Business, Finances

How To Start Hotshot Trucking – Business Plan

Ever wondered how to start hotshot trucking? If you dream of owning a highly profitable business while traveling across the country, you should consider starting a freight business as it is the backbone of the American economy. The freight business is generating over $500 billion quarterly, and it’s growing each year.

Hotshot trucking is a good business that generates good income. While the restrictions make it difficult to break into a traditional trucking business, hotshot trucking might be more reachable. If you’re interested in starting your own hotshot business, you are in the right place. Here’s a quick guide on how to start a hotshot trucking business.

You might think that starting a trucking business is so complicated. However, there is actually a simpler way to work in the trucking industry, and you can actually start it in only a few days. Hotshot trucking is the answer for those who want to start a simpler trucking business.

However, there are some requirements that must be met before starting the freight business. Fortunately, these requirements are easy to meet, and you find a simple step-by-step guide below on how to start a hotshot trucking business.

Business Plan on How to Start Hotshot Trucking

Hotshot truckers are used by shippers and brokers with small packages that need to be delivered quickly. These drivers and operators are professionals who provide the time-sensitive deliveries, as well as project-critical cargos such as construction machinery and materials, agricultural machinery, and heavy machinery. Hotshot truckers usually use super-duty pickup trucks instead of class 8 trucks.

The hotshot trucking business can be very profitable if done properly. Having this business, you choose either becoming an owner-operator – owning and operating your hotshot trucks – or leasing your trucks to other companies. Now let’s move on to the step-by-step guide to starting a hotshot trucking business.

Now that you understand the basics of hotshot trucks let’s start with the details of starting a hotshot business.

1. Make a choice of specialization

The first and most important step in starting a hotshot trucking business is to choose your area of ​​expertise. If you are unfamiliar with freight transportation, you may not have the equipment you need to manage various packages. The good news is that you can choose the specialization of your freight business based on the equipment you have.

There are different types of trucks and trailers to handle different loads. Hotshot trucks are generally medium in size but larger than pickups. There are three types of trucks that are usually used for a hotshot business:

  1. Class 3 medium-duty trucks with a weight limit of 10,001 to 14,000 pounds. These trucks are mostly used by contractors and last delivery drivers. Some lesser hotshot loads sometimes use these trucks too.
  2. Class 4 medium-duty trucks with a weight limit of 14,001 to 16,000 pounds. These trucks are more prominent but still non-commercial.
  3. Class 5 medium-duty truck with a weight limit of 16,001-19,500 pounds. This category includes many of the smallest commercial trucks. 

Trailers are commonly used for the following tasks:

  • Bumper pull trailers are popular as simple transportation for packages less than 10,000 pounds. They are less expensive and shorter than heavy-duty trucks and also simple to operate, which makes them popular with civilian drivers.
  • Bumper pull trailers are widely used to deliver loads to construction sites or isolated locations with little turning room. These trailers have a wider turning span than gooseneck trailers. Bumper pull trailers can also deliver larger and heavier loads frequently.
  • Tilt deck trailers are advantageous for making large loading cargo easier by tilting the deck at an angle.
  • Lowboy trailers are ideal for transporting large loads because they have a low center of gravity.
  • Dovetail trailers are widely used to move vehicles or other wheeled equipment.

The advantage of starting a hotshot trucking company is that you can choose to transport only light cargo. Small refrigerated trucks and trailers can also transport medical equipment and food.

You can change your mind at any time but start with an industry that you are passionate about. As you specialize, clients are more likely to refer to similar projects. Choosing a specialization can require trial and error before deciding what is best for your desired lane.

2. Set up a limited liability company (LLC)

The next important step in setting up a hotshot trucking company is to establish an LLC. A limited liability company (LLC) must be incorporated and registered in your state. This is the first step in incorporating your company, and whether you are doing business alone or planning to invite others to join, set up a legal corporation has many advantages, such as:

  • Limiting personal guilt.
  • Ownership and management flexibility.
  • Tax-related benefits.
  • There is less paperwork.
  • Profit-sharing is flexible.

