How to start your own Logistics Business

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Transport and storage, or logistics, as it is broadly called, is a massive market with multiple players already enjoying a good chunk of the meat, in India. Having said that, there is a huge scope still available for new players. If you are planning to enter the logistics market, you need to prepare and strengthen your base so as to penetrate and sustain in the market. But it could seem like a difficult affair when there is a lot of research to be done. But no worries! Here's a list of things you need to get thorough with:

Know your Market

You are entering a market which has a few big players and multiple small ones. So to start your market research, first, identify your position. Ask yourself these questions—How do you see yourself in the market? Is your business local, regional, Pan India or global? What channel will you be using — offline, online or both. To answer these questions, you may need to research about the below listed elements in the market, and look for windows of opportunity that you can use to penetrate the market, and position yourself accordingly.

Product - Although it's stating the obvious, but you'll need to know your product in and out. First, decide which products you will store and transport. Will it be a single type of product like chemicals, or will it be multiple products? Because in logistics, along with knowing your own product —which in this case are the storage units and transportations facilities, you also need to know enough about the different kind of products you will store and transport. Be it chemicals, wood, pharmaceuticals etc. every product has a different requirement in terms of storage, transport, costing and regulations.

While starting out, always select the products that are more profitable to you in terms of costing and the ones that have the least competition, and hence more opportunity to grow.

Customer - Once you know your product well, it's time to understand your customers. A good way to go about it is by segmenting the market. First, identify the customers being targeted by the global industry. Then see what are the type of customers being targeted by the domestic companies. Post that, look up who the companies in the region / channel of your choice targets. This way, you'll be familiar with the types of customer the logistic industry has reached out to, and you'll understand your ideal target group. Consequently, you will get an idea of the customers that the industry and the smaller segments of the industry has still not explored, giving you your window of opportunity.

Competition - Once you narrow down on the product and the customer, it's easier to study your competition. The other alternative is to start off with studying your competition and then move on to products and customers. In any case, studying your competition is imperative. An approach you could follow is: First, list down all the players in the market. Then, list down your direct competitors. And since you are a start-up, big players of the industry will probably be eliminated here. Now, do an analysis of your competition's strengths and weaknesses. This will provide you with areas of opportunities, as well as areas of threat and concerns that you would need to work on. Next, check if there are immediate threats in the form of new players or substitutes. (For instance, traditional shopping has a threat from online shopping as a substitute). Once you have figured all this out, the next and perhaps the most essential aspect of your business, is finance.

Finance - It won't be a stretch to say that everything in business revolves around money. And therefore it is only natural that you need to research about the monetary part before diving into investing. Study how much money will be required and how you will accumulate it. Some of the factors that cost you are the property for your office, customer acquisition activities, and products (your storage facilities and your transportations). Be smart at cost cutting and choose the best ways to save on money. To know how you can go about generating capital, read the article on Starting a business in India - Capital generation opportunities. Make sure to generate capital as per your needs. There are many options available for generation of funds, but be sure whatever you choose is tailored to your needs, because in a market that offers similar products, personalised service is what will help you.

All in all, there are many approaches/models to do your market research — try and read up on the scholarly articles you can find on Google scholars. One such model is Potter's 5 force model which is one of the highly acclaimed one. It has derived '5 forces' that determine the competitiveness of the industry and therefore the opportunities in the industry. The important thing is to keep learning and evolving.

Write a Business Plan

Once you are done with your basic research, it's time to come up with a business plan. It's important to write a business plan to not only give a structure to your business but also to generate capital as the data will aid you qualify for loans. Use all the research you did to develop your business plan. Your plan should contain separate sections that explain in detail as to how you'll structure and manage your business, what kind of services you'll provide, who your target market will be, how many employees you'll hire, how you'll market yourself, how much competition you'll face, how you'll differentiate your business from competitors, how much it'll cost to start and maintain your business, and how much money you expect to make. If you have never written a business plan before, you might want to look into hiring a professional to help you write the same. Also, there are many examples on your old friend internet about typical and great business plans. And an important note: Remember to write a plan which you can comprehend later.

Regulation
There are different regulatory bodies in logistics, depending on the type of business.
The major ones in India being,

FFFAI (Federation of Freight Forwarders' Associations in India)
WDRA (Warehousing Development and Regulatory Authority)
NTDPC (National Transport Development Policy Committee)

Apart from these, Income Tax Department, DGFT (Director General of Foreign trade), Registrar of Companies, and other such departments need to be registered to.

As far as regulations related to finances are concerned, you may want to register for VAT and ESI (Employee's State Insurance - if you have a company employing 20 or more people.)

The reforms proposed in the GST present a massive opportunity for the logistics sector to grow as all the taxes will collate to form one single tax, probably making it easier for this sector in terms of book keeping and smooth running. Do consult a legal advisor and expert in this field. Be sure to be on the right side of the law.

All in all, starting a business in logistics is a huge step you, so make sure you are prepared for anything that the industry has to offer. All the best for your venture! Do well!!

If you like what you read, and want to know more about logistics, check the articles here.

How to start your own Logistics business

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