6 Top Reasons Why Trucking Companies Go Out Of Business & Shut Down

Small trucking companies fail mostly due to other operators who are accepting poor rates. Not only does this drive down the earnings rate for all truck work, it eats up all of the trucking businesses and owner-operators who can’t survive on bad rates with incoming bills.

Are Trucking Companies Shutting Down & Going Out Of Business?

Trucking will always be here, but not all companies survive.

That said, mega companies likes will always be around. It’s the smaller businesses that have failed to optimize their operations and keep money saved for hard times, that will go under.

Understand that companies shut down or get purchased by other trucking companies for reasons we don’t see all the time.

If you are thinking of starting your own trucking business, then look at the situation like this—

When you see a trucking business go bankrupt, it means there is more leftover for the folks who know what they are doing.

Why Trucking Companies Fail & Close Down

Trucking companies fail the same reason any company fails—more money is going out than there is coming in.

If the price of goods you see at stores is not going down but your cpm is still low, it’s likely because the brokers dealing out your freights are pocketing the difference.

Make sure you take note if the contract rates are higher than spot rates!

This is similar to food delivery contractors from UberEats and DoorDash, where the pay is too low that the miles driven, wear and tear, and time cost isn’t worth picking up a delivery.

When people are willing to take bad pay, they ruin the rates for everyone else. Sometimes the rates don’t cover the expense and cost to do the job in the first place—

When this happens, some companies are essentially nosediving into the red with false hopes of breaking even.

If you have high of monthly expenses, such as leasing/financing, you likely will be forced under since you can’t afford to wait out for better rates for your work.

If your truck is paid off and you can afford to sit on insurance, and don’t have other heavy expenses, you have higher chances of surviving downtimes.

Many trucking companies don’t keep their expenses low enough to survive downtime, and that’s one of the biggest reasons these trucking companies fail.

6 More Factors Why Trucking Businesses Close Down

It’s difficult to predict the future of the trucking industry. Despite the increased demand due to online retail, there are always evolving regulations and customer needs that get in the way of ensuring operational success.

If you increase your truck fleet without paying attention to incoming regulations, such as stricter emission standards, you can find yourself looking at massive upgrade costs.

Poor executive decisions in leadership. Lots of companies fail due to lack of ethics, legal issues, financial in-appropriation, and ignoring customer demand.

An example of this would be if the CEO misused company money for personal use. This unethical and illegal behavior would lose business trust, cost legal battles, and ultimately get the company shut down.

Bad financial management. With a bad cash flow and accumulation of debts, businesses find themselves declaring bankruptcy due to a lack of financial stability. Prevent this by taking a closer look at profit factors.

Issues with compliance. Small trucking companies typically have limited resources, and the cost to stay in legal compliance can impact business operations at high expense.

This hits harder when not only is the business unable to meet new compliance standards, but is then given penalty fines.

Shortage of qualified drivers. With fewer drivers, there are less demands being met. However, we at CDL Expert Organization believe that business should take the time to train newcomers. If businesses only took those with experience, we’d be leaving an entire future generation of people untrained when it otherwise wouldn’t be the case.

Having a shortage of quality drivers can cause a trucking company to miss deadlines, lose customer satisfaction, and costs business opportunities.

Poor communication. These days, customers are expecting live updates to check on shipments. Trucking companies that fail to adopt modern technology and customer care practices will lose business and revenue over time.