Feedback on Business Plan

[carstea]

Let's say I purchase a new D unit with 22' box, and a comfortable sleeper for $80,000 (including sales tax). Also, assume I hire a husband and wife team to drive the truck, and I choose to compensate each year as follows...

40% of the first $75,000 in revenue,
50% of the next $50,000 in revenue,
and 60% of all revenue above $125,000 during the year. On top of that I either pay for the fuel charges or they would pay for it but that reimbursement would be in addition to the above described compensation.

An example, say the husband and wife team earn $150,000 in revenue. Their compensation would be 40% * 75,000 + 50% * 50,000 + 60% * 25,000 which comes to $70,000. In other words the more revenue they bring in the greater share they would take in the revenue.

With that how does my financial statement below look...is it realistic? Am I forgetting anything? Understating or overstating anything?

Miles Driven: 156,250
Gallons of fuel: 15,625 (10 mpg)
Cost of fuel: 27,244 (1.75 per gallon)
Revenue: 150,000 ($0.96/mile driven deadhead and loaded combined)

So...

Revenue: $150,000

Less:

Compensation: $70,000
Fuel: $27,244
Insurance: $2,500
Base Plates and Apportionment: $3,000
Repair/Maintenance: $4,000
Orientation Expense: $1,000
Satellite Cost etc.: $1,000
Legal and Accounting Consulting: $5,000 (mostly start up)
Depreciation: $16,000

Net Income: $20,256

Also the way I would like to run the show would be since I live in an area where expediting is pretty much unheard of, the couple could live east of the Mississippi somewhere while I live in the Pacific Northwest. They have the truck, and they make the decisions as to what runs are the most profitable for them (and by virtue of the compensation schedule it would be most profitable for me as well). They take the truck in when it's time for maintenance, and I pay the repair and maintenance costs.

Would this business plan work? Is it very easy to find drivers who can be trusted and are knowledgible enough to run the show? Can I get a truck that a husband and wife team would be comfortable with for less than the $80,000 I have in my pro formas?

Just looking for some feedback, am I way off base, or can this work?

Thanks for your time, I am still a few years from doing this, but I don't want to keep researching (and spending money on research) if my numbers aren't realistic and I can't make a worthwhile return.

 

[tazman]

Hi,


I have built a similar business plan (using myself and my wife) as driver/owner....

The rule of thumb is about $.10 per mile for maintenence...or so I hear....( experienced guys...tell us please)

Insurance may be a little low as well (would depend on the state of registration)

The other this is being a "couple of years away" you would have to consider the "inflation factor"...With regulations as they are today...who knows what "lurks in the hearts of politicians"...

It will be interesting to see your other responses...from the experienced guys...

Frank in Pa.
TAZMAN
"The Beast in the East"

 

[apollo]

I am investigating the same way you are. I think a very important thing to do is gain some actual experience driving. You are sure to discover expenses, repairs, etc that you may not have thought of. I am going to get my CDL and do exactly that for a year or so. I will drive for an O/O that is leased on to most likely Panther II. The other option if you are wanting to act as an investor is to find someone with many years experience to get onboard as your "CEO" to help you set up the business, make contacts, etc.

I had done a similiar business plan. But after I thought that I had everything accounted for, I cut the figure in half to account for a worst case scenario. In your case that would be $10k instead of $20k. My plan worked out to about $7-8k a year on each truck.

 

[davekc]

Being in the Northwest will have some complications .....maybe.
If a driver is involved in a accident or quits and abandons your truck, one must be prepared for this.
I am not sure where you are going to plate the truck, however $3,000 seems alittle high. Although in CA that may be low.
To base plate in FL on a 33,000GVW truck it is less than 500.00
The biggest issue confronting what you are trying to do is finding the right team. Sounds easy, but it certainly is not.
You have to allow in your numbers that your truck may be sitting for several months if the driver quits, gets ill, family problems ect. There is a whole list of reasons that could park your truck for a period of time. Just because it is a new truck doesn't mean you won't have some mechanical issues. As you read some of the posts you will see some folks who have purchased a new truck, only to have it sit for weeks because of repair or parts issues. And I am sure you know that expenses such as payment, interest, insurance, QC charges ect. keep coming.
In addition, you should factor in monies to retrieve your truck if it becomes necessary. Could be expensive if you are in the Northwest and had to go to Maine.
Additional maintenence monies set aside as well in the event a driver tears up your equipment. Not everything can be covered under a warranty.
A good example would be a driver hooking up a inverter, and burning your electrical system up. Maybe $1,000 deductible on insurance and truck tied up a week or two for repairs.
I don't want to sound discouraging but it turns into; "expect the best, but be prepared for the worst.
Hope that gives you some ideas to start.
10 percent for ALL miles is not a bad number on maintenence. If starting with a older truck, expect higher numbers
Davekc

 

[carstea]

Excellent feedback. Hopefully I will continue to get additional responses. Something like this is better if you gather numbers and information from several folks...does the compensation to the driver seem below average, average, or above average?

