Some say the logistics business is just a “trucking business”, however it’s much more than that. Logistics companies initiate the transport and storage of goods across countries. “Goods” do not only refer to food but also information and services.
The four major functions of logistics companies are, order fulfillment, management of inventory, warehousing, and coordinating with other logistics businesses. Essentially, logistic companies help in keeping the flow of products in the supply chain stable.
How To Start a Logistics Business
Starting a logistics business is never simple. There are various things that one has to keep in mind, principles and dreams alone are not enough. These are only a few things that one has to be critical about when starting a logistics company:
A logistics business does not only possess a fleet of trucks but also personnel who can and will operate the machines. The company would also need a logistics dispatcher who would be responsible for advising the truck driver about road conditions that could delay or hasten the transport. Adding to that, the company will also need a freight agent, supply chain manager, warehouse logistics manager, logistics engineer, customer service representative, and a lot more.
Now, how to get funding? Venture capital has worked alongside logistics companies for years now. Simply put, venture capital includes private sectors, mainly wealthy agencies or individuals, investing in a start-up company. The companies could also receive consultations and financial guidance from the investors which will help them if they decide to use it.
If venture capital funding is not on the list, you could also get funding through self-funding, quite similar to bootstrapping in which you use your money or existing resources to fund the business. Banks are also offering loans but people nowadays see this as a not-so-good way to start a business.
When you finally get the money you need, you have to consider the things that you will spend it on, such as fuel costs and maintenance costs for the vehicles, training funds for newly hired drivers and employees, and insurance. However, the most important things to consider are the salaries of the employees that run your company. They keep the company “alive and kicking”, after all.
- Licenses and permits
An aspiring businessman needs to know which licenses and permits to acquire before operating a business. However, the legal processes of operating a business vary across the globe. However there is no doubt that you must register your business first. Then you have to acquire the business number that will be used to identify and locate your business.
Along with acquiring those, you will also have to get the licenses and permits that will be your key to operating legally. The license in question is a business license that will be issued to you by the government. It is advisable to hire a lawyer that will guide you in the acquisition of the documents you will need to start your business.
- Establishing the business
A business model will serve as the framework of your company. It is the plan you have for making a profit through your company. This is essential as it not only helps you make money, but it makes you look good to investors.
A standard business model of a logistics company includes three things: gain share, a broker model, and a commission model. These are the most common things that companies use. To elaborate:
- Gain share or gainsharing in simple words, is dividing the profits into two. This is usually followed by third-party logistics (3PL) providers. It works like this, there is an agreement that half of the profit will be given to the other agencies who have helped the other significantly. It is like “rewarding” a person who helped you get through things.
- Broker model or brokerage model, is either a business-to-consumer (B2C) or business-to-business (B2B) transaction. B2C refers to directly selling the products and services to the consumers or clients who will be benefiting from the goods. As for B2B transactions, this refers to businesses delivering the goods directly to another business.
- Commission model is just like any other commission-based service. However, in logistics, there is a 3PL that works for you. 3PL will act as an intermediary between the company and the consumers. It promotes transparency in the process of the transactions.
Aside from the usual business models, there are also business structures that anyone should follow to ensure their success. It determines how you run your company, from paying taxes to daily transactions. Here are several business models that you can choose from:
- Sole proprietorship is the most common type of business structure and is considered the least formal. The company is owned and controlled by one person. They have full authority over the company. Keep in mind that the owner will be the only one liable if there are complications in the company that is left unsolved.
- Partnership is when the company is owned by several individuals. This type of structure can vary between general and limited partnership. General partnership refers to the owners assuming equal responsibilities and receives an equal share of the profit.
A limited partnership has general partners and limited partners. General partners assume their role just like in the general partnership. However, the limited partners will only serve as investors and have limited authority when it comes to making decisions. Sometimes they have no right to make such decisions.
- Corporation is more expensive and complex compared to other business structures. This refers to a legal entity that is separate from the business owners. A corporation protects its personnel from personal liabilities.
Once you understand how to start a logistics company, you can now start purchasing the equipment you need including specific vehicles.
The Marketing Strategies for Logistics Businesses
Any company needs a marketing strategy that is flexible enough to adapt to the modernities of the world. It is the game plan of the business. It determines how you will operate for a span of time. It is also important to allocate the budget for marketing.
- Social media marketing
Social media has become the largest consumed product in the world, there is no doubt about that. That is why you should utilize its services. A social media account for your logistics company will serve as your digital marketing platform.
Establish an online presence as well. Post updates or even the accomplishments your company has attained in a certain length of time. Create a first good impression on social media consumers and keep it that way.
- Set up a buyer representation
This usually refers to establishing a near-fictional character that will be benefited from your logistics services. Their details should be displayed in an ad that provides goals as well as your target market demographics. Demographics are considered important because they contain the age, gender, employment, income level, etc. of a certain population.
- Pay-Per-Click marketing
Pay-per-click or PPC is a strategy in which the advertisers pay every time their online ad is clicked on. Consequently, the user will be directed to your site and has a chance to review the content including the details about your business transaction. It is as if you are attracting people to visit your site.
- Search Engine Optimization (SEO)
SEO is a way of modifying the content of your site so that search engines will likely pick it up and show it as a top result whenever a person looks for something on the Internet. By modifying your website’s content, you are increasing your chances of being seen across the web. These are just some examples that will benefit your SEO: blog posts, social media content, videos such as tutorials or promotional videos, and the like.
- Initiate an affiliate program
Partnering with a certain organization is helpful for expanding your network and thereby making your company known. This also promotes bonds among other companies that will be beneficial to you in the long run. Affiliate companies can also assist and guide you in running your business.
Logistics have come a long way from the first World War, as it once was a medium of the military to send in troops. Now it is used in the world of consumerism and has started to grow through the decades. In times of crisis, this kind of business helps the world through services that ensure people that the essential products or necessities that they need will be within their reach. They help in keeping the economy running in terms of transporting goods, which facilitate the flow of trade in any given country. Furthermore, a logistics company helps in economic growth as it triggers a chain of events that will benefit the economy.
However, due to the health crises the world is experiencing right now, some circumstances will disrupt the delivery of goods. With what is happening right now, what we all need to do is just be patient and understand that we are not the only customer experiencing such misfortune. Companies do not work for only one person.