How to Start a Hotshot Trucking Business
Is your happy place a garage full of spare parts, heavy tools, and engines? Do you like being on the road but are not necessarily into long-haul driving? Are you looking for an opportunity to start your own business without worrying about a significant startup investment?
If you answered yes to these questions, read on to find out what it takes to start your own hotshot trucking business and become an owner-operator.
Business Description
Hotshot trucking is a specialized form of freight transportation. It refers to hauling smaller, LTL (less-than-truckload) cargo to a customer as soon as possible. Goods are usually high priority; their transport is time-sensitive and often last minute. Due to these factors, businesses commonly operate with pickup trucks and trailers and locally within a defined area. That said, long-haul hotshot trucks are sometimes used to ensure goods get from A to B within the timeframe.
Industry Summary
Trucking made up over 80% of the US total freight cost in 2019, bringing in gross freight revenue of $791 billion. Of that, 23% is attributed to LTL.
After the supply chain disruption experienced in 2020 and 2021, Hot Shot Trucking reported a welcome 2.7 % growth nationwide in for-hire truck tonnage (May 2022).
According to CloudTrucks, most carriers are small companies – 91.3% operate with six or fewer trucks, and 79% employ fewer than ten workers.
Hot shot trucking is often used as a stepping stone into the wider trucking industry due to its relatively low barrier to entry. Most hotshot trucking businesses are owner-operated. Alternatively, many operators choose to lease on a larger trucking company such as ACME Truck Line, Expedited Freight, Hotshot Logistics, or USA Truck Company.
Related Industries
Industry Trends
After the supply chain disruption of 2020/21, all forms of transportation of goods are in hot demand. CloudTrucks reports that the size of the LTL market segment in the US “has grown to $80.16 b in 2021 and is forecast to increase in the coming years.
As freight demand in the US and globally continues to increase, the driver shortage is ongoing. US census statistics show truck drivers are less likely (4.1%) to be unemployed than all workers (5.3%).
These statistics make now an excellent time to start your own trucking business. And if you are planning to employ hotshot drivers, make it your priority to attract and retain well-qualified staff.
Target Market
Your target market will be any shipper or broker that needs urgent or time-sensitive transportation of their goods and supplies. For example, products most likely requiring immediate transport to a specific customer are agricultural and dairy produce, pharmaceutical products, and building materials such as lumber and wood products.
Understanding industry needs in your area will be vital for your business to be successful. Depending on those needs, you will be able to determine the size of your fleet, whether you need additional, specialized equipment or hydraulics to lift heavy equipment, for example, and whether your services will remain local or will focus on cross-state transportation.
Checklist for Starting a Hotshot Trucking Business
The hotshot business is perfect for people who are looking for a way to be their own boss and make their own schedule. In this article, we will discuss the steps you need to take to get started with your own hotshot business. So, if you are ready to jump into the world of entrepreneurship, keep reading!
Step 1: Write a Business Plan
First and foremost, you need to have a clear idea of what your business is going to be about. This means creating a business plan that outlines your goals, strategies, and how you intend to achieve them. Without a well-thought-out plan, it will be very difficult to make your business successful.
Related: How to write a business plan
Step 2: Name the Business
After you have a plan in place, it’s time to start thinking about what you want to name your business. This is an important step because it will be the first thing potential customers see when they’re searching for hotshot trucking services. Choose a name that is catchy and easy to remember so people will be more likely to choose your business over others.
After finding the perfect name, be sure to check your state requirements for naming a business.
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a hotshot trucking business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!
Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
Depending on the size of the operation, a hotshot business can be run out of a home office from the owner’s home. Preferably your equipment will be secure as well while at home too.
Be sure to research local regulations in addition to any restrictions from HOAs or landlords for running a business out of your home.
Step 5: Apply for Business Licenses and Permits
Like any business, a hotshot trucking business owner will likely need to obtain a variety of business licenses and permits, Employer Identification Number (EIN) in order to operate.
The Federal Motor Carrier Safety Administration (FMCSA) requires drivers to pass a Department of Transportation (DOT) physical to obtain a Commercial Driver’s License (CDL) and motor carrier operating authority number (MC).
Related: Common business licenses, permits, and registrations by state
Step 6: Find Financing
Due to the cost of vehicles, unless you have a large amount of money saved up, you’ll likely need to find some financing for your hotspot business. This can come in the form of loans or investors.
There are a number of different ways to finance your business, so be sure to explore all of your options before making a decision. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Marketing a hotshot business can be a challenge, but with the right strategy, it can be a success. First, identify your target audience. Are you marketing to businesses or individuals? Once you know who your target audience is, you can create a marketing plan that resonates with them.
Next, consider your budget and what kinds of marketing activities you can afford. If you have a limited budget, focus on online marketing activities that are cost-effective, such as social media campaigns and search engine optimization.