So now you know that setting up an LLC will benefit your hotshot business as listed above, and that’s why you should think about it before starting out your business.

3. Registering with the tax authorities

Once you have formed an LLC, the next step is to get your company’s taxpayer ID number. If you have a taxpayer ID number or employer identification number (EIN), you can receive checks and other payment methods directly into your company’s account. 

 Below are the steps to get your company’s tax ID:

  •  Fill out the IRS Form SS4 and mail the form to the appropriate address. 
  •  Get the taxpayer ID number (TIN) from any of these three entities: LAUO (Local Area Unemployment Service), IRSC (Internal Revenue Service), and SDLI (State Department of Labor). You will need to file unemployment claims to LAUO, while IRSC provides a federal tax ID number, and SDLI provides a tax ID number in Pennsylvania.
  • Once the tax ID is set, we can move to the next step.

4. Open a bank account

If you have a separate bank account for your business, you can redirect all business transactions to your business bank account. This allows you to track your spending while sending and receiving payments.

Having a bank account for your business is a great way to keep track of how much you are spending and what you owe and own. It also reduces stress because you don’t have to worry about deposits and withdrawals in the same bank account where all other funds are deposited.

5. Get a commercial driver’s license (CDL)

This is an optional step. In most cases, you do not need a commercial driver’s license (CDL) as long as you do not exceed the government’s GVWR. CDL is not required if the following criteria are met: 

  • If you’re pulling a total weight of fewer than 10,000 pounds.
  • If the total weight of the vehicle and trailer is less than 26,000 pounds. 

Getting a CDL is a difficult task. You must register with an accredited training center, complete a few weeks of training, and then apply for and pass a professional driver’s license test. Therefore, while it is desirable to skip this requirement in the early stages of business, it is advisable to license it once the business is established and fully operating.

6. Get an Employer Identification Number (EIN)

The next important step to starting a hotshot trucking business is to get an EIN. The IRS will issue an Employer Identification Number (EIN) for your business. This number will allow IRS to track your business for tax reporting.

You can also choose to get your own 401k plan through your company as an employer rather than do it as an individual. But if you’re not sure about this, you can always discuss the options with your financial planner.

7. Get a Motor Vehicle Report (MVR)

Getting a vehicle information report is actually easy in most states, but it’s better to plan it early if you can. There is usually a cost to obtain an MVR, but the process to obtain it is actually simple. Most states now offer digital registration, and you can pick it up when it’s ready or request the MVR to be mailed. Getting an MVR used to be free, but it costs around $10 to $20.

You will need an MVR when your business gets audited. An MVR provides the summary of your driving history report. Usually, an MVR is required when you apply for insurance. The insurance company will need to examine how good your driving record is through the MVR. You may not need the MVR now, but it is always an advantage to have it prepared early.

8. Get a TWIC (Transportation Workers Identification Credential)

The Transportation Workers Identification Credential is regulated by the Maritime Transportation Act. The basic requirement for a hotshot trucking business actually doesn’t include TWIC. However, this credential will be useful when you try to expand the type of cargo you can haul. The credential will allow your truck to enter local places like ports.

Therefore, you will need a TWIC if you take an order to transport cargo from or to ports, for example, a drayage trucking job between ports or warehouses. To obtain a TWIC, a truck driver must undergo a background check and other security threat assessments.

9. Get the Required Equipment

how to start a hotshot trucking business

The next step in how to start hotshot trucking as a business is to get the required equipment. You must provide the equipment needed for the services you offer. For example, hauling and towing equipment is the most needed service from a hotshot truck. And of course, you will also need a reliable truck for your business.
To start running the business, you will need a medium or heavy-duty truck that features 400 horsepower. You will need a powerful truck to tow the gooseneck flatbed trailer that weighs at least a ton. You can get a good truck for the business for around $15,000 to $60,000. Alternatively, depending on your specific business needs, you could also consider Live Bottom Trailers which have become more popular than dump trucks in recent times. This is an ideal solution if your hotshot business will transport loose materials such as gravel, sand, mulch, and agricultural products.

