This is a tight margin and competitive business. It also requires a large investment in high value assets which use up capital to buy or create leasing overheads.
This business can be affected very quickly by the price of road fuel which can all but wipe out the profitability. In addition, the firms we deal with often have staff problems in recruiting staff or problems with employees they cannot easily make redundant to reduce costs.
These businesses tend to suffer from cash flow problems. Wages, fuel, tyres and repairs must be paid for quickly, but some customers can take up to three months to pay.
In addition, with all this going on the cost of vehicles can use up spare cash and capital. Often businesses like these own several vehicles and lorries all on finance. Any trading problems can lead to a reduced credit rating and in an increased cost of finance.
The options for this type of business usually tend to be closure and liquidation as they are unable to keep going without credit.
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Licensed Insolvency Practitioner