No one wants to fail but sometimes the more you try to avoid it, the more you get pulled to the other end of success. In the hotshot business, it’s easy to lose thousands of dollars in investment with one wrong decision. In fact, there are 5 surefire ways to fail in this business. Fortunately, knowing these top reasons for failure helps you identify your escape route.
1. Poor management
Business success depends heavily on how effective the management is. Managers make important decisions involving shippers, brokers, workforce and day-to-day operations. Poor management often results in making bad decisions.
In the trucking industry where change is always up and around, a good manager is always on the lookout for changes as they can affect their daily decisions. At the same time, you should always recognize opportunities where you could get more loads, save on operating expenses and increase your cash flow while protecting your business against threats. Management failure will result if you don’t recognize what the current industry trends are telling you.
Additionally, failure in management may also happen if you give more focus on one aspect of your business and are neglecting the rest. For instance, if you are an owner-operator and are often preoccupied with deliveries such that you neglect providing good customer support or meeting government requirements, there is a greater chance you will fail. Another reason for failure is having dysfunctional leadership which typically happens in bigger companies where managers work on their own rather than as a team.
How to avoid poor management:
- Use industry trends to forecast, plan and make decisions.
- Manage the entire operation and not just part of it.
- Learn, study and enroll in trainings where you can enhance your management skills specific to the industry
2. Failure to gather feedback and take action on them
Do you know if your shipper is satisfied with the service you provided? Were you able to meet your broker’s expectations? If you don’t know the answers to these questions, chances are that you are losing future loads for every unhappy shipper or broker.
Shippers and brokers who offer profitable loads are the lifeblood of the trucking industry. Needless to say, if you make them happy, you can expect a repeat transaction. Making them happy involves a lot of listening to what they are telling you or would like to tell you. You can accomplish that by getting their feedback. When you gather feedback, you should incorporate questions that will give you an idea about their level of satisfaction, if they have complaints, or what areas for improvement they want to see happening in your next transaction.
How to gather feedback:
- You can gather feedback by contacting the shipper or broker right after the load is delivered.
- Another way is by sending a survey or questionnaire form through email.
3. No understanding of financial matters
A lot of people just start a hotshot business with the hopes of making money but don’t have the interest or skill to manage the overall financial operation. This includes overseeing the cash inflow and outflow, expenses, taxes and other financial issues. Poor financial management often results in business failure.
How to deal with your business finances:
- Hire a professional to help you set up your accounting software to easily record, monitor and report all your financial transactions.
- If you lack confidence in your financial management skill, hire a bookkeeper, accountant or tax advisor to help you.
- You can also attend training on business financial management so you can do a DIY bookkeeping of your finances. This is especially useful for owner-operators.
4. Too impulsive for growth
Do you have plans to acquire a new fleet of vehicles in the coming days? Before you do that, ask yourself several times if it’s the best financial decision for your business.
Every now and then we see a hotshot business acquiring a new truck or trailer after a sudden spike of loads. If the demand is not stable, this is not a good decision as it means putting much of your financial resources on equipment that might just be idle after the spike. What’s worse is, if it’s under financing, you’ll be making repayments on the principal plus interest while the equipment will not bring regular cash inflows to your business.
Steps before you decide to grow your fleet:
- Conduct a research to know the industry trends in your area. Will loads increase?
- Check your current financial condition and see if you can handle additional monthly repayments (if you intend to borrow) or if you have enough cash to buy outright.
5. Poor or lack of knowledge on market trends
Do you know if you can still get your expected number of loads in the coming months? Is there any expected increase or decrease in the average rate per mile? If you don’t know the answers to these questions, your knowledge in market trends is likely poor.
Market trends can help predict your future revenue in a more realistic way. This will help you make an effective budget for both the good times and the slow times.
How to get abreast of market trends:
- Read hotshot news and articles which are widely available online.
- Learn from the industry experts.
- Consider historical data from your business and the industry.
When you start a business, you have a 50% chance to fail and 50% chance to succeed. If you avoid the common mistakes we listed above, you will surely increase your chances for success.