The third-party logistics (3PL) industry is expected to grow significantly in the next decade. This growth is driven by the increasing globalization of trade and the need for companies to outsource their logistics functions.
If you’re an entrepreneur looking to start a successful 3PL company, there are a few things you need to know. Here is a step-by-step guide on how to start a third-party logistics business.
Ten Steps to Launching a New Third Party Logistics Company
1. Choose Your Type of Third Party Logistics Company
The first step in launching a third-party logistics business is to identify the type of business you want to launch. You might choose from the following types, among others:
- Warehousing and storage
- Air Freight or ocean freight
- Freight forwarding
- Customs brokerage
2. Name Your Third Party Logistics Business
Give your third-party logistics business an identity so people will consider it a well-known and respected brand. You can take the name of your third-party logistics business from your industry, focus on a geographical location, or use your name, among other options.
The main goal of naming your third-party logistics business is to make it sound appealing and trustworthy so that potential clients will want to do business with you.
3. Determine Your Third Party Logistics Business Model
There are several possible types of business models for a third-party logistics business including:
- Asset-based – You own the vehicles and storage facilities needed to provide logistics services.
- Non-asset based – You don’t own any assets but contract with other transportation and storage providers to deliver services to your clients.
- Hybrid – A combination of the asset-based and non-asset-based models in which you own some assets and contract out others.
No matter which model you choose, ensure that it aligns with your business goals and the services you offer.
Read more about choosing the right business model for your third-party logistics business.
4. Choose a Legal Form for Your Business
By incorporating your third-party logistics business, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your third-party logistics business will determine the taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common third-party logistics business structures.
5. Write a Third-party Logistics Business Plan
All third-party logistics business owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include the company’s products or services, market analysis, financial projections, and management team.
When developing your third-party logistics business plan and strategy, you should think about the following questions your customers might have:
- What type of logistics services do I need?
- What are my shipping schedules and volumes?
- What are the origins and destinations of my shipments?
- How time-sensitive are my shipments?
Read our article about how to write a third-party logistics business plan.
6. Apply for the Necessary Permits and Licenses
You may need to obtain required licenses and permits before launching your third-party logistics business.
For example, if you’re operating a trucking company, you will need to obtain a commercial driver’s license (CDL). If you’re operating an air freight company, you will need to obtain an air carrier certificate from the Federal Aviation Administration.
You must also register your third-party logistics business as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
Read our article about obtaining the proper third-party logistics business licenses.
7. Determine Your Budget & Apply for Funding as Needed
In developing your third-party logistics business plan, you will figure out how much funding you need to start and grow your business.
If you have funds to invest in your third-party logistics business, you may consider taking advantage of that. In addition to your funds, other forms of potential funding for your third-party logistics business include traditional bank loans, SBA loans, credit cards, angel investors and family and friends.
Read our article about the costs associated with starting a third-party logistics business to help you determine if funding is needed.
Read our article about how to fund your third-party logistics business.
8. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your third-party logistics business, it’s essential to have the right technology in place to maximize efficiency. You need a computer with Internet access, and accounting software for tracking expenses and revenues.
You may also want to invest in enterprise resource planning (ERP) software, which can be used to manage your inventory, warehouse, and transportation. There are many different ERP software solutions available on the market, so do your research to find one that fits the specific needs of your business.
Read our article about the technology and software you need to run a third-party logistics business.
9. Market Your Third Party Logistics Business to Potential Clients
Before selling your services, you must let the world know you exist. The first step is to create a website so people can learn more about your services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn and Twitter. Also consider networking with other people in the third party logistics industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute on your promotions strategy, which is your strategy for attracting new customers. Third party logistics businesses should consider the following promotional strategies for which you should start getting prepared:
- Develop a strong elevator pitch that you can use to introduce your business to potential clients in just a few sentences.
- Create informative blog articles, infographics and other types of content that educate your target market about third party logistics and how your company can help them. Be sure to share this content on social media and elsewhere online.
- Develop a sales deck or pitch to present to potential clients that overviews what your company does, who your target market is and how you can help them.
- Generate positive reviews and testimonials from happy clients that you can share on your website and social media channels.
Read our article about how to market your third-party logistics business for more tips.
10. Get New Clients & Grow Your Business
When you promote your services, you’ll start to get interest from potential clients.
Make sure you’re ready to serve these clients. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your third-party logistics business.
Read our article about how to effectively grow your third-party logistics business to learn more.
Starting a Third Party Logistics Business FAQs
The third-party logistics industry is growing rapidly,due to the rise in online shopping and the need for businesses to outsource their logistics operations. This provides a great opportunity for entrepreneurs looking to start a business in this field.
Here are some tips for starting a third-party logistics business:
- Find the right software and technology to support your business.
- Create a website and promote your services online.
- Network with other people in the industry.
- Develop informative content to educate your target market.
A simple checklist to use when starting a third-party logistics business is as follows:
- Choose Your Type of Third Party Logistics Business: This should be based on what you are best at and how much experience you have. Remember to always keep your interests, skills, and experience in mind.
- Name Your Third Party Logistics Business: This should be done carefully, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Determine Your Third Party Logistics Business Model: Determine how your business will make money. Will you sell products, services, or a combination of both?
- Write a Third Party Logistics Business Plan: Your business plan will also help you determine what your start-up costs will be and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations, you will be required to apply for a business license or permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need the right tools to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Third Party Logistics Business to Potential Clients: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the services they truly need.
- Get Clients & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your services.
Starting a third-party logistics business can be a great way to become your own boss and provide valuable services to clients. The key is to develop a business plan, find the right software and technology, create a marketing strategy, and get clients. You can build a successful third-party logistics business with hard work and dedication.