Being a very upfront kind of guy, I'll be honest that “big trucks = big bucks”.  In stating this, I mean that it takes a lot to operate these big pieces of machinery.  With higher expenses on average than so many other industries, it is no wonder why only 15% of small start-up trucking companies ever make it to their second year of business, according to the NASTC (newauthoritytraining.com).  Do not let this negative, intimidating figure fool you into believing the hype out there that, “there’s no money to be made in trucking these days".  In planning for the unexpected, you are one step closer to running your business succesfully.

One major key to succeeding is identifying, planning for, and managing large expenses “smartly”; both seen and unforeseen.  

Knowing exactly what your expenses are and being prepared for them can easily be the razor’s edge between boom and bust.  It is all too often I run into drivers who think that their settlement deposit after direct expenses is their “true” net profit and their personal spending money.  Soon enough, operating in this manner will catch up to anyone.  All it takes is a blown turbo, one bad injector, or blown tire to wipe out a trucking business operating with no buffer for maintenance.  If a $1000 setback could do this to an unprepared driver, imagine what a $3000 set of drive tires or $3000 quarterly tax estimate might do! 


Drivers that operate without knowing exactly what their expenses are can usually plan on ending up on the negative side of a trucking statistic.  Luckily, you are the first line of defense in protecting against this kind of failure.  Historically, I have learned to set aside 10% in a separate buffer account to plan for these maintenance expenses, which could vary for you based on your operation.  If you’re not used to doing so, at first it can seem like a large part of what you thought was your "profit".  When the time comes that you actually need it though, you will be more than glad it is there to save your rear.  I will leave you with an important quote that rings especially true in trucking and that I tend to try and live by, "He who fails to plan is planning to fail." (Winston Churchill).
 

Comments (6)

Jimmy Nevarez

Jimmy Nevarez is the Owner/President of Angus Transportation, Inc., based in Chino, California.  Jimmy pulls a 53' dry van hauling general dry freight for his own small fleet, operating on its own authority throughout all of Southern California and Southern Nevada.

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Great advice Jimmy. You're right on target, to be successful you have to budget adequately for those big expenses.

February 28, 2013 21:21:59 PM

I actually planned a rebuild as more of a planned portion of that percentage. When I planned out the 10%, it accounted for an average of 5% routine and 5% major mechanical. If I feel I have an excess in the routine, I move it over to major, to increase that buffer. I learned this the first year after buying my last truck, which was a little bit of a "lemon", until I got done with it. Of course I bought it used with someone elses' problems attached, since a used truck program as good as SelectCertified from SelecTrucks was not available to me at the time. Needless to say, $12,000 in unexpected major repairs my first year, even with a warranty, was enough to learn how important buffers are as an owner operator! I also have three dedicated maintenance/tire credit cards that have a 6 month no-interest period and cannot be used for anything but truck maintenance and tires. These use-specific credit cards not only allow me to stretch major repairs out over 6 months if needed, but also help me to build corporate credit.

February 28, 2013 20:48:30 PM

Its VERY important to have a "cushion" in your business plan. If your plan is based on everything working perfectly everyday it sets you up for failure the first time something goes wrong. Great topic.

February 28, 2013 12:03:38 PM

Do you seperate "expected" maintenance expense budget-tires, etc. from saving for a major event such as an engine rebuild

February 27, 2013 20:50:41 PM

Jimmy,

Great article. I only hope people will read article and take your advise!

February 27, 2013 9:10:36 AM

Great information Jimmy! I really like Winston Churchill's Quote. In trucking I do not like surprises and while we cannot plan for everything we can still have money set aside for the unexpected.

February 27, 2013 4:34:55 AM