American student transportation services startup, Zūm, recently gained unicorn status as they raised $140 million in a Series E round, which put the company’s value at $1.3 billion. Last August, Zūm also launched the first fully-electric school bus fleet in the U.S. and plans to transition all their fleets to electric in the next few years. As a young fleet startup, you likely have the same goal as Zūm. Growth. Fleet expansion allows you to serve more customers, enter new markets, and ultimately make more money. However, it’s important to act strategically. As long as you’re certain expansion is the right move, research fleet vehicles carefully, and write a business plan that attracts investors, you’ll successfully expand your fleet and keep your operations smooth, cost-effective, and stress-free at the same time.
Consider why you want to expand
Before you invest in new vehicles, it’s important to be clear on the “why” behind your intention to scale. Has your customer base increased recently? Has demand increased? Or do you want to add new services to your repertoire? More vehicles alone won’t translate to more clients or more bookings/orders. Rather, your expansion should be in response to a real commercial need — otherwise you’ll only add to your expenses and responsibilities without any clear benefit. Similarly, consider how many vehicles you’ll likely need to further accommodate future growth. This is important as you don’t want to waste money and purchase vehicles you won’t use.
Research fleet vehicles
Once you’re confident expansion is the right move, it’s now time to research trucks to grow your fleet. For example, you may want to transition your entire fleet to electric as this can lower operational costs overall. By 2025, electric vehicles are expected to have a cheaper total cost of ownership compared to internal-combustion-engine vehicles of all kinds. This is largely because electricity is roughly three to five times cheaper than diesel, McKinsey reveals. If you go this route, look for electric trucks with a strong battery range — around 250-300 miles per charge is ideal for fleets. Also, consider the MPGe (miles-per-gallon equivalent) rating, which indicates how well a vehicle uses electricity. Trucks with an MPGe between 80-90 or more are fuel efficient, and therefore help you save on charging costs.
Attract investors with a business plan
You’ll also need to attract investors to fund your expansion — so, create a business plan that justifies your need for new vehicles. In your plan, detail the recent growth and revenue increase that directly results in the need for a bigger fleet. Also, include breakdowns of the expected costs of fuel, maintenance, insurance, road tax, and new drivers. Whereas you previously had to highlight your business potential to raise funds, you can now focus on actual performance metrics to stand out and gain investor confidence.
If your startup is doing well, then it likely makes sense to scale your fleet to accommodate further growth. As long as you take time to plan your expansion carefully, you’ll attract investors and put your startup on the road to long-term success.
