Starting a transport business
Director Mike Johnston of Transport Concepts, a transport and distribution consultancy, says that starting a transport business can be tough. It is a hard industry for start-ups not just because it is capital intensive, but because you need to be reliable.
“Credibility is critical for a start-up transport company as any businesses requiring transport services has to know you are not going to let them down”, explains Johnston.
Threats facing the transport business are not just crumbing and congested roads and highways, traffic fatalities and injuries, but financial issues as well. “Don’t over indebt yourself. Take it slowly and make sure that you have the necessary skills. By this I mean, you might have the driving skills and licences, but you also need financial and business skills.”
“It’s best to have mentorship before you embark into this industry. Some of the areas you need to understand include the Traffic Act, operating cost estimates, licence fees, toll fees, maintenance and the escalation of fuel and other costs as well as vehicle performance formulae and terminology”.
“Remember there are vehicle schedules, staff duty rosters, maintenance programmes to worry about. Avoid running a business that is demand-responsive (ad-hoc jobs) because this results in operations being random rather than planned.
Think about each job offered and ask yourself if it’s what you are looking for, will it be profitable? If not, rather walk away,” Johnston advises.
How easy is it to start a transport and logistics business?
The transport and logistics industry is an easy business to enter, but the trick comes in sustaining the business. The transport business has a ‘low barrier to entry’ at the bottom of the market, meaning that anyone with a ‘bakkie’ or a minibus can start offering transport services. This results in a flood of competition at the bottom end of the market.
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. This lack of capital curtails marketing activities that may result in increased income.
With fierce competition, operators cut prices to survive barely making enough to cover their expenses. This naturally leads to a distressed business that is unable to survive.
Before starting a transport and logistics company, do your homework. Work out how you will build a sustainable business.
Seek out customers and contracts BEFORE you start the business because transport contracts don’t magically appear later on.