Are you interested in setting up a shipping company from home? If so, check our complete guide on starting a shipping business.
Of course, the business of the shipping company promises to be very profitable. But not all businessmen will be able to master it. After all, this kind of activity requires enormous investment, effort, time, and energy. And you can make money in this area in different ways. We invite you to consider the possibility of transporting goods between specific destinations.
Also, don’t forget about one practical option. Just like other people can buy essay, plans, dissertations, or reports, you can buy a business plan for a shipping company. It is better to entrust such an important mission to professionals.
What you need to know and how to start?
The shipping industry is an excellent example of how globalization forces many companies to restructure, requiring new strategies and business models. Traditionally, the success of shipping companies has been linked to the amount of tonnage they own. Firms can also engage in other functions, such as buying and selling ships, financial transactions, and promoting innovation in ship design.
However, with the rise of outside investment, publicly traded companies and professional managers are replacing the private shipping companies and shipowners of the past, focusing on the integrity, timeliness, and accuracy of financial reporting.
Planning
You will need to invest a certain amount in this project. Ideally, your company should provide annual freight traffic. An additional source of income is the leasing of part of the fleet. To start a business, you will need to solve many questions, including where to get such a large amount.
You can turn to investors, but this requires a shipping company's business plan stating all the expenses to be covered in different stages: buying ships and the necessary equipment, creating the appropriate working capital, getting a team of professionals, etc. Your business plan should also contain the results of marketing research and desired promotional campaign.
Now there is a tendency to increase the volume of coal purchases. Therefore, the services of your bulk carriers will certainly be in demand. Your company will deliver the goods in the shortest possible time, safe and sound.
Also, it is worth applying modern management methods and technologies to strengthen its position in shipping. It is best to rely on ten-year-old vessels that have a minimum payback period. As a result, the profit you will receive will be the greatest.
Consolidation and specialization
Shipping companies responded to efficiency demands by consolidating. They needed to be big to compete in the world. The size gave them the flexibility to relocate their ships to take full advantage of fluctuating supply and demand and deter potential competitors from entering the market. More importantly, alternative financing for large fleet sizes is the only way to generate the good financial results shareholders expect.
But companies aspiring to become global leaders realized that specialization might be the answer: shipping firms define their core activities and delegate non-core work to freelance specialists. This means that the company finds one business line. It is successful and then expands through outsourcing to other sectors, thereby bringing to market a specialized product that can compete globally.
The specialization thus emerging divides integrated shipping companies into four archetypes:
- owning ships,
- using ships,
- operating ships,
- innovating ships.
Those companies that own ships will focus on size, volume, and low costs; those utilizing vessels concentrate on developing strong customer relationships through scale, brand name, company performance, quality of service, etc.
The third archetype, which focuses on ship management, seeks to keep crewing and maintenance costs low. The fourth type puts efforts into developing innovations in the shipping industry.
Faced with the need to adapt, the first step for the shipping company is to identify where the most promising opportunities may be, now and in the future. This should be followed by a specialized focus on one of the four archetypes and a thorough understanding of the critical success factors.
Management must understand what needs to be achieved in their specific business model. You also need to understand who the customers are and what type of service they want.
Staff
The best option for such a company is a management scheme with the board of founders. A lawyer, an executive director, a consultant are also required. It will also be necessary to hire enough personnel to cover all the business processes and be a fully operational company with the following departments:
- fleet development,
- finance,
- marketing,
- liner fleet,
- ship crew,
- audit,
- accounting,
- safety.
Everything needs to be organized so that maximum interaction between management and the subject is ensured. The main goals of management are to increase the company’s competitiveness and get the highest possible profit.
Please note that your staff should only consist of experienced specialists who have already received recommendations from other companies. You can, of course, hire promising young professionals but may risk deadline overdue or incomplete tasks. Employees need to be allowed to undergo training to improve their professional level and implement newly created working procedures to increase their work proficiency.
We recommend that you only hire people for a trial period first. This is necessary so that employees first prove their competence in practice. If a particular person’s work is productive, it will be possible to think about his promotion. The competitiveness of the company largely depends on the professionalism of your team.
Financial questions
The initial capital of your shipping company must be large. You will need to work hard to get potential investors interested in your project and invest about $ 25 million in your enterprise. This amount is quite enough to start a business but to become independent and competitive, you should acquire:
- three modern bulk carriers (not more than 5 years old, each costs approximately $ 9 million)
- one ten-year-old bulk carrier (about $7 million)
All ships need to be taken with a capacity of 60 and 40 thousand tons.
Such an undertaking can pay off only in more than five years if you consider all the little things. This project is quite sound, and if taken into account the estimated cargo turnover, it will bring relatively high and at the same time stable profit. After the project pays off, it is necessary to increase and expand the sales markets for services and improve the quality of the service provided in all possible ways.
Why change?
For those who find it difficult to move away from the sentimentality of the idea of ship ownership, there are five key reasons why the classic approach to an integrated shipping company is worth rethinking:
- Ship ownership usually requires a long-term focus; high liquidity is needed, which is a high-risk factor. When using a vessel, however, break-even management is key.
- Fleet ownership involves financial engineering, chartering, marketing, and trading in charter derivatives, which are not always based on the ship as the transaction’s target.
- If the various past types of shipping activities were integrated into one complex, now customers can contact specialists at low cost. It is less likely to be a long-term benefit from the exclusive control of all business parts, as was the case with large integrated shipping companies. In reality, there may be a negative effect.
- Funding takes different forms in specialization. For ship ownership, for example, the focus is on finding the cheapest source of capital. However, for a trading or charter firm, the focus is on finding a reasonable source of funding with reasonably stable, preferably positive cash flow. At the same time, it is easier to get public funds for financing, which is fundamentally different from the less predictable cash flows of a classic ship owner company.
Ultimately, various aspects of the value chain require different knowledge, and managing too many unrelated activities is challenging to do globally.
