The Small Business Times

How To Start A Hotshot Business

There are several considerations when looking into how to start a hotshot business. And it can be hard to know where to start.

First, familiarize yourself with the hotshot industry. As a hotshot trucker, you use your pickup truck and trailer to transfer cargo for customers. You can work in a variety of industries, including construction and agriculture. Secure sufficient funds for your business and the essential licenses to get started. Once open your business, manage it with accounting software and marketing tools.

Hotshot hauling is one of the fastest-growing sectors in the US. There have been recorded year-to-year increases in the number of businesses in the less-than-truckload (LTL) market. Consumers demand this service more often because it’s a fast, reliable, and affordable way of transporting cargo.

We’ll give you an overview of the hotshot business in this post. We’ll also provide a step-by-step guide to start your hotshot business. Let’s get started.

Hotshot Business Basics

Before you get all the essential documentation to start your business, you should know a few things. This includes the money you’ll need to put into your company. Also, what kind of truck and trailer to buy.

How Much It Costs to Start a Hotshot Business

It’s no secret that a hotshot business requires a significant initial investment and involves high operating costs. Startup costs range from $13,500 to $75,000. If you already own a vehicle and a trailer, though, you may just need $15,000 to get started.

The costs involved in starting a hotshot business vary from person to person. It also depends on whether you plan to get a commercial driver’s license (CDL) or not. These are some expenses:

  • Registration and licensing (USDOT number, Unified Carrier Registration (UCR), BOC-3, ELD, drug consortium, business license, etc.): $500 – $1000
  • Pickup truck: $15,000 – $45,000
  • Trailer: $7,000 – $20,000
  • Truck and trailer down payment (leasing): the amount depends on your budget
  • Truck and trailer registration: less than $900
  • Load board and equipment: $1000 – $3000
  • Insurance: $1450 – $4000, depending on the insurance company
  • Branding and advertising: $500 – $2750
  • Fuel tank: $1800

Types of Trucks and Trailers Used for Hotshot Hauls

The type of truck you use will affect the loads you can transport. Therefore, this is one of the most important decisions to make. The good news is there aren’t any legal truck requirements. Hotshot trucks fall under these classes:

  • Class 3: basic heavy-duty pickup trucks used for lighter hotshot loads. Examples of standard models are the GMC Sierra 3500 and the Chevrolet Silverado 3500.
  • Class 4: heavier trucks for larger freights, such as the Ram 4500.
  • Class 5: light commercial trucks, including the Chevrolet Silverado 5500, Ford F-550, and Kenworth T170.

If you’re searching for the best truck for hotshot drivers, the Dodge RAM 3500 Tradesman is the way to go. It comes with a Cummins heavy-duty diesel engine.

The type of trailer you’ll use is an equally important decision. This depends on the truck and the cargo you intend to haul. These are the typical kinds of trailers to consider:

  • Dovetail trailers: for transporting vehicles and other equipment with wheels.
  • Lowboy trailers: best for hauling heavy and tall loads.
  • Bumper pull trailers: a popular trailer that’s shorter and more cost-effective.
  • Gooseneck trailers: a step up from a bumper pull trailer, the gooseneck trailer is ideal for larger, heavier loads.
  • Tilt deck trailers: this trailer tilts to make loading heavy cargo easier.

How to Start a Hotshot Business: Step-by-step Guide

Now that you know what you’re getting yourself into as a hotshot trucker, it’s time to set up shop. There are several bases to cover for your company. This includes getting the proper licenses and permits, registering your firm, and opening a business bank account.

Step 1: Choose a Niche

You can work in a couple of industries as a hotshot trucker. However, it’s best to choose a specialty. This will not only save you money on equipment, but it will also help you in deciding which trailer to purchase. Specializing in a particular niche will likely be more lucrative.

The most common specialties include:

  • Lightweight cargo
  • Perishable cargo
  • Heavy-duty cargo
  • Construction industry
  • Medical industry
  • Mechanics requiring spare parts
  • Manufacturing industry
  • Agricultural industry

Step 2: Finance Your Business

Get your finances in order once you’ve decided on the type of loads you want to transport. Consider the type of trailer and equipment you’ll need to buy. Ensure that you have sufficient finances to cover these costs.

