If you have been running an expediting business without a budget and have also been following this series to improve your results, this is a moment of truth. There is no way to have a good business plan without a budget.
In this step-by-step Business Planning for Successful Expediters series, we have discussed the challenges and benefits of writing a business plan, and introduced a number of business planning concepts. A suggested business plan outline, developed especially for a one-truck, same-household expediting team was presented in part five.
We are now working our way through the outline, discussing each item. Next up is your business plan’s table of contents. But before we get to that, there is something else for you to start work on. It is your budget.
Did you groan when you read the word, “budget?” For many people, the word “budget” fits with dentist, taxes and surgery. It is something you know you should do but don’t care to do. There are those rare folks who enjoy keeping a budget. If you are among those fortunate few you can probably skip the budget talk in this series.
For the rest of us, budgeting is a chore. The best we can hope for is that budgeting will grow easier over time. In fact it does, as do most tasks with practice. As you see your finances improve, working on your budget can even become a satisfying activity.
It is fun to sit down with your co-driver, review your numbers, and see that you are doing well. If the numbers show you are not making good money or not doing better than the year before, your budget and business plan will help you know why.
In previous parts we said writing a business plan is like putting together a puzzle. You don’t’ have to do it in an orderly fashion. You can start with the easy pieces now and set aside the hard pieces for later. Writing a budget includes some hard pieces. We’ll start with the easy ones.
Every truck driver knows how fast a pile of receipts can grow. A couple of fuel stops, a few meals, some truck supplies bought on the fly, a Wal-Mart stop, a truck wash; almost overnight, you find yourself with a pile of unprocessed receipts to deal with. Then you check your mail and the paper pile grows.
It is so easy to “file” this week’s receipts with those you “filed” last week’s to do later. Your filing system becomes a piling system. As the pile grows, so does the sinking feeling that comes when you look at it.
That feeling moves you to put the pile out of your mind by watching TV, going to sleep, making a phone call or even going to the dentist. But the pile keeps growing. If you neglect it too long, the sinking feeling can grow into a sinking business.
If this is the way it is for you, you have two choices; (A) continue to do what you are doing, or (B) do something else.
If you have been running an expediting business without a budget and have also been following this series to improve your results, this is a moment of truth. There is no way to have a good business plan without a budget.
So what’s it going to be, Driver? Are you going to master your paperwork or will it master you? A year or two from now, do you want to look at your business books with a sense of pride and accomplishment, or do you want to look at that same pile of paper with the same sinking feeling it gives you today?
This is a step-by-step series. You do not have to know how to put together a proper budget to decide you want one. The first step is to make up your mind good business bookkeeping is something you want. In other words, set a goal. Resolve, right now, to master your business paperwork and have a real budget.
The good news is you don’t have to do it all at once. You don’t even have to do all the work yourself. There are business services you can hire to do a lot of this work for you. Either way, the first steps are yours to take.
To start, go to your pile and pull out two months worth of receipts, bank statements, credit card statements, fuel card statements, transponder statements (if you use EZ Pass or PrePass), etc. Include your household bills, pet food receipts and losing lottery tickets. Include it all.
Pick two consecutive months that show your usual amount of home time and time out on the road. When you have a two-month pile assembled, take a moment to congratulate yourself. You have just completed your first step toward a proper budget.
Your next step is to categorize your transactions. In other words, name the ways your money comes in and goes out. We’ll start with two broad categories or chunks; business transactions and personal transactions.
The pile will be sorted into those two chunks. Later we’ll sort them into even smaller chunks like truck repair, fuel, household utilities, etc. For now, just think about the two bigger chunks; business transactions and personal transactions.
The good thing about using papers from previous months is the pile will not change. The mail won’t come tomorrow and inject new statements into your old-transaction pile. You are not dealing with a moving target. You can use your own history to learn a great deal about your business and finances; and you can use it to develop a budget.
This is a project you can do on the road. To keep your original documents safe at home, make copies of every piece of paper in your two-month pile. Take the copies with you in your truck. If you keep a check book register, copy two months from it too.
If you have your papers in a brown paper bag, get a second bag. If they are in a file folder or a box, get a second folder or box. Label one, “Business” and the other, “Personal.” Then sort your papers into the appropriate container.
