buying or leasing trucks, salaries, legal fees, operational costs, etc. It is advisable that you start on a small scale and then expand as your organization progresses.
Tax ID Number or Employer Identification No:
So, to start a legitimate transport business, you need to get a tax ID or employer identification number (EIN) issued by the federal government.
It is not only a legal requirement, but it also entails several benefits for your business. Like for example, you will be recognized as a legal business by the government.
Other benefits of acquiring an EIN can be; you can get a loan from banks, your credit history establishes, and protect against identity theft and similar forgeries.
Legal Aspects:
You also need to obtain licenses and permits to operate from the state transportation authorities and the requirements of it vary regionally. You can check your local licensing authority and asks for the procedure.
In most cases, you will need to submit proof of your identity and your business to them.
As building a logistics company, your business operations may span regionally or globally so you must get all the legal permissions with you to start them.
You can always hire the services of a lawyer who will walk you through the registration process. He will, of course, charge for his services that you can negotiate with him beforehand.
Legal Status:
At this stage, it is also important that you finalize the legal status of your transportation business before building a logistics company.
You can register your logistics business as a sole proprietorship, a partnership, a private limited corporation, etc.
However, each business entity has its advantages and disadvantages. You can take legal counsel here to know which type would suit you the best.
Get Insurance:
Insurance is very crucial for a transportation business. It is carrying people and cargo, and there are chances of accidents along the way.
Insurance would provide the much-needed cover to your goods from accidental losses and even unforeseen delays.
Search for a good insurance company and get quotations for different packages, so, choose the one that provides the maximum coverage with minimum cost.
Devise a Business Plan:
A business plan lies at the heart of every business. It is the roadmap that you must follow to reach your destination.
A transportation business plan will spell out how you are going to achieve your overall objectives. Typically, a business plan consists of the following sections.
- Executive summary
- Introduction to the business
- Goals and objectives
- The scope of the transportation business
- Target market
- Business marketing
- Competitive edge
- Operational capacity
- Management
- Financial analysis
Building Your Fleet:
Getting appropriate and reliable vehicles are vital for building any logistics company before it starts operations.
They are integral to the efficient running of your transportation business in every sense of the word. An old, rickety vehicle can damage the reputation of your organization.
While choosing suitable vehicles, you need to consider certain factors that we are outlining below.
- The volume and weight of your intended cargo
- Will you be carrying humans too?
- The distance your vehicles would cover.
- The terrain that would be used for transportation by the vehicles.
- Models, make age, and general fitness of the vehicles.
- Safety, comfort, and convenience features in them.
- Their average fuel consumption
- The extent of their expected depreciation over time
- Are any eco-friendly options available in them?
Therefore to get the best deal, take your time and study all the available options.
Please do not rush through it as your transport business’s success very much depends on the vehicles you choose for it.
Hiring the Best Staff:
As much as it is crucial to get good trucks, it is equally important that you hire the most qualified persons to drive them. For this to happen, establish a clear and strict hiring process.
It should also stipulate what qualities you are looking for and what would be your hiring criteria.
Do consider the local, national, and even international laws of transportation in this regard and ensure you comply with them.
Initially, you won’t require many people to run your business, but later, you would need more people for different jobs as you will grow. These might include the following.
- Mechanics and other technicians
- Sales and marketing experts
- Human resource specialists
- Seasonal employees
- Administrative staff
Pricing:
Pricing is very crucial for your transportation business to excel and thrive.
It requires diligent planning and razor-sharp precision to arrive at a price that is acceptable to the customers and beneficial to the company.
If you set your price too low, you can be labeled ‘cheap’ or ‘low-class’ by the clients.
Conversely, if the price is set too high, then it will drive the customers away. To select a realistic price, first, see what your competitors are offering to their users.
Then rationally assess your company and check its strengths and unique selling points.
If you think you have enough unique selling points to command a higher price than your competitors, do it; otherwise, follow a more realistic price formula.
Choosing the Right Location:
The physical location of your company would matter as much.
Therefore, it leaves a good impression on the clients, and they feel that the organization represents a genuine business intending to make it big.
The office should preferably be located in a commercial district with easy access.
Besides the office, you would also need space for the warehouse by building a logistics company.
Sometimes it is hard to find ample space for the warehouse downtown; in that case, you will have to look for it in the suburbs.
The warehouse should be located near highways so that the cargo trucks do not get stuck in city traffic.
Make a Website:
You cannot ignore the power of the internet in today’s times. You must build an SEO-compliant and adequate website for your company before you officially start running it.
A strong presence on social media is equally important as well. Target your audience, create an online community and engage them by regularly posting on your social media.
Many people nowadays contact via social media channels, so ensure that your company correctly answers all their queries in the shortest possible time.
You can get more customers online than you would through traditional methods.
Advertising and Marketing:
It is the age of marketing. For an effective launch of your organization, you will have to indulge in target-based and result-oriented marketing and advertising techniques. They include both traditional and online advertising methods.
Therefore, you can hire a digital marketing expert for the online advertisement of your business. It is worth the effort and money spent. You will be amazed at the results.
Secondly, for traditional marketing, you can hire a PR firm. You can throw a launch party for your company and invite the industry bigwigs and potential customers. If done right, the advertisement can take you places.
Know Your Competitors:
Getting to know your competitors is also very important. You can learn from their mistakes and emulate their success stories as well.
Develop a cordial relation with them, you are all in the same trade, and more often than not, your paths will cross. Therefore, it is essential to develop a healthy, working relationship with your competitors, whether big or small.
Stay Focused and Motivated:
Staying put and persevered is the key to success for any business, and it is the same here for a transportation business.
To keep yourself motivated, set short, medium, and long-term goals. Fix a realistic timeline for these goals and try achieving them on or before the deadline.
It will keep you going, and you can gauge your performance as well. Follow your business plan and remain faithful to it.
Pat yourself on the back for every achievement and work harder.
If you fail to achieve your target, analyze where you are lacking and take corrective measures so that it does not recur. This self-accountability will keep you on track and you will not lose sight of the big thing.
Precautions:
While starting your enterprise, you would be better off avoiding the following mistakes;
- Do not forget to ensure your transport business. You should follow a plan that gives you comprehensive insurance cover. As it is prone to accidental losses, so plan and do not leave anything for luck.
- Fulfill all the legal requirements. Your business should have all the requisite documentation, permits, licenses to operate lawfully. Please make no mistake about it. The nature of this business is such that a bit of laxity has the potential to pay you dearly.
- State everything clearly when you start a transportation contract with a customer. Do not leave anything in doubt. There should be a complete understanding between you and your customer about the terms and conditions. It is crucial to avoid any disputes in the future.
Conclusion:
We have outlined all the critical steps for building a logistics company. Now you know, what do I need to start a logistics company or how to be successful in logistics. We hope you will find this to be helpful.
Transportation is big business, and you can earn handsomely through it. The key is to make a viable business plan, focus on your clients, and giving them personalized service.
Staying competitive is also very important as there are hundreds of logistics companies there, and to be relevant, you have to remain viable
