Over the past year, the transportation industry has encountered tremendous change. There have been numerous things impacting how the industry functions. As 2021 begins, an excellent way to start this year is to focus on trends likely to surface in the coming year to see how they will truly impact the industry. Here are five things transportation companies should focus on as we move into 2021:
WHAT YOUR TRANSPORTATION BUSINESS SHOULD BE FOCUSING ON THIS YEAR
IMPROVEMENT OF TECHNOLOGY
The industry has continued to adopt new technology to generate growth and minimize costs. From the corporate offices of transportation companies to the vehicles themselves, technology has been improving. Corporate offices are beginning to employ many software programs to help make their operations more efficient. Vehicles are now being equipped with far better technology to track trips and fuel efficiency and provide remote control features. The transportation industry continues to have opportunities to evaluate their technology strategies and assess if it meets the company’s needs and continues to explore new ways to build. The opportunity and need to explore new ways to develop and adopt technology has never been greater. Contact Smith Schafer’s Technology Services Group to schedule a consultation.
RISING FUEL COSTS
Increasing oil prices can adversely affect industry profit. However, the solutions today are much more than what the industry had in the past. Today, transportation companies can opt to go in for alternative fuel or even electric vehicles to cut the costs they would have to spend on fuel daily.
DRIVER SHORTAGE
As driver shortages continue to increase into 2021, optimal onboarding processes will be critical. We have seen transportation companies re-thinking driver benefits and wellness initiatives to stimulate employment. Voluntary and group benefits are being added to attract and retain quality drivers. On-the-road benefits will continue to be critically important. Hiring experienced drivers, keeping them trained, and leveraging technology to manage their risk is the formula that will keep transportation companies in the clear.
SUCCESSION PLANNING
These difficult times have taken a toll on transportation businesses. Some owners are considering selling their business or consolidating. While negotiating a merger or business sale, it is helpful to conduct a valuation. There is more to business value than simply your balance sheet today. Your goal should be to make sure you are getting the best purchase price, even during the current crisis.
Not only that, but considering roughly $68 trillion is set to be passed down from Baby Boomers to their beneficiaries over the next 10 years, it is clear that succession planning must be assessed sooner rather than later. For example, if your business has multiple owners, you should have a buy-sell agreement in place. Having this agreement in place now can reduce conflict and potential costs when a business owner exits the business.
Click to read: Tax & Accounting Resources for the Transportation Industry
COVID-19 SITUATION
The services of transportation logistics companies are in high demand due to the continued need for the movement of food, consumer staples, medical supplies, and other necessities. Carriers may have to reposition their fleets to serve the hardest-hit areas, adding costs and additional time.
Conversely, the need for school buses and motor coaches has virtually been eliminated as schools remain closed, and long-distance trips continue to be canceled. Costs have decreased in the form of lower salaries and fuel costs, but revenue has also declined significantly.
We have advised our clients to think long-term. The COVID-19 pandemic is a drastically different situation from 2008 or other economic downturns. We can still weather the storm with proper planning and thoughtful decision making. We recommend the following:
- Cashflow analysis and projections are vital. We recommend creating a 14-week cash flow forecast.
- Be aware of alternate funding sources, such as SBA loans or other federal or state programs.
- State and local funding allocated to industry services are expected to be impacted over the coming years. We recommend planning for additional shortages and reforecast financial plans.
- Understand your drivers and key performance indicators. This will help you make the best decisions.
QUESTIONS?
While not an all-inclusive list, these items are sure to continue to impact the transportation industry. Success for the upcoming year can be achieved through continued dialogue with your team and professionals as the landscape continues to evolve.
Our transportation industry experts stay on top of changing trends and leverage years of experience, relationships, and continuing education. Smith Schafer’s specialization allows us to efficiently and effectively provide services tailored to our client’s needs.
