There are many ways in which you may be able to make some extra cash in the transport industry, if you know how. Read our blog to find out more.
For those in the transport industry, 2020, and now 2021, have been mixed years. Some parts of the industry have been doing well, such as shipping, and others, like aviation, have been struggling. No matter what sector your business is in, if you own a transportation company, you’re likely on the lookout for ways to make more money in the coming year.
Below are four tips that will help you to earn extra money, by focusing on:
- How to free up your cash flow
- How to run your operations more efficiently,
- And, how to make sure that you’re ready for the inevitable changes of the next few years and beyond.
1. Focus on cash flow
Anyone moving freight can tell you that cash flow can be a major problem. Whether you’re an owner-operator, or you’re managing a fleet of trucks, it’s tough to wait on payment for up to 90 days. You likely have all kinds of useful things that you could be doing with that cash right now. One solution is “freight factoring,” which is explained well in this guide from TAFS.
More generally, “factoring” is a simple enough idea. If you have a $10,000 invoice, billed to a customer with 30 days to pay, you could go to a factoring company instead of waiting. That company might offer to pay you 95% of that invoice’s value, with 80% as an advance, and another 15% upon payment by your customer. That means you get:
- $8000 right away
- Another $1,500 upon payment
- And the factoring company gets a $500 fee (5%). (1)
Factoring can help you to make money by freeing up your cash flow. With that $8,000 advance, you could invest in maintenance or other things that can help you to operate more efficiently. (1)
If you increase the volume of freight that you can ship, as you do so more efficiently, you can ultimately earn more in the long run. When it’s working well, the factoring company gets their cut, but you ultimately make more money by having access to funds when you need them. (1)
2. Run an efficient back office with digital tools
If increased efficiency can help you to earn more money, there’s one easy place to look: your own back office. Fleet management has always been complicated, but digitizing certain processes could help you to earn more money.
A Boston Consulting Group study from 2018 found that “automating manual processes now could reduce certain back-office […] costs by up to 40%.” The focus of their report, freight forwarding, has implications for the wider transport industry as well. (2)
This argument is intuitive: if digital solutions can help to stem the flood of paperwork that your transportation company generates, they’ll save you money. If they can make your business operate more efficiently, they’ll help you to earn more money too. (3)
There are lots of options to consider, including:
- Implementing solutions that allow drivers to do some of the processes that used to happen in the back office via iPad or other digital device
- Or, using a service that pairs optical character recognition (OCR) and machine learning (ML) to read and process hand-filled forms. (3)
3. Make sure that you understand your costs
Depending on the kind of business that you’re running, the process of calculating your costs will vary, but no matter what, you should make sure that you know what they are. If you don’t understand your costs, you’re likely to either lose money, or fail to make as much as you could otherwise. For example, you won’t be able to set rates that will ensure your profitability.
One key thing to understand is the difference between two types of cost:
- Fixed costs—These are costs that won’t change based on the volume of business that you’re doing. If you run a business manufacturing mugs, you might have a fixed cost of $10,000 a month to rent a facility. Whether you use it or not, you have to pay that $10,000; that’s a fixed cost. For transportation, these are costs that don’t depend on the number of miles that you’ll be driving. Payments on vehicles, permitting costs, and insurance all fall under this category.
- Variable costs—These are costs that do change with the volume of business that you do, or in the case of transportation, the number of miles that you’ll need to travel. Using the mug example above, say your firm pays $2 a mug—if you make more, your costs will go up. Make 500 units this month? Your variable costs are $1,000. Make 1,000 mugs the next month? The costs increase to $2,000. For transportation, fuel usage is a key variable cost, as are maintenance and other similar expenses. (4)
4. Look to future trends
Companies that fail to anticipate the future in an industry can end up getting left behind. One clever way to make money in the transport industry is to make sure that you’re ready for the next big thing before it happens. This way, you’ll be well-positioned to meet consumers where they are, rather than struggling to catch up.
For those in the United States, this means recognizing the likelihood of coming climate regulation, and the growing consumer demand for green products and services. As outlined by Maria Mendiluce in the Harvard Business Review, the following are some things to keep in mind as you plan for the future of your business:
- Climate regulation is coming—The world’s governments are headed for a “net-zero” future. The European Union has set a 2030 target to cut emissions in half, and the United Kingdom is going to end the sale of new gas and diesel cars in the same year. For a transportation company, it would be unwise to think that the same kind of regulations aren’t coming in the United States. Plan now, while there’s time to do so.
- Delaying action is risky—Planning now can prevent you from being the Blockbuster or Kodak of the transportation industry. There’s a real risk in waiting; competitors will ready themselves for what is coming, and you should too.
- Public investment in green industries may rise—It’s extremely likely that there will be an increased focus by federal and state governments on investing in clean energy and other green industries. Transportation won’t be an exception, so keep an eye out for opportunities to join public-private partnerships or other programs. (5)
If you’re running a transportation company, then following the tips above should help you find ways to make some extra money—not just this year, but for many years to come. Focus on ways in which you can free up cash to spend on things that will help you to grow more in the future. Consider your costs, and how digital tools can help to keep them down while allowing you to do more with less. Finally, make sure that you’re ready for what’s coming, and don’t miss out on future business opportunities due to focusing too much on what’s happening today.