If you don’t have sufficient finances, look into alternative funding sources. Perhaps you could approach your family or friends for a loan. Get capital from a bank or crowd funders if you’re not comfortable with this. 

Step 3: Get a Commercial Driver’s License (CDL)

Whether you get a commercial driver’s license is entirely up to you. At most, hotshot drivers should have a basic Class D License. With this license, you’re limited to transporting cargo that weighs less than 10,000 pounds.

One advantage of obtaining a CDL is that you will have more flexibility. You’ll be able to transport heavier loads and earn more money.

To get a CDL, you must first learn the CDL manual, then get your commercial learner’s permit (CLP). Afterward, enroll in a CLP program, pass the exam, and ace the driving test.

Step 4: Register Your Business

To protect yourself from liability claims, you must register your business. Opening a banking account for your business, raising funds, and paying taxes are necessary steps in the process.

Consider the region in which you’d like to register your company. Although doing so in your home state is ideal, it can impact your income, legal obligations, and taxes.

Also, ensure you choose a suitable company structure. Most hotshot truckers go for a Limited Liability Company (LLC) because it offers pass-through taxation and liability protection. In most states, you can file LLC paperwork with the Secretary of State. And there is an online submission portal available.

It’s important to brainstorm a good business name as well. Ideally, choose something catchy, short, and relevant. Once you have a few options, run them through the USPTO website to confirm availability.

Step 5: Get an EIN (Employee Identification Number)

An EIN allows you to pay yourself and other employees as well. It also enables you to make additional contributions to your 401K through your business.

The IRS will issue an EIN for your company. Filing for an EIN can be done via mail, online, or by fax. To learn more about applying for an EIN, visit the IRS website

Step 6: Get the Necessary Legal Documents

Depending on the type of loads you’ll carry and your state, you need to get specific legal documents. This includes:

  • An Operating Authority (MC number): all hotshot drivers must get an MC number through the Federal Motor Carrier Safety Administration (FMCSA). If you’re unable to obtain one, you won’t be permitted to operate outside your state.
  • A Transportation Workers Identification Credential (TWIC): regulated under the Maritime Transportations Act (MTSA), a TWIC allows you to transport loads to secure areas, such as ports.
  • A Department of Transportation (DOT) number, including a physical and medical card.
  • A Motor Vehicle Record (MVR).

Step 7: Open a Business Bank Account

Once you have your business registered and an EIN, open a bank account for your hotshot business. You can do this at any local financial institution or even an online bank.

It’s best to keep the money you earn from hotshot hauling separate from your personal finances. Having separate bank accounts will benefit you come tax time. It also makes tracking expenses and income easier. 

Step 8: Get Business Insurance 

This step can be daunting, but it’s essential. With the correct insurance in place, you, your family, and your business will be protected if anything goes wrong.

As a condition of getting an MC number, you’ll be expected to have a commercial insurance policy. The price will differ from one person to the next, depending on factors such as your experience, age, and location. Also, consider getting other types of coverage, such as:

  • General liability
  • Business property
  • Professional liability
  • Equipment breakdown insurance

Step 9: Organize Your Business

This is the exciting final step before you start transporting your first load. Ensure you get a dependable phone and laptop. Also, determine how you’ll access the internet while on the road.

Aside from that, you’ll need to organize your truck and trailer. Make any necessary purchases or sign a lease for a truck or trailer. Also, check that your truck complies with DOT regulations.

In addition, secure the right equipment for hauling cargo. This includes straps, chains, binders, tie-downs, bungees, and more.

Finally, set your rate-per-mile. To set your rate, consider what your competitors are charging and what will make your business profitable.

Conclusion

A hotshot business is one of the most lucrative options available. However, it has high barriers to entry, such as the cost and licensing. With enough planning, it’s possible to overcome these obstacles and get your business started.