Will Growing Your Company Actually Increase Profits?

On Esta Klatzkin’s small business financial blog, a small business owner says that though he adds more people and equipment he isn’t increasing his net profit. He asks, “What am I doing wrong?”

If you’re an owner-operator who’s been working harder, running more loads and/or bringing on a new driver, that question may have been floating around in your head as well. Why isn’t the extra work showing up as additional income?

The Risk of Growth for Growth’s Sake

Klatzkin, a tax and financial consultant who specializes in providing tax accounting and financial services to owner-operators and other drivers in the transportation industry, explains that when a typical company grows, expenses increase as well which may absorb any profit.

For example, take a company that nets $50,000 on total sales of $1,000,000. That means the company is producing a 5% net profit. After totaling pay for a load, deduct wages, fuel, maintenance, travel expenses, etc., and you have your net profit.

If this company has a 40% gross profit (on loads sold), a $100,000 increase in sales should add $40,000 to the bottom line. “I say ‘should,’” Klatzkin explains, “because the increase in sales may cause the need for more equipment, space, or inventory.” For an owner-operator, additional wear and tear on the vehicle, more nights on the road, hiring additional drivers, increased tax burden, slow-paying customers, etc., can also diminish the impact on profits.

Keeping More of What You Earn

Good record keeping, careful cash-flow management, tax planning, accurate financial data and preventive maintenance can help owner-operators enjoy more of the fruits of their labors. Another thing to consider, according to Klatzkin, is whether growth is really the best route to increased profits.

“Growth for growth’s sake can be financially unhealthy,” she says. “A better way to increase net profit might be to increase the gross profit on all or most of the items sold.” In other words, a 4% increase in rates would add $40,000 ($1,000,000 x 4%) to this company’s bottom line – if the price increase doesn’t cause a loss of customers.

That’s a big “if,” you may be thinking. Increasing rates is indeed a risk, but Klatzkin says to focus on the value you offer your customers. “Suppose a company sells a top quality product and provides excellent service,” she says. “These are major facts in the competitive world. If 30% of the current customers account for 70% of the total sales, they are probably dealing with the company for reasons other than just low prices.”

This points out the necessity of keeping good records. You have to be able to pinpoint if 70% of your sales are in fact coming from 30% of your customers.

It also points out the importance of providing good service which for some carriers is worth higher rates. “Sell these customers on the fact that a slight increase in prices is necessary to maintain the quality of product and service that they expect and deserve.” Klatzkin says. “Good customers would like the company to be around in the future and should appreciate and understand the need for increasing prices.”

Learn more about this topic by downloading Klatzkin’s e-book, Driven 4 Profits: An Owner/ Operator’s Guide to Keeping More of the Money You Earn.

Dealing With Unexpected Expenses

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Independent owner-operators have an enviable life in many ways, not least of which is being your own boss. But without the stability of regular paycheck it’s harder to be ready financially for the unexpected. And when you own your own truck, “the unexpected” can mean tens of thousands of dollars in repair costs and lost revenue.

And then there’s the expenses racked up thanks to severe weather or an accident. A slump in demand for your services takes a further toll on revenue. There’s no surefire way to prevent any of these crises from happening, but you can reduce the stress, the sleepless nights and the strain on your marriage by being prepared.

Stamp Out Debt

Eliminating as much debt as possible is your first step. Credit card debt is the worst. Interest rates on this kind of debt can go above 30%, much higher than for other kinds of secured debt, like truck and home loans. With such a high rate, paying down credit card debt is that much harder. As the interest compounds, you’re paying more and more interest and less and less of the principal.

Carrying debt on credit cards “keeps you poor,” according to consumer expert Clark Howard. With the high interest rate, you’re paying that much more for everything you buy on the card. It also siphons off cash that could go into savings. When an unexpected expense arrives, you have fewer resources to fall back on and are forced to put the charge on a credit card, perpetuating the vicious cycle of charging, delaying payment and accumulating debt that compounds at 30% per year.

