Don't fail to plan your trucking business, or else plan to fail. It's that simple.
By Timothy Brady

The need to write a business plan applies to anyone who is going to operate a trucking business of any type. According to the SBA, start-up businesses that don’t have a business plan are over 90% more likely to fail within the first 14 months. Businesses which fail to review and update their business plan annually, will find themselves headed down a steep financial grade with fading brakes. A business plan is a living, breathing document that becomes your road map to success. It continually answers the question: Is this the correct direction in which to be headed? Nothing is more boring than a road map, until you need to discover where you are and where you need to go. The same can be said of your business plan. A business plan lets you know where you are and where you should be going.

The first part of assembling a business plan is setting financial goals:

• How much money do you need to maintain your lifestyle?
• Financially, where do you and your family want to be next year? In three years? In five years?

A surprising number of Owner/Operators and motor carrier owners never set goals for the amount of money they intend to make. Without setting an income bull’s-eye to aim for, you may be left with a very expensive hobby.

Now you need to ask: How do I achieve these financial goals? Will this trucking operation I’m planning reach those objectives?

In putting together your plan the first step is always about the money. What is it going to take to get up and running? What amount of revenue will be required to stay in business and how long will it take before you start seeing a profit?

(Note: there is a huge difference between being able to pay yourself a salary and having your company actually make a profit. Meeting your salary is the first objective; then making sustainable profit is your second. Remember; owner salary and profit are two separate items. An owner’s salary is an expense just like your truck insurance and payments. A profit is what allows you to grow your company.

Financial and Technical Information:
You need to assemble the following financial data: (You may want to engage the services of an accountant familiar with the trucking industry to bring together this information.)  

• Profit/Loss projections for the first five years, calculated by the month for the first three, and quarterly for the last two years. This helps you visualize when you should go from the red ink into the black.
• Projected Balance Sheets need to be assembled for the same period as the Profit/Loss projection above. This keeps the projected running totals of your trucking company’s assets, liabilities and net worth. The Balance Sheet keeps you abreast of how you’re preventing your company from burdening itself with debt.
• The Budget—Cash Flow Projection: This ties in with your Profit/Loss and Balance Sheet projections. It needs to be done for the same periods of time as the other two. This is one of the most important projections you will do. It’s supporting evidence for the Profit/Loss and Balance Sheet projections. This shows you where your money is coming from and where it’s being spent. It will also show when you can anticipate the greatest income and times of greatest expense, so you are prepared and plan ahead for both occurrences. This is an important document for any lender financing your trucking adventure.
• Break-even Analysis: This will show you the point at which your expenses and income match each other. It can be broken down into an annual figure, a quarterly number, monthly and weekly amounts, and a daily point. This is the analysis that tells you if your hauling rates are too low and need to be adjusted. It’s better to know this before you’ve published your rates, bought or leased your truck, or placed that first load on your truck.

In next week’s post, I’ll discuss the six components which, once the above financial data is plugged in, make up a trucking business plan.

You owe it to yourself and your family to get the complete picture. And the only way to do this is with a comprehensive trucking business plan. Why do a very large percentage of truckers businesses fail?—They fail to plan. You won’t be making that mistake, or else you wouldn’t be reading this article.

Good roads and great loads, everyone.

Timothy D. Brady © 2010
www.timothybrady.com