Aug

A budding entrepreneur eyes the trucking business – how difficult is it?

2010-08-25 14:52

I have been discussing with friends and colleagues of late that I believe South Africa is completely awash with “budding entrepreneurs.’

It is my further belief that the economic times right now are probably the most difficult for any budding entrepreneur to make the plunge into self employment in South Africa that I have ever seen.

Let’s, for example, look at what it would cost a “new’ entrant in road transport to start up a business with the idea of becoming a competitive player in the market.

The upfront assumptions are that our entrepreneur has a viable contract and is able to get finance.

So, what is the “money?’ Let’s assume our entrepreneur wants to do general haulage with a truck tractor/ flatdeck outfit.

Here goes

Upfront costs (Ignore VAT or other taxes)
10% deposit for a used truck tractor (R500K) and trailer (R200K) R120,000
Let’s further assume our entrepreneur is first paid 30 days after submitting invoices, works 10,000kms a month, pays all costs cash because he can’t get any trade accounts- being new to the game.
Costs – month one
Fuels say R8/ liter at 10,000kms at 50l/ 100kms R40,000
Oils etc. 10% R4,000
Tyres at two a month R10,000
Cost of wages/ either the entrepreneur or driver: R10,000
Insurance per month R3,000
Installment for rig R14,600
No provision has been made for trade account deposits, toll fees, extras (consumables), driver assistant, overtime.
Total (month one) R81,600
Repeat the same for month two: R81,600
Total costs for start up and first months to be carried by the new entrant before revenues are collected. R283,200

The total carry as it were will be at least for the two months prior to monies coming in.

So a minimum of just under R300 000 is required just to get started. This excludes the problems like when the debtor starts talking about another week or two to pay and so on.

Assuming this contract works on say R12/ km revenue, is it any wonder that new operators find it almost impossible to get into this industry?

Even receiving the first month’s R120,000 Revenue, it is economically a very long claw back to profitability because of the gearing and high capital entrance fees.

The transport industry is also high risk in terms of other risks, for example, theft, and road accidents

I therefore deduce that the “tragedy’ here is to a large extent because the new transport entrant is clearly far more than simply being “out there on their own!’ They are also faced with seemingly insurmountable odds.

I still believe there is so much entrepreneur talent available in this country but opportunities for them, are to my mind, very few and far between.

This is a terrible waste and a profound shame.

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