Build Three Different Funds

Most people can get by with an emergency fund to cover three to six months of living expenses, but when your work requires a tool as expensive as a truck, you really need three funds: an emergency fund to cover motel and rental car in case you’re stranded by weather, breakdown or an accident; a truck fund to take care of unexpected repairs; and an income reserve fund to live off in case you have to endure a dry spell in your business.

Establish a goal for each fund and begin channeling any surplus you can spare to these funds, starting with the emergency fund. Research what it would cost to rent a car from the farthest point in your range and return it in your hometown. Overdrive magazine pegs the cost of maintaining a four-year-old truck at 12 cents per mile to give you an idea what to shoot for with your truck fund. Three months’ worth of living expenses is a good rule of thumb for your income reserve fund.

Considering that severe weather emergencies come with power outages that could make your credit card useless, keep a reasonable amount of cash on hand at all times. Also, make sure your credit card’s limit is high enough to cover expenses for getting home with all of your belongings in case you’re in an accident.

Finding the Funds to Do It

According to Mint.com, it’s more about finding the discipline to do it. Most people look at their checking account and conclude they can’t afford to save, but reducing expenditures and making saving a non-negotiable expense can make the funds mysteriously appear.

Being honest with yourself about the difference between wants and needs is key. Smartphones, cable TV, dinners out – anything beyond food, shelter and basic clothing is a want. Financial experts recommend you establish a goal for monthly savings and fulfill that before spending anything on wants.

How to Make it as an Owner-Operator

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Making your way in one of the most heavily regulated industries on earth can make you wonder if it’s worth it sometimes. And the increasingly expensive equipment required to be on the road may be sapping your revenue more than ever.

But there are drivers making a good living as owner-operators. How do they do it? One common thread among successful O-Os is their tendency to be business-minded tinkerers. They’re usually trying different approaches for being more efficient and cutting costs. They’re often studying up on the latest technology or on some new way to get better fuel economy. They talk to other O-Os to see how they’re dealing with challenges like detention time, new HOS rules, or getting good loads.

Know What It Costs You to Operate

Survival depends on bringing in more income than you spend. So the foundation for managing your business well is knowing what it costs you per mile to operate, including all your expenses and your salary. On the Owner-Operator Independent Driver Association’s (OOIDA) website, you can find a spreadsheet that helps you calculate that number. Once you have numbers to work with, it’s easier to evaluate a load, track your profitability after you’ve hauled it and apply what you’ve learned next time a similar opportunity arises. Over time, having accumulated that kind of data allows you to make better business decisions.

Once you know what it costs you to operate, see if there are ways to reduce that number without making yourself miserable or driving your family crazy.

Understand the Regulations and Figure Out How to Do the Best Job Within Those Bounds

Before he drove a truck, Henry Albert drove stock cars. (He tells the story in this video.) He didn’t go to college, but raced stock cars in his early 20s and says that was his college. “The parallels between trucking and stock car racing are pretty interesting,” he says. “The people that made the racing rules usually didn’t even own a race track or a race car. Many of them had never raced a day in their life.”

These people changed the rules every year. So once a year, all the racers received the new regulations they had to follow. Albert says, “First, you decided if you wanted to keep racing with the new rules in place. If you did – it was the same rules for everyone – so you had to spend your time figuring out how you were going to make those rules work better than anyone else.”

There were always those who complained about the new rules, but other racers focused on how they could be the fastest within those boundaries. Pointing out the cleaner air we have thanks to unleaded gas, Albert says regulations have their place. “We all have to deal with the same rules. If you want to make it as an owner-operator, put your mind to work on how you can do the best job and still obey the law.”

A good place to start is to avoid the fines and delays that come from being a flashing beacon for FMCSA enforcement personnel. Click here to read How to Avoid Six Common CSA Violations

Become a Fuel Efficient Machine

Carlos Cruz, a struggling lease-operator, was ready to turn in his keys after a few months on the road. But as a last-ditch effort, he decided that on this final trip to the terminal, he’d follow all the advice about fuel efficiency he’d been hearing from trucking business gurus and see if it allowed him to recoup expenses and increase his take-home pay.
The experiment was a success, so much so that he decided to give his business another month. After 30 days his fuel mileage went from the 6.2 to 7.8 miles per gallon, a 1.6 mpg improvement that more than quadrupled his net revenue.

