How to start a transport business

If you know a lot about the transport industry and are keen to run your own business, this short guide aims to cover the steps you need to take and help you understand how to start a transport business. 

Why start a transport business?

Demand for transport services is high right now. A shortage of HGV drivers and high fuel costs mean that many clients are desperately looking for suppliers to transport goods around the UK and on the continent. 

That means that if you have experience in the haulage industry and fancy being your own boss, it could pay to set up your own transport business.

Be warned, however, that it is also a competitive industry, so it’s crucial to do some research and take steps to keep your costs low to increase your chances of success. 

What are the steps to opening a transport business?

If you’re thinking about opening a transport business, below are the key steps to follow to get your plans off the ground. 

Step 1. Identify your niche 

First of all, you need to decide what sort of service you want to offer. You can, of course, operate in a number of areas, but it’s generally better to establish a particular niche at the start to help you stand out from your competitors and perhaps attract more specialist clients. 

Some examples to think about include waste disposal, parcel delivery, and vehicle transport, but there’s a whole range of alternative options. Make sure you carry out some research on your chosen niche to check there is enough demand before you go any further. 

Step 2: Decide on the size and type of fleet you want to build

Now you need to work out how many vehicles you want and how fast you want to expand. It’s generally better to start small and have a fleet of, say, two to five vehicles as this can help keep your overheads down. You can then decide as and when you want to add to your fleet, depending on how well your business is performing. 

Another consideration is whether you want petrol or diesel vehicles, or maybe even electric. You’ll also need to decide on the size of the vehicles, which will depend on what type of services you’re offering. 

Step 3: Choose a location

The location of your business also needs to be considered carefully. To help you make your decision, you’ll need to think about whether you can easily access major road routes and what rental prices are like. Warehouses tend to be cheaper to rent compared to standard commercial properties, but prices will vary depending on the region you’re based in. Keeping your rental costs down will help reduce your overheads and potentially increase your profit.

Step 4: Work out your costs

Your next step is to think about all the regular costs your business will face. These include the purchase or leasing of vehicles, vehicle maintenance, fuel and insurance, plus staff wages, your rent and advertising and marketing fees. Knowing exactly how much to budget for these items will ensure you don’t end up spending more than you can afford.

Step 5: Be aware of your legal obligations

You’ll need to take out fleet insurance to cover your vehicles, as well as goods in transit insurance to cover the items you transport. It’s worth having breakdown cover too. 

On top of this, you’ll need to factor in other business insurance costs such as public liability insurance, employer’s liability insurance and professional indemnity insurance. 

Public liability insurance protects you against costs resulting from third party injury or damage to property, while professional indemnity insurance means you’re covered if a client loses money as a result of negligence in the services you’ve provided.

Employer’s liability insurance is likely to be a legal requirement if you employ staff. It pays out if an employee becomes ill or injured as a result of the work they do for you. 

In addition, there are other rules you’ll need to abide by, including tachograph legislation. A tachograph records information about driving time, speed and distance and is used to make sure drivers and employers follow the rules on drivers’ hours. You’ll need a tachograph if the vehicle you’re using comes under EU or AETR rules. 

Step 6: Sign up to a freight exchange

It can also be worth signing up to a freight exchange website such as Haulage Exchange. This can make it easier to run your company and allow you to check the status of your freight operations. It can also help you find trustworthy and compliant drivers for your business and will provide a host of tips to help you build a successful business. 

Secure funding

Most people starting a business will need to borrow funds to help get them up and running and also to expand later down the line. 

One option to consider is a startup loan which is designed to help new businesses launch and expand. You’ll be given a lump sum of capital that you then repay in monthly instalments at a fixed rate of interest. However, you will need to be at least 18 years old and live in the UK to qualify and your business must not have been trading for more than 36 months.

If you don’t qualify, you might be able to apply for a standard business loan from a high street bank or online lender. Again, this will enable you to borrow a lump sum of cash over a set term.

It can also be worth looking into asset finance to help you acquire the vehicles you need to run your business. Within this, there are three options to consider – hire purchase, leasing and contract hire. 

If you opt for hire purchase, you’ll pay an initial deposit for the vehicle and the remaining cost is then divided into monthly instalments, with interest added. You’ll own the vehicle outright after you’ve made the final payment. 

With leasing, you rent the vehicle from a finance provider and pay a regular fixed fee over a set term. Again, interest is added to this. At the end of the term, you’ll usually be given the options of paying a lump sum to buy the vehicle, continuing to lease it, or cancelling the agreement and returning the vehicle.

Contract hire is often used for new or nearly new vehicles. You sign a contract with a finance company that buys the vehicle you want and then hires it back to you. Once the contract has come to an end, you return the vehicle and can then acquire a new one with a new contract.

Get started with Swoop

Not sure which funding option is best for you and your new transport business? Don’t hesitate to contact the team of experts at Swoop who will be happy to talk through your funding requirements and help you find the most suitable choice for your new business. Get in touch today.

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Written by

Rachel Wait

Rachel has been writing about finance and consumer affairs for over a decade, helping people to get to grips with their finances and cut through the jargon. She's written for a range of websites and national newspapers including MoneySuperMarket, Money to the Masses, Forbes UK, and Mail on Sunday. Rachel has covered almost every financial topic, from car insurance and credit cards, to business bank accounts and mortgages.

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