Finally, don’t forget to measure your results so that you can see what’s working and make adjustments as needed. Marketing a hotshot business takes effort and planning, but it can be done. With the right approach, you can attract new customers and grow your business.
Related: Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 9: Get Business Insurance
Every business needs insurance, but there are some types of businesses that require special coverage. For example, a hot shot trucking business that delivers time-sensitive cargo needs to have insurance that covers lost or damaged shipments. If the business owns its own truck, it also needs to have insurance that covers the vehicle in case of an accident. In addition, the business should have liability insurance in case one of its employees damages someone else’s property while on the job.
If you are using a personal vehicle in the business, be sure to review your insurance policy as many insurers will not cover a personal vehicle unless they have commercial auto insurance coverage. To get a quote, your insurance carrier will likely request your motor vehicle record (MVR) which can take time in some states.
By carefully selecting the right type of insurance, a hot shot business can protect itself from financial ruin in the event of an accident or other disaster.
Step 10: Set up an Accounting System
Last but not least, you’ll need to set up an accounting system for your business. This will help you track income and expenses so you can stay on top of your finances. There are a number of different software programs available, so be sure to choose one that’s right for your needs.
Related: Setting up the accounting for your business
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How much does it cost to start a hotshot trucking business?
One of the advantages of hotshot trucking is its significantly lower barrier to entry compared to the rest of the trucking industry. Its operational costs are typically also far more modest. Still, startup costs can easily reach $30,000, so a good business plan will be essential to understand expenses and forecast revenue.
Budget items will depend on what market you will be servicing and whether you already own a truck, for example. However, here are some points you may like to consider:
– Basic class D driver’s license: You won’t need a commercial driver’s license as long as your cargo will remain less than 10,000 pounds.
– A USDOT (US Department of Transportation) number ($300) is a legal requirement for transporting clients’ cargo. You will also need an MC number if you operate out of your state. And to activate your MC number, you will need commercial insurance.
– Commercial and liability insurance can cost anything between $1,000 and $2,800 a month.
– Trucks and trailers: Especially if you already have one, a smaller truck typically also has the advantage of fuel economy and lesser on-road costs. If you don’t already own a pickup truck, you may need to budget a downpayment of $5,000 to $6,000 and monthly costs between $1,000 and $1,500. For a trailer, such as a Gooseneck, bumper pull, tilt deck, low boy, or flatbed trailer, you will need to budget around $10,000 to $18,000.
– General equipment: Ratchet straps, chains, and tarps will be needed to tie down cargo – $200
– Consider investing in scheduling and accounting software, and don’t forget to put aside a budget for marketing your services, networking, and staying informed about industry trends and requirements.
How much can a hotshot trucking business owner make?
Factors such as the cargo you will be transporting, the location and distance traveled, and your industry experience can influence salary – whether it is yours as the owner or a driver’s as your staff. Here are some US statistics from Indeed to serve as a guideline:
– Owner-operated driver: $146,000 / year
– Truck driver: $70,500 / year
Another way to look at salaries is the amount received per mile:
– Company solo driver: $0.40 – $0.64/mile
– Owner-operator: $0.94 – $1.79/mile
To help boost profits, be sure to take advantage of load boards which can help find additional work when returning home, so you don’t have to drive with an empty truck.
Are there grants to start a hotshot trucking business?
It’s extremely rare to find a grant to start a hotshot trucking business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a hotshot trucking business?
Knowledge of mechanics and excellent driving skills. Being a hotshot truck driver is a lifestyle choice for many. You will like being on the road for long hours, and you should be able to lift freight and handle, at times, heavy equipment.
It goes without saying that you’ll need a clean driving record and excellent driving skills -it will assure your clients that their cargo is secure with you.
You will also save yourself a lot of costs and headaches if you can undertake minor truck and trailer maintenance and keep your fleet in top shape and within regulations.
Time management and organizational skills. Scheduling, speed, and the capability to adapt on the go will be your best friends. Successful deliveries – and happy customers – rely heavily on perfect timing, good planning, and the ability to stick to it. It is a skill to know how to work a shift most effectively.
Don’t forget to factor in time to network, meet with potential customers, send quotes and invoices and ensure you stay up to date and within all necessary industry requirements.
Interpersonal skills. Although you may spend long hours on the road by yourself, good interpersonal skills and a positive can-do attitude will help you build your reputation and grow your customer base. In addition, you will need to be a good listener and communicate well with your clients, so that load requirements and deadlines are very clear and understood.
What is the NAICS code for a hotshot trucking business?
The NAICS code for a hotshot trucking business depends on the distance typically traveled. For businesses primarily working in their local market, their NAICS code is 484110 and long-distance trucking is 484112.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Final Thoughts
Google it, and you’ll see the word ‘hotshot’ describes an important or exceptionally able person. The hotshot trucking business is undoubtedly a very important part of the modern transportation industry -and its future looks promising. So now is an excellent time to follow up on your dreams.