 

[apollo]

The pay comes out to only 46-47% of earnings. There are many companies that pay a 60/40 split, but make the drivers pay for fuel. If I was on that contract as a driver I would really cut back idle time and take it easy to conserve fuel. That in turn would hopefully lessen the wear and tear on the equipment for you in that case. I am no expert by any means, but just another thought I figured I could throw out there.

apollo

 

[RichM]

Important point is make sure you get your own CDL,so when you have to rescue the truck(which you will) you are qualified to drive it.
I would try to make some contacts in the mid west and east so that you can have someone you trust to drive by a truckstop or motel where the vehicle is parked and give it a visual onceover, also until you get to trust your drivers find someone who can possibly follow the truck for 50 miles or so to see how it is being driven.

 

[tazman]

Te big question....I see .. IS:
Will you find a team that will work 40/weeks a year and drive an average of 3750 miles/week ??????
(3.5 weeks per month)

Is there enough work out there to support that ????

When you take into consideration the slooooow months (summer, etc.)

Will any teams being willing to step up a give us an idea of the weekly loaded miles they are pulling ????

How say everyone ????

Thanks,

Frank in Pa.

"The Beast in the East"

 

[pellgrn]

If your a team and leased to one of the big carriers,you won't have trouble getting freight.The previous post are right on,your biggest risk will be the team or driver you choose.

 

[wfsurran]

RE: Business Plan: An Accounting Oversight?

FROM: William F. Surran
On line Resume: http://resumes.hotjobs.com/wfsurran/truckdriverclassa
On line Journal: http://dumbtrucker.blogspot.com/

TO: carstea
~~Over the years I notice that most business plans constructed for the transportation industry do not include the cost of ROI, or return on investment. It is a hidden cost. It is a legitimate expense because you surrender the opportunity to earn the ROI when you invest your money elsewhere. It is a discarded earnings. Most non-accountants never include ROI in business plans because it is an intangible cost. They simply are not aware of it. Indeed, many financial professionals simply ignore or forget to include it in the statements. So add one more calculation to your projections.
~~ROI is calculated by multiplying the cash invest amount (in your case it seems to be $80,000) by the return it should earn if placed in a safe investment for the period (say 3% in the bank or a one-year CD). That amount ($80,000*.03=$2400) is deducted from the yearly net earning of the proposed venture.
~~In other words, reduce the net profit you think the truck will earn by the ROI ($20,256-2400.00=$17,856). If bank rates increase or decrease then adjust the figure accordingly. During periods of inflation investments can payoff 20% a year and more(1970's), which means your truck would earn very little ($20,256-$16,000=$4,256) compared to the return on investment from the bank ($80k*20%=$16k).
~~At some point it becomes sensible to put the money in the bank and earn more with less risk than found in expediting, or use other people's money (borrow) to finance the business while keeping your assets protected. That method risks the bank's money while yours remains protected and earning a return. Of course, that is why business plans are made: to compare profitability paths. Remember inflation increases costs and lowers net income, slowing down the economy. It costs us money. That is why the Federal Reserve attempts to control inflation by manipulating the federal funds rate. I try to listen when the Chairman speaks. I hope this helps others to understand legitimate hidden expenses.
~~Prayers of thanks, safe passage, and prosperity for you and your family. Good luck on your adventures.

Bill Surran

 

[davekc]

RE: Business Plan: An Accounting Oversight?

Probably should have mention this in my other post. With being out west you might in addition consider leasing a tractor on with a company. If things don't work out, you have alot of other options to work with. Not a large market out west for used expediter trucks.
The downside as already mentioned is that if you have to rescue your own truck, you should get a license to drive it.

 

[BigBusBob]

Not really into the whole "Business Plan" aspect of things as a driver, but learning as I read on this awesome site with awesome site filled with awesome people... anyways,
Tazman mentioned the figures of nearly 4,000 miles a week, for a team. I don't know if that's easily done for 3 weeks a month or not. I know as a solo I was barely cuttin' out 800 to 1,000 miles a week, on average it was 1,200 miles a week I'd say.

What kind of miles do teams generally run, on average, with most companies??? Let's hear those figures? I'm curious as I'm sure many other's are as well. Team Miles: A Day? A week? a Month?