That was three years ago. Today Carlos continues his lease deal and can afford to live well on his income.

Details of his story are in Jim Park’s column on TruckingInfo.com, but the three habits he says make the biggest difference are:

  • Slowing down from 65 to 55 mph
  • Never idling
  • Becoming a “progressive shifting machine.”

More good info sources for boosting your fuel economy:

Worth It or Not? The Aerodynamics Debate

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They’re ugly. They don’t make enough difference in fuel economy to be worth it. They won’t hold up to road abuse. They don’t produce the savings I can get just by slowing down.

Drivers and fleets have plenty of reasons they’ve generally opted out of aerodynamic add-ons, and while it’s true they’re not smart for everybody, companies are getting better at making durable, effective drag reducers. If you’ve always written the things off, it might be time to re-investigate.

Henry Albert, a trucker since 1983 and a contributor to TeamRunSmart.com, drives a 2013 Cascadia Evolution and has been on a pretty well-publicized quest to achieve 10 mpg for over five years. In a recent interview, he says he’s achieved in excess of 10 mpg on many individual driving days. His truck is completely decked out, with side skirts, nose cone, a trailer tail and wheel covers.

“I have drivers tell me all the time, ‘side skirts don’t make that much difference,’ and they’re right – they only save between 2.5% and 3% in fuel cost. But they also say the same thing about the nose cone and the wheel covers and trailer tail, but cumulatively, when I put it all together, it adds up,” Albert says. The fuel savings of adding aerodynamic modifications to his truck covered his cost in six months.

On the other side of the debate are drivers who point to the weight of the add-ons and the fact that on certain routes, crosswinds in combination with accessories like trailer side skirts can actually create drag. In the comments section of this article, a driver who travels the I-80 corridor between Milwaukee and San Francisco, a route where he’s usually rolling through 25 mph crosswinds, installed side skirts. He reports no difference in fuel mileage and concludes, “There is only one way to good fuel mileage, and that is SLOW DOWN. I went from driving the 75 mph zones to driving 60 and have saved an average of 160 gallons per trip.”

But this driver begs to differ: “I don’t subscribe to the theory that slowing down increases profits!” In the comments section of an article on the trailer Kevin Rutherford developed for owner-operators, he explains that, “when you slow down, your are also reducing your per-hour revenue.” By way of example he says that a driver averaging 70 mph and earning $2 per mile grosses $140 per hour, while someone driving an average of 60 mph at that same pay rate makes $120. Since fuel only costs $11 per hour more to run at 70 mph, the 70 mph driver is $9 per hour more profitable. His philosophy: “Revenue first, then control costs.”

One way he controls his costs is by employing an undercarriage device and nose cone to diminish aerodynamic drag. He uses an Airman undercarriage add-on, which is designed to move with the tandems, unlike the skirts that are stationary. He says, “For every slider hole you move the skirts away from the tandems, your efficiency decreases. At a certain distance, the efficiency is actually worse than no skirts at all. The 5-6% fuel savings I’m getting from skirts is only achieved at the 40-foot California setting. Utilizing both the nose cone and Airman, I am achieving 7.2-7.4 mpg running @ 75 mph in 75 to 80 mph states, usually grossing 75-80,000 lbs and am hitting 11 mpg empty.”

An option for drivers who determine trailer side skirts aren’t right for their situation are tractor wheel covers. As Mario Bravo, marketing manager for Flow Below points out in this article, one advantage of making a modification to the tractor is that you get that fuel economy benefit even when the trailer is sitting in a customer’s yard, unlike trailer side skirts. “The higher a fleet’s trailer-to-tractor ratio, the more standing time, and no aerodynamic device saves anything when the vehicle is sitting still,” he says.

His company’s AeroKit consists of panels that close the gaps between a tandem’s drive wheels, and others that guide air as it leaves the tandem area. Circular covers block wheel indentations and reduce turbulence.
The advantage of being an owner-operator vs. a fleet manager in this situation is that owner-operators many times run dedicated loads and/or routes, according to comments in this article by Mitch Greenberg with SmartTruck Systems.

