Your business plan should be a road map to where you are going.
On my last blog, I discussed with you the importance of planning prior to starting a business in the trucking industry. I searched back into some old files and found a copy of my original "Business Plan." It was fun reading the old documents from 1996.
The 1996 documents included our goals of the company, target market, competitor strengths/weaknesses, our own strengths and weaknesses and a financial budget. The initial budget included a projected income as well as expenses. The expenses were itemized to include fuel expense, truck and trailer payment, truck and cargo insurance, tags, permits, heavy use tax, property tax, maintenance fund, tires, owner salary and health care insurance. Also, we included the projected profits in addition to the owner salary.
The figures were based upon a 48 week year. All costs were inflated and all income had been reduced from actual numbers. I made sure this budget was set up in a conservative manner. I wanted to be sure that in a worst case scenario, there would be enough money available to support my family. For example, I figured on paying all my expenses over 48 weeks even though there are 52 weeks in a year. Fuel mileage was calculated at 6 mpg when I knew I could attain 7 mpg. Fuel was figured .50 higher per gallon. I calculated how long tires would last and divided that in half. Some people told me, "There's no way you'll go through that many tires in a year." They were right as they lasted for nearly three years.
On my income figures, I calculated conservatively by using market forces to determine the rates in the freight lane to be served. For good measure, I reduced those numbers by one third. When sharing these figures with friends and peers in the industry, I was told by all there is no way I would ever have as bad a year as the one projected on my business plan.
I have witnessed all too often people who paint a rose colored picture when they begin a business. I would advise to make your figures conservative and figure on a worst case scenario while shooting for the stars as you put your plan into action.