January 12, 2022
In this article I am going to show you how you can generate $100,000 in annual profit with a hot shot trucking business. I will outline the industry trends, startup costs, typical expenses for a hot shot trucking business and potential profitability. To help organize all of these financial assumptions and project profitability based on your specific plan I will use our trucking financial projection spreadsheet.
Hot Shot Trucking Industry
The hot shot trucking business has been growing in popularity over the last several years. A quick search on Google Trends shows increasing search interest for “hot shot trucking” over the last five years.
Hotshot trucking is typically short turnaround deliveries made with smaller trucks and trailers as described in great detail in this article from Truckstop.com.
Startup Costs for a Hot Shot Business
The estimated startup costs for a hot shot trucking business is $76,000 to $106,000.
One of the reasons that starting a hot shot trucking business is gaining in popularity is because the startup costs can be substantially lower with a class 3 truck when compared to a class 8 long haul semi-truck. Your startup costs for a hot shot trucking business will consist of:
- Fees for licenses, permits, and insurance
- Working capital (fuel, insurance, salaries, repairs, etc)
We did a bit of research and based on 3 reliable sources ( LTL Rig, Autotrader, Step By Step Business) we estimate the following breakdown of startup costs for a hot shot business.
- Fees, licenses, permits and insurance deposit = $6,000
- Truck = $40,000 to $70,000 for a Ram 3500 which is commonly used for hotshot trucking
- Trailer = $15,000
- Working Capital = $15,000 to cover fuel, insurance, repairs for the first few months
Total Startup Costs for a Hot Shot Trucking Business = $76,000 to $106,000
If you decide to lease a truck and trailer you would be able to reduce your startup costs significantly, but your ongoing monthly expenses would be greater.
Getting a Business Loan for a Hot Shot Trucking Startup
If you are going to buy your truck and trailer, you might need a business loan to cover the startup costs. One of the great things about the lower startup costs associated with a hot shot trucking business is that you can probably get started with an SBA Microloan rather than needing one of the larger, more complicated and time consuming SBA 7a loans.
The SBA microloan program:
- Provides loans up to $50,000
- Interest rates are fixed
- Loan terms up to 6 years
- SBA microlenders are non profits that offer business coaching for free as well
Learn everything you need to know about an SBA microloan in our Ultimate Guide to SBA Microloans.
In the video below I show you exactly how to enter your startup costs, revenue assumptions, and expenses into our trucking expenses spreadsheet template. This template will be exactly what you need when your lender asks you for your financial projections. If you need any help filling it out, just let me know!
How Much Revenue Can You Make with a Hot Shot Business?
We estimate that you can make $181,000 in annual revenue with a hot shot business.
Of course, this can vary, but let me outline the assumptions we used to project hot shot revenue potential.
With a hot shot trucking business your revenue potential is going to vary depending on how much you drive and the rate per mile you can generate.
According to DAT, $2 per mile is a good goal to shoot for. I would encourage you to sign up for a load board or two and see exactly what rate customers are paying in your area.
Next, it really depends on how busy you can be. You won’t always have a load, sometimes you will have to drive back home without a load, sometimes you will just need a break etc. But based on $2 per mile, and running at 50% capacity Step by Step Business estimates you can drive approximately 250 miles per day for an annual revenue of $181,000.
In the video below I will show you how to enter in your revenue projections in our template - Hot Shot Trucking Revenue Projections
You might also be able to add revenue streams to your business like freight brokerage. If you are considering getting into the brokerage business, make sure to check out our article on How to Start a Freight Brokerage Company.
Gross Profit Margin for a Hot Shot Business
Gross profit margin for a hot shot trucking business is roughly 60%.
Again according to the previously mentioned Step by Step Business article the average cost to operate a hotshot truck is .78 cents per mile. The specific cost per mile is going to depend on current fuel prices, but as a general rule of thumb if gas prices go up the rate per mile that you can charge an end customer will go up as well.
So a good assumption is for your cost of goods sold to be approximately 40% of your revenue which means your gross profit margin will be 60%. So if you charge $2 per mile you could assume 80 cents per mile in costs to operate the truck including costs like:
- Broker fees if you use a broker or load board
Other than these variable costs you really won’t have much in terms of fixed costs if you are driving the truck yourself. You can expect about $1,000 per month in insurance on the high end according to Commercial Truck Insurance HQ. If you keep your truck at home and just operate off of load boards and through brokers then you won’t have advertising costs.
How Profitable is a Hot Shot Trucking Company
A hot shot trucking business can make $97,000 in profit per year.
Based on our research above your profitability should be as follows:
- Annual Revenue = $181,000
- Cost of Goods Sold (40%) = $72,000
- Annual Insurance Costs = $12,000
- Annual Profit = $97,000
Just a few more jobs and you can hit $100,000 in annual profit.
Now before you get too excited about a 6 figure take home pay, if you borrowed money to buy the truck and trailer, your loan payment will come out of your profit. If you borrowed $70,000 for 7 years at 8% your monthly payment would be just under $1,100 or $13,200 per year.
This leaves you with $97,000 - $13,200 = $83,800 per year as your potential take home pay.
Hot Shot Truck Driver Employee vs. Owner Operator
So if you can cash flow roughly $83,000 per year as an owner operator hot shot truck driver, how does this compare to what you would earn as a salaried employee driving for someone else? According to Ziprecruiter the average hot shot truck driver salary in the US is just over $60,000 per year.
It is clear that there is potential upside if you own your own hot shot business. There is risk as well and some extra work to be able to get a truck loan for your own truck, but if you have always wanted to be your own boss, we hope this article has helped point you in the right direction.
If you have any questions, let us know!
Photo by Ryan Leeper from Pexels
Photo by Iván Rivero from Pexels