For example, a fuel receipt is a business expense. Put it in the business container. Lawn mower repair would be a personal expense since mowing your lawn at home has nothing to do with your trucking business. Window cleaner bought for the truck is a business expense. Window cleaner bought for the house is a personal expense.
You will soon come upon items that do not fit easily into either container. It might be something like the new satellite radio setup you bought. When you are on the road, you use the receiver in your truck. At home, you plug it into the boom box that sits in the kitchen. On the road, you use the radio to check the weather and traffic but most of the time it is for music and sports.
Is the purchase of the radio a business or personal expense? What about the monthly subscription fee? Is it business or personal? Notice that we are not talking about what is tax deductible. We’ll get there but not yet. We are only talking about two chunks. One chunk is business, the other is personal.
One of the reasons business paperwork can get so overwhelming is many transactions do not fit neatly into categories. People sometimes get tangled up by trying to think about everything at once. Do not do that. Take it a step at a time. Do not think about how your radio is treated for tax purposes. That is an entirely different topic.
Keep it simple. At this point, decide only if your radio is a business or personal expense. Do not think about the radio and the monthly subscription fee at the same time. Do not think about taxes. Just decide what container to put it in.
Your choice is not locked in. After you think about it for a while, you may decide to move the radio receipt from one container to the other. That’s OK. Move it as many times as you need to reach your final answer.
If an item stumps you, start a third container. Label that container with a question mark. Dump the questionable items there and move on. The question container is for the difficult pieces of the puzzle. For now, focus on the easy stuff. As with a puzzle, the difficult pieces get easier after the easy pieces are done.
Bank and credit card statements are tricky. With those, you do not have a separate piece of paper for a separate transaction. Instead, you have a whole list of transactions, some business, some personal, all on one statement.
Sorting those is an education. You are doing it not only to prepare a budget but to learn more about your business and personal finances. When you get closer to mastering your paperwork you won’t do what we say to do next, but at this point you should.
For each item on a bank or credit card statement, write the details on a 3×5 card (or separate piece of paper) and put it in the proper container. If you have a receipt that matches a statement item, staple the receipt to the card. If you do not have a stapler in the truck, buy one. Part of mastering your paperwork is having the tools to do it.
If you have not categorized your transactions before, you will quickly see how they tend to blend together. If you buy fuel and take a $200 cash advance, both transactions will show up on your fuel receipt. But how do you categorize the $200? Was it used for smokes? Did you buy a gift for the grandkids with some of it? Was it used for meals, a magazine and a pair of gloves? Hopefully, you will have receipts to help figure this out.
The difference between financially successful expediters and those that just scrape by lies partly in the little things. Financially successful expediters keep all their receipts. They sometimes make little notes on the receipts to help them remember and categorize the transaction.
Instead of blending their business and personal money in one account, most financially-successful expediters set up personal and business accounts. They will have personal debit and credit cards, and business credit and debit cards. They maintain a personal bank account and a business bank account.
That does not mean you have to open a formal business account at the bank. Two free checking accounts will do. Use one for business and the other for your personal expenses.
If you are standing in line at a fuel desk behind someone who uses one card to pay for a gallon of oil and another to pay for a gift item, the chances are good that you are looking at a successful truck driver. Successful expediters don’t wait for later to sort their business and personal transactions. They do it on the spot.
There are more steps to complete before you will have a proper budget. Let’s fast forward a bit to show why you are doing this. If you present your business plan to a banker who is considering you for a truck loan, the banker will quickly look to see what your monthly “nut” is. “Nut” is a slang term used in business to describe your monthly overhead.
In other words, at the beginning of each month you have a nut to crack. The nut is the total value of the expenses you must pay before you become profitable. Sorting your expenses into business and personal categories puts you well on your way to knowing your nut. Knowing their nut is something financially successful expediters do.
Space limitations keep us from talking here about your business plan table of contents. We’ll pick that up in part seven. Until then, you have some work to do. Get started on the easy pieces of your budget.
Correction
Part five included a quote but the footnote citing the source was inadvertently omitted. The quote is, “A business plan helps entrepreneurs and business managers think through their strategies, balance their enthusiasm with facts, and recognize their limitations.” Source: Covello, Joseph and Hazlgren, Brian. Your First Business Plan, (Sourcebooks, Inc., 2002), p. 2.
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Phil Madsen is the Senior Field Editor with Expediters Online. 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. Phil can be reached at [email protected] .
