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NZ TRUCKING ASSOCIATION - Are you starting out in trucking?

Wednesday, December 4, 2019

Do you really understand what running a trucking business involves? Trucking is a tough and competitive industry; margins can be slim. Running your own trucking business requires a whole different level of skills and knowledge. Getting good quality advice from people who are experienced in the trucking industry is the first decision you need to make. The team at the NZ Trucking Association should be your first point of contact. The team has more than 40 years of experience in the trucking industry and specialises in providing advice to new entrants to the trucking industry. Our experience is earned the hard way, by running our own trucking businesses. Without good advice your chances of success are greatly reduced. We will help you to understand what is required to get started: transport service licence, delivery rates, contractual agreements, capital equipment, finance, insurances, regulations, obtaining supplier credit agreements, servicing, fuel, tyres, road user charges (RUCs), GST, income tax, and ACC levies to name a few.

If you intend to operate a vehicle that has a gross laden weight exceeding 6000kg, you will need a transport service licence (TSL). To obtain a TSL, you must first apply through NZTA, where you will be required to pay a fee and pass a knowledge-based test. You will also need to meet the ‘Fit and Proper Person’ criteria. To pass these criteria, NZTA will consider any criminal history, fraud, dishonesty, evasion of RUC, bankruptcy, driving offences, and other considerations. It is illegal to operate a transport service using another person’s or business’s TSL. We will help you to understand all the costs involved in running the business. Sometimes the difference of a few cents on a kilometre rate can be the difference between success and failure. Does the business that you are going to contract to have a good history of prompt payment? If you have to wait 90 days – or sometimes more – for payment, it won’t matter how good the rates are if you can’t afford to make the payments on the truck or fuel account. Our members have free access to our industry respected cost modelling service, where we can very quickly work out if your business venture is going to be profitable and sustainable.

We can provide advice on contracts. Many contracts appear to be for long terms but are in effect only 30-day contracts because of the termination clauses they contain. Contracts can contain restraint of trade clauses that will restrict your ability to earn an income if you decide to leave. Using our experience, we can advise you on the capital equipment needed for your business. As a new business, money will be tight until you get established. So concentrate on getting what you actually need for the job, rather than what you would like. Do you really need that flash new truck with all the extras, or can you make do with something more modest, or even secondhand? Getting the right finance structure for your business is important. We can help you with this. Have you got any equity of your own? If so, it certainly helps to reduce your monthly commitments. Many finance institutions will loan you 100% of the purchase costs, but you will be paying a higher interest rate for this privilege.

The danger with this option is that if after a few months you realise that the business is not going as well as you had hoped, and you decide to sell up, it is likely that with the depreciation of your assets that you will still owe considerably more than the equipment is worth, leaving you financially worse off than before you started. With the right advice your monthly payments can be structured to suit your budget. Insurance is a major consideration. Motor vehicle insurance, carriers’ liability and public liability are necessities. Worth considering is a loss of use extension on your motor vehicle policy that provides cover for a rental vehicle if yours is off the road due to an accident. Accident and illness or income protection insurance will help cover the cost of your commitments if you are unable to work for an extended period due to health issues. As a member of the NZ Trucking Association, our key insurance partner gives you access to insurance specific to the transport industry at very competitive rates.

NZ Trucking Association members enjoy substantial discounts on fuel, tyres, insurance, oil, finance, and a range of business support services. This gives your business a competitive advantage. Setting up your back office correctly is important. You will probably be working long hours when you start out. Do you have a partner who can help with key tasks such as paying invoices, GST, wages, PAYE, budgeting the finances and arranging the servicing, among other things. If not, then you will need the services of a good accountant or bookkeeper who understands the trucking industry. You can’t afford to get this wrong, as your business success depends on it. We can point you in the right direction for the best advice. Running your own trucking business can be profitable if you get the right advice at the start. More than 80% of the trucking businesses in the country are owner-operators, who got their start with a single vehicle – with some having become the largest and most successful trucking businesses in New Zealand.