The fight isn’t over yet
By Timothy Brady

We’ve seen it happen to others or it may have happened to you in the past. Either way, the possibility of it happening increases with each year you’re in business. What’s the occurrence?  The personal emergency that takes you off the road for an extended period of time. It could be an on-the-road injury or accident, a sick or injured spouse, child or relative; another hurricane like Katrina, or a local event such as an ice storm or tornado. Any of these have the potential to take you off the road for a couple of weeks to several months. What can you do to prepare for the financial upheaval of any of these? How do you save your business from self-destruction while you’re taking care of personal emergencies?

There are several things you can do to protect you and your family from a financial setback if the worst happens. 

1. Have a comprehensive accident /disability insurance policy that pays regardless of where or when you injure yourself. This policy needs to pay a daily amount or a lump sum amount for the period of time you’re indisposed.
2. Carry either workers’ compensation coverage on yourself (even if it isn’t required by law), or at least an Occupational Hazard policy to cover you if you’re injured in the course of doing business.
3. Have Air Medical Transport Coverage on your health insurance or accident policy that will either bring you home or bring your spouse to you if you’re injured away from home. 

The best protection for not having your business put out of business by an unexpected event is by creating your own insurance policy, in the form of Sustaining Capital. It’s guaranteed you’ll receive dollar-for-dollar return on your money. This isn’t discounting the three suggestions for insurance noted earlier. But by far your best assurance is having the necessary cash set back in your own account. When you pay an insurance premium, you’re betting against the insurance company. You will most likely never get back as much as you pay out in premiums over the life of the policy. But with a Sustaining Capital Reserve, you have access to every dime and interest paid into the account, and if you don’t ever need it, you’ll get back all the money you invested later.

It’s not difficult, but it does take some dedication and time. Here’s the procedure: 

1. Establish your company’s annual fixed costs. Include in this fixed cost an annual salary for all essential (people needed to produce cash flow) personnel.
2. Take this annual figure and multiply it by 1.5 (one and a half years or 18 months of fixed cost).
3. Take this total and divide by either 156 weeks (3 years) or 260 weeks (5 years).
4. This figure becomes your Weekly Sustaining Capital Goal. Add this number into your Fixed Cost and be sure to include it as you calculate your rate range, or in the case of lease operators, include the amount for which you’re willing to haul a load.

Let’s say you’re a single pony operator:

1. Your Annual Fixed costs are                                                             $     36,500
2. Your Annual Salaries are                                                                  $     50,000
3. Total Annual Fixed Costs                                                                 $     86,500
4. Multiply Annual Fixed Costs by 1.5                                                    $   129, 750
5. Divide by 156 weeks (Weekly Sustaining Capital)                                $         832
6. or divide by 260 weeks (Weekly Sustaining Capital)                            $         499          
7. Take your annul Fixed Costs                                                            $     86,500
8. Divide by 52 (weeks)                                                                     $      1,663.46
9. Add either 156 wks’/Weekly Sustaining Capital @ $832                       $      2,495.46
10. or add 260 wks’/Weekly Sustaining Capital @ $499                             $     2,162.46   

At this point, select the weekly amount that is a realistic match with the revenue your operation can produce. (Remember you still need to add your weekly Operational, Load Specific and Fuel costs to this figure for your total cost per week.) For this to work, you must consistently place either the $832 or $499 each week into a specially designated Sustaining Capital bank account. Obviously, the shorter the time period, the quicker you’ll reach your Sustaining Capital Reserve Goal. But be careful not to set an unrealistic, too-huge goal which discourages you from participating in its growth.

Once you’ve reached your Sustaining Capital Goal, you’ll have 18 months of fixed expenses set back for those unexpected accidents and emergencies. Remember we included your pay in this, so not only will you be able to pay all the company bills, you’ll have the money to take care of all your personal home expenses. Add in comprehensive health, Workers Comp or occupational hazard policies and disability insurance, and you should be able to maintain your trucking operation, meet all your home expenses, and have a large majority of any medical expenses paid.

Is it easy? No, but with some effort and determination, it can make your life a lot less stressful.

Good loads and good roads, everyone.

Timothy Brady  © 2010
www.timothybrady.com
731-749-8567