He points out that they also tend “to measure their fuel mileage more consistently and run the same equipment day in and day out. Any differences that stem from aerodynamic add-on devices will more effectively and directly present themselves, Greenberg says, due to the aforementioned variables being so controlled, which is often not the case for large fleets looking to implement aero devices.”

There’s no one right answer and every driver needs to test for himself what combination of equipment, accessories and driving skills will create the best results.

Nifty Apps for Truckers

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Depending on your device and driving style, there’s a smart phone application out there that will make the miles roll by a little easier.

Here’s a list of apps that score well – reviews average four stars or better – on Google’s Android app store.

Avoid Traffic Delays

Waze Social GPS, Maps and Traffic is free and consistently scores top reviews on AppCrawler and the Android app store. Fellow Waze users drive with the app running, which contributes real-time traffic and road info. Helps find the cheapest gas station along your route with community-shared fuel prices. Allows Facebook users to meet up and coordinate on the road. Includes voice-guided navigation, automatic re-routing as conditions on the road change, and ETA notifications for those you designate.

Track Sleep Cycles and Wake at the Optimal Time

There are a variety of apps that monitor bedtimes, wake times, and sleep-time noise and movement to determine your cycle. Sleep Cycle seems to be the most widely used and most positively reviewed. The app relies on findings in sleep science to estimate what cycle stage you’re in and wake you when you’re least likely to be in deep sleep. Syncs with mysleepbot.com so you can get more detailed analysis of your sleep and help diagnose sleep apnea and other sleep problems. You can download it from the Android app store for $1.

Learn Something About the Country You’re Traveling Through

For history buffs and fans of local color My GeoReader combines GPS location technology on your phone to alert you to “talking points.” There over 130,000 of these preloaded data points covering historical markers, interesting bridges, UFO sightings, and more. The app is free.

Digitize all Those Receipts

CamScanner is also free and lets you use your phone’s camera to scan a document, crop, correct the contrast and send as fax or email. Send in your monthly receipts without having to find a fax machine. Archives all your scans so you’re ready when tax season rolls around with all your receipts stored in one place.

Keep Yourself Safe from Night Tornadoes

Red Cross Tornado App – When you can’t see the clouds in the dark, this app from the Red Cross will let you know if you’re near a tornado. Be sure to cross reference with an app that enables radar on your phone to avoid over-reacting and stressing out to false alarms.

Get Weather Predictions and Radar

MyRadar is a fast, easy-to-use, no-frills application that handily beats the Weather Channel’s app (which is $3.99), based on AppCrawler and Android store reviews. Displays animated weather radar around your current location, allowing you to see what weather is coming your way. Can zoom in and pan around the map to and see what the weather is like anywhere in the contiguous 48 states.

Find the Best Place to Stop Tonight

Trucker Path is free and lets you look ahead to truck stops on your route. See which have showers, overnight parking, RV dumps, restaurants. Includes up-to date information about weigh stations and truck stops, including reviews and directions. Find info on rest areas, CAT scales, truck washes, low clearances, motels, current weather, map views, and notifications for the opening and closings of truck stops.

A crowd-sourced feature also alerts drivers to openings and closings of weigh stations. Reviews are mixed on how accurate it is.

Find locations of: Flying Js, Love’s, TA Travel Centers, Pilots, Petro Stopping Centers, AM Best, Pacific Pride Commercial, Petro-Canada, Sapp Brothers, Roadys and other smaller brands, and thousands of independents.

One reviewer says while it omits quite a few places that are in his hardcover book, it’s so much easier to use – tap the screen and see all the options on your route. If what you want doesn’t appear, you can always cross reference with another info source.

Trucker Tools, also free, includes a truck stop locator with the same establishments covered as Trucker Path and a crowd-sourced portal for weigh station opening/closing info. It also offers trucker-specific restaurant, truck stop and service promotions information and real-time traffic updates. You can find latest and lowest diesel prices, live traffic, turn-by-turn directions and a truck routing and fuel optimizer.

The app has a chat feature, a way to find cargo insurance instantaneously, help with IFTA and DOT compliance, a