The commercial trucking industry is the backbone of modern commerce, transporting goods across vast distances and connecting businesses to consumers. While it plays a critical role in the global economy, the commercial trucking business is not without its fair share of challenges and risks.
Aspiring entrepreneurs looking to enter this industry need to be well aware of these risks before taking the plunge. In this article, we’ll explore some of the reasons why the commercial trucking business is risky to step into.
High Initial Costs
To start a commercial trucking business, you must have a significant upfront investment. This investment will cover costs like purchasing trucks, trailers, setting up an office, etc. There are also expenses related to insurance, fuel, maintenance, permits, and licenses.
For new entrants, these initial costs can create a financial burden that takes time to recoup through operational profits. Economic downturns or unexpected fluctuations in fuel prices can exacerbate this financial strain, making it difficult to maintain a healthy bottom line.
Driver Shortages
The trucking industry is currently struggling with a shortage of drivers. WILX reports that by 2030, the American trucking industry could see a shortage of 160,000 truck drivers.
The lack of skilled drivers can lead to increased labor costs as companies offer competitive wages to attract and retain talent. Moreover, a shortage of drivers can disrupt operations, delay deliveries, and strain client relationships, ultimately impacting the company’s reputation and customer satisfaction.
Accidents and Legal Trouble
In 2021, while most of the US was dealing with a shortage of truck drivers, St. Louis was gaining drivers, as reported by KSDK. Between 2020 and 2021, St. Louis added 124 new drivers locally. While this was positive news for the city’s trucking sector, it was still not worth celebrating. That’s because truck accidents in this part of Missouri are witnessing an increase, as explained by TorHoerman Law.
FOX 2 recently reported such an accident where one person was injured. That individual will likely have contacted a St. Louis trucking accident lawyer to seek compensation for his injuries and other associated losses. As a result, the trucking company responsible will probably have to settle with this individual at some point or take the matter to court. The chance of getting caught up in such legal drama poses a threat to this industry, making it a risky business to get into.
Fluctuating Fuel Costs
Fuel is one of the most substantial expenses in the trucking industry, and its costs are highly volatile. Fluctuations in oil prices, geopolitical tensions, and supply chain disruptions can lead to unpredictable changes in fuel costs.
For trucking businesses operating on thin profit margins, sudden spikes in fuel prices can have a devastating impact on profitability. While some companies use fuel surcharges to mitigate these costs, these surcharges may not fully cover the increased expenses. That, in turn, leads to decreased profitability during times of high fuel prices.
Regulatory Challenges
The commercial trucking industry is subject to a complex web of regulations aimed at ensuring safety, environmental responsibility, and fair labor practices. These regulations include rules governing hours of service, vehicle maintenance, driver qualifications, and emissions standards.
Staying compliant with these regulations requires continuous monitoring, documentation, and training. All these add to the operational complexity and cost of running a trucking business. Non-compliance can result in hefty fines and even the suspension of operating licenses, putting businesses at risk of closure.
Competitive Pressures
The commercial trucking business is highly competitive, with many players vying for contracts and clients. This fierce competition can lead to price wars, driving down freight rates and squeezing profit margins.
Smaller businesses may find it challenging to compete with larger companies that benefit from economies of scale and established customer networks. The pressure to cut costs to secure contracts can lead to compromises on safety and maintenance. That, in turn, will potentially put both the business and its drivers at risk.
Technological Disruptions
While technological advancements have the potential to improve efficiency and safety in the trucking industry, they also present challenges for those entering the business. Automated driving technologies, for example, have the potential to transform the industry by reducing the need for human drivers.
While this could address the driver shortage, it also raises concerns about job displacement and the need for costly technology investments. Keeping up with these technological changes requires ongoing investment in training and equipment, creating an additional layer of risk for new entrants.
Conclusion
All in all, the commercial trucking business, although profitable, is still very risky to get into. Yet, many entrepreneurs are taking those risks and navigating them well enough to make it big in this market. As long as you, too, can find your way around these challenges, making a good profit in this market shouldn’t be too difficult.
