Haulage Companies and the Challenge of Success
Most small haulage companies hope to move on from the initial stage of operations and experience real success. But success brings challenges to be faced.
A cycle of success and loss is endemic to all industries. Transportation is an age-old enterprise that sits at the heart of most economies and therefore is inevitably susceptible to fluctuations in economy. Most small business operators in this industry have some awareness of this cycle and will prepare for seasons of 'bust' and all seek to profit from the 'boom'. But planning for the challenges of success, when too much of a good thing leads to subsequent deflation, is another matter entirely.
Where to Invest the Returns?
When haulage companies see profit margins creep up quarter by quarter, the owners will, of course, want to sing their own praises. But increasing profit does not necessarily reflect a strengthening of the business. You need to be aware why this profit is flowing in, and how to adjust when factors change and leaner times occur. So, in fact, the issue is not simply how to continue this increase in profit margins, but how to invest the returns so the business does not suffer from the 'bubble burst' of what could perhaps be an unrealistic success. This means knowing how to strengthen every aspect, including vehicles, staff training, client bases and route management, so your operation is as airtight as possible.
Consolidate or Grow?
Behind the question of how to reinvest success back into the business looms the larger dilemma: should a young small business experiencing good times consolidate on this success or plan for greater expansion? Should you secure repeat customers or buy another vehicle? Should you pay off old debts or accrue new ones? These questions need to be answered by all haulage companies at one stage or another. Understanding the specific and broad causes of your boom times will help you realise where risks and opportunities lie, and therefore whether you should consolidate or grow.
How not to Over Stretch Operations
One of the biggest challenges facing a boom business is how not to over-extend resources. Your reputation is developing, so new clients are calling, new routes are opening, new loans can be taken and new vehicles could be bought. But at some point the possibility of one client too many, one route too far, and one cargo beyond capacity can lead to you missed opportunities or a commitment to services you cannot fulfil. Having to turn down a client or carry out a job in a slipshod fashion can damage the reputation of new haulage companies. Therefore options such as outsourcing, limiting routes, or focusing on return loads are viable means to prevent this scenario from ever occurring.
How to Maintain Market Share
Haulage companies need to ensure they do not get greedy for growth and stretch their vehicles, workers, and routes to breaking point. Yet there is also the reality that if you say ‘no’ too many times you may weaken the ability to penetrate your market. Transportation is competitive, but small businesses have the ability to challenge larger competitors as long as their operations are sound. The measure of longer-term success depends on the ability to secure market share in times of both growth and shrinkage.
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ABOUT THE AUTHOR
Norman Dulwich is a Correspondent for Haulage Exchange, the leading online trade network for the road transport industry in the UK and Europe. It provides services for matching haulage companies with jobs in road transport and haulage work in the domestic and international markets. Over 4,000 transport exchange businesses are networked together through their website, trading jobs and capacity in a safe 'wholesale' environment.