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Barriers to Entry

Eneryone wants to enter the Transport Industry - Not sure why? But this is a fact.

I will admit that it is a very lucrative industry to be in from an investment and return on assets point of view. It can be very profitable if you work with the right company and if you personally take deep interest in managing your truck's performance as well as your driver and take full cognisance of the reports we generate for you.

Many entrepreneurs are keen to enter the industry, BUT there are major barriers to entry especially if you are not a cash truck buyer.

Definition of barriers to entry: Factors that make it difficult or costly for businesses to enter an industry or market.

So how do you secure finance for your truck?

This is the catch 22 situation!

Firstly a bank will not finance your truck unles you have a DIRECT CONTRACT and clients will be reluctant to give you a direct contract if you do not have trucks.

Here is my story - Afriatransport

People request a transport contract from me in order to secure finance. Unfortunately I have to turn them down because of the historical problems I have had.

Last year one of the leading banks requested that we sign surety for an entrepreneur wishing to purchase a truck. Now put yourself in my shoes - WILL YOU SIGN SURETY in this case? Then there was the instance when a bank requested to do a due diligence on our books.  

For these reasons I do not accommodate and do not get involved with financial transactions.

For this reason we do not issue contracts for financing purposes.

We will gladly subcontract your services to operate under our direct contracts. That is what we do - That is our core business. We are not a bank and we are not truck dealers and we do not participate in such transactions.

We only contract existing trucks and not "trucks to be purchased".

As you can see the barriers to enter the Transport Industry is really getting hold of a suitable truck and trailer. Once you have a truck, putting the truck to work is not a challenge or barier at all - provided that you have a sought after truck. We subcontract and place trucks every week and we secure contracts on a regular basis.

So contractual work for trucks - There will always be!

So what are the solutions?

I tend to meet with truck dealers and financiers quite often and I have gathered that most will accept a 30 to 40% (or 50% in some cases) deposit and they will finance the balance. Getting hold of 30 to 40% is probably another challenge.

What are the possible soruces?

1. A rich grandad, uncle or other relative.
2. Taking a second bond on your home.
3. Exhausting your savings.
4. Partnering with 1 or 2 other persons and raising the deposit together.
5. Applying for finance and using the equity in your home as security.
6. You could try a business loan, but believe me you will only succeed with 1. to 5. above.

You could go nuts writing the best business plan, financial forecasts, market analysis and blah - blah - blah. Don't waste your time and don't waste money spending on great business plans. Banks are interested in one thing only. What is your deposit and what security can you offer? Combined they will look for anything between 70% and 80% (i.e. combined deposit and security).

So there you have it - Let's hope that I have saved you some money and valuable time. Work on what is possible and not the impossible.

Once you have your truck, contact Africatransport. Note that we specialise in Side Tipper trucks for the transport of coal, wheat, maize, chrome etc. Whilst we also secure contracts for flatdecks, 10 cube trucks, and sloper trucks - there are far more opportunities for side tipper trucks. Maybe I am being biased because of our expertise in the Side Tipper Field.

Neverthless once you have your truck contact us.

Last Updated (Thursday, 14 January 2010 20:39)

 
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