Creating your financial map

| December 12, 2008

While your books may reflect a profitable business operation, you may fall short of your personal needs and desires if household expenses are not included.

THIS ARTICLE IS FROM the 2007 edition of the Partners in Business manual, a joint effort of Overdrive, American Truck Business Services, Freightliner Trucks and Castrol. The next Partners in Business seminar will be 2 to 4 p.m., March 23, during the Mid-America Trucking Show in Louisville, Ky. To order a manual, call (800) 633-5953, Ext. 1135. Visit this site for more excerpts and program information.

A business plan is one of the most effective business tools you’ll ever use as an owner-operator. Think of it as a roadmap that allows you to track income and expenses over time, with the goal of reaching your desired financial rewards. Just as every load you pick up requires a bill of lading with a consignee or destination that tells you where it goes, your business requires a business plan to successfully move forward.

pick up requires a bill of lading with a consignee or destination that tells you where it goes, your business requires a plan to successfully move forward.

A business plan helps you make ends meet. It shows you exactly how much money is needed for expenses, where it will be spent, and how much you can afford to pay yourself. Your business plan should show all sources of income and costs, while taking into account industry averages, personal expenses and cash flow. And it should provide this complete financial picture in weekly, monthly and annual detail.

Creating a business plan can be a source of great personal satisfaction as well as an important contributor to the success of your business. It also allows you to know when you have reached your break-even point – the point at which all trucking and personal fixed expenses are met and every extra mile driven puts extra money in your pocket.

Experienced drivers will tell you that operating without a business plan is like sitting in the bed of a moving pickup truck looking backward. You can see where you’ve been but not where you’re headed.

The best time to begin the planning process is before you even start your business. The process will give you targets to aim for, and these later can be compared with your actual financial performance to set adjustments as needed to maximize profits.

Even if you already have started your business, it is not too late to think about planning. In the event that you have run into problems, planning can help begin your recovery from a difficult position and improve the performance of your business.

In its simplest form, the business plan should identify your revenue (or gross income) and your expenses. Without knowledge of your revenue and expenses, you can only guess at how your business will perform.

All personal household expenses also should be included. This is important to keep in mind as you determine whether your business plan is adequate to ensure overall professional and personal financial success.

If you’re taking your success seriously, sit down with your spouse or business partner and identify all of your personal and business income and expenses. As you work through this process, collect as many of your settlement statements, bills and receipts as possible. Accumulate three to four months of information in order to properly reflect your spending habits. Try to realistically reflect your actual expenses, and don’t forget to budget for savings, estimated taxes, unexpected situations and lean times.

If you lack past data for developing your business plan, do your best to estimate what you expect to encounter. Remember to be conservative in estimating your income and slightly overestimate your expected expenses so you don’t start out with a flawed plan. If there is money left over, place it into savings for those unexpected emergencies. If you need help, check with a business services provider that understands trucking.