However, purchasing a new truck is not the only option. Decide how much money you want to put in as an initial investment. You can always rent a truck to save some money. A reliable trailer would only cost about $7,000 to $25,000.

10. Approvals from the government

You will need to register your business with the state’s DoT (Department of Transportation) and also with the federal government if you take interstate jobs. After registering, you will get a DOT number from the state’s DoT, and also an MC (Motor Carrier) number issued by the federal government that will be displayed prominently on the side of your truck.

The hotshot drivers might also need a physical and medical card issued by the DoT. To get this card, a truck driver must undergo a medical, emotional, and mental assessment to prove that the driver is in good physical and mental health to drive the truck.

The DoT’s physical and medical card is also required by the FMCSA (Federal Motor Carrier Safety Administration) if you want to keep your CDL when you drive interstate with a specific vehicle weight or with hazardous cargo. 

11. Get the right amount of insurance

To start a hotshot business, you might need more than one type of insurance. First, you will need business insurance for your LLC as protection from liability and other claims. And second, you will also need insurance for your trucks.

The cost of insurance for a hotshot trucking business varies depending on the insurance providers and also depends on some factors below:

  • The truck type.
  • Your personal credit rating.
  • The truck’s deductibles: the deductibles will reduce your insurance costs.
  • The insurance requirements. Each company might require a different type of insurance. Make sure you only get the insurance that your company really needs.
  • The insurance claim limitation. Make sure you choose the limitation that your company needs. However, the bigger the maximum limit, the better, especially when it comes to cargo insurance. This includes the rates from the insurance agent or insurance companies.

The average insurance cost might start at $5,000 a year. But this cost may vary depending on the factors listed above. You might want to review your insurance options with an insurance agent that familiar with the freight business to make sure that you will get the insurances that you need to protect your business.

12.  Register for a permit from the state and federal government

To obtain a permit from the state government, you need to apply for a DoT number. In addition, a federal permit is also needed if you drive interstate in the US. In this case, you must apply and receive an MC number from the federal government too. Both the DOT and MC numbers are to be attached to the side of your truck.

Once you receive these two permissions, you will always need to update them on a regular basis in order to keep them active. There are also standards that you must complete to grant the permissions. There are two ways for you to complete both the state and federal government standards to obtain the permissions:

  • Establish your own trucking company. You will need to complete all the paperwork mentioned above and apply for the permissions. This is a hard way to get a DOT and MC number, and it is so time-consuming. 
  • An easier way to get the DOT and MC is to lease your truck to another company that already has the DOT and MC number. It’s called transferring your authority to someone else. The other company can use their DOT and MC numbers on your truck because they’re renting it. This is the most convenient option for most businesses.

These two ways to obtain permission from the state and federal governments are legal and meet the government’s standards. Depending on the situation, one method could be easier than the other. You can choose any option that is suitable for your business.

13. Look for clients

The last step on how to start your hotshot business is to search for loads once all the paperwork is set. You can quickly find the nearby loads from a load board website or from a load board app. In these load boards, you can find trusted clients who need your hot shot trucking services.

Try to find the loads immediately after your truck is ready to go. The quicker and the more loads you can find, the higher your business income. Also, try to find loads during deadhead runs to avoid your truck running without a load. There is something called a load board that can help you getting rid of or at least reducing deadhead runs.

Conclusion on How to Start Hot Shot Trucking

This post answers how to start hotshot trucking and make it a business. Clearly, it’s done by establishing a company and requires a lot of hard work. But if you stay motivated in all the steps and meet all the requirements, you will pass the challenges and will start earning profits from your company right away.

When you start your hotshot business, you will need to set a solid plan and do your research to obtain information on how to start a hotshot trucking business. You will also need to own the right equipment to keep your business running, and you need to be able to make the right decisions for your company. You may also wish to know more about how to start a box truck business plan as well.