People who take a business planning approach to their insurance get better rates than those who jump from one company to the next, hoping to save money. That's because business planners make better choices.
Part I
While some expediters try to maximize their miles, keep up with their bills, and hope for the best, others take a more businesslike approach. Business-oriented expediters look and think ahead. They take advantage of the positive opportunities and prepare for the negative setbacks expediting involves.
Doing so takes extra effort, but it’s well worth it.
In their book “Build Your Business: An Owner-Operator’s Guide to Success,” American Truck Business Services says, “By truly managing your business instead of merely driving down the road, you can put an extra $20,000 or more per year in your pocket.” They would know. ATBS is the largest business services provider in the U.S. serving the specific needs of independent owner-operators.
Think about that for a moment. Truly managing your business could put an extra $20,000 a year or $55 a day in your pocket.
What does it mean to truly manage your business? In part, it means knowing what’s going on in the industry, who you are in the industry, what you intend to accomplish, and how you’ll do it.
The management tool that helps organize that information and communicate it to others is the written business plan. Writing a business plan forces you to examine not only your goals and methods, but also the external factors that affect your business.
As you might guess, writing a business plan is no small project. Nevertheless, virtually every business management expert says it’s worth the effort. Expediters who have written business plans agree.
Expediters Online knows of an expediting team that has money in the bank and a good credit history. When they went to purchase a truck, the dealer offered a truck loan with a 17% annual interest rate. At the time, the prime rate was 4.25%. The dealer said the high rate was charged because this was the team’s first-ever truck purchase. The failure rate among first-time truck buyers is high. The finance company offsets the risks of lending money to first-time buyers by charging high rates.
While some expediters would have settled for dealer financing, this team went instead to a small-business business lender. That lender required a written business plan as part of the application. After reviewing the team’s plan, the lender offered money at 5.25%, just one point over prime.
On a $120,000 truck financed over five years, the finance cost difference would be $33,613, or $6,723 a year on that business management item alone. Without a written business plan, the team would not even have been considered by the 5.25% lender.
Another business management item is insurance. Cheri Chwastyk, assistant vice president at Hartzell Insurance in Hatfield, PA specializes in writing insurance for owner-operators. She says, “If you run under your own authority, the management decisions embodied in a written business plan can make a 10% difference in your insurance costs.
“People who take a business planning approach to their insurance get better rates than those who jump from one company to the next, hoping to save money. That’s because business planners make better choices. They choose their insurance companies and coverage well, and tend to stay with the same company. Insurance companies like that kind of behavior and reward it with lower rates.”
Chwastyk says for single-truck, owner-operators running under their own authority, the savings can range from $500 to $1,500 a year, depending on the type of trucking they do.
So, if a written business plan is such a good resource, why don’t more expediters have one? In a word, business plans take time and effort to write. Many people don’t know where to begin. Even for the people with plan-writing skills, expediting business plans are difficult to produce.
Dan Barton and Karen Damberger do dedicated cargo-van runs in Ohio, Indiana, and West Virginia. They’re preparing to buy a straight truck and run expedited freight nationwide. Barton has a college degree in business administration and understands how beneficial a written business plan can be.
Barton says, “I knew I’d need to describe our business, state our goals, research the market, research carriers, develop a spreadsheet, and develop pro forma statements for our income and expenses. Then I’d need to put it all in writing to satisfy the banker who will finance our truck.”
“The trouble is, expediting is a small segment of the trucking industry. Information is hard to find. I had to search in several directions before I found something useful. Before I can even start writing the plan, it has taken me dozens of hours just to gather the background information. It will take dozens more to actually write the thing.”
Trucking industry service providers and other writers have produced some excellent business planning resources (See sidebar, P. x). While these are of some value to expediters, they are written mostly for over-the-road, tractor-trailer owner-operators, or for non-trucking business people. As Barton indicated, the specific information expediters need for expediting business plans is hard to find.
Words like “pro forma” and “spreadsheet” can be intimidating to people who are not familiar with them. While many expediters may be willing to pour their time and effort into writing a business plan, they have a hard time getting started. Most have never taken on a project like this before. Some don’t know how to begin.
To address those needs and to be of service to expediters, Expediters Online is launching a series of step-by-step business planning articles especially for expediters. The articles will appear in Expedite NOW magazine and on the www.ExpeditersOnline.com web site. Web site companion pieces will include expediter-specific business plan templates and spreadsheets.
The templates will include discussions of general economic conditions, general industry conditions, carrier-specific business descriptions, and much more. Expediters will be able to copy these discussions off the web site and paste them into their business plans. The spreadsheets will be designed so most expediters will be able to download and adapt them to their businesses. Business planning concepts like pro forma, depreciation, and freight cycles will be explained in the articles.
As stated above, business plans take time and effort to write. Industry research, writing and spreadsheets do not come easily to some truck drivers. By creating business-plan templates and spreadsheets, and pulling together industry information from EO’s many contacts, we hope to make things easier.
Even so, if you don’t already have a business plan, writing your first will not be easy or quick. In business plan writing, patience truly is a virtue. It will take time and effort to complete each business planning step, and to learn certain concepts that may not yet be familiar.
That said, we invite you to get on board as Expediters Online guides expediters through the business planning process. The EO staff is very excited about this project. We hope expediting community members of all stripes – drivers, owner-operators, fleet owners, carrier staff members, service providers, and others – will find EO’s growing collection of business planning resources to be beneficial.
This article launches the project. The next will discuss what an expediter’s business plan should contain, how to start gathering the background information you will need, and how to avoid being overwhelmed by the process.
If you have not already done so, sign up now for your free subscription to “Expedite NOW.” Call 859 746-2046 or sign up online here
Phil Madsen is the senior field editor with ExpeditersOnline. He and his wife Diane are a straight-truck expediting team. In 2003, they left their white-collar careers and became expediters to increase their income, simplify their lives, spend more time together, share a business project, and see the country. They’re pleased to say, “It’s working!” Phil can be reached at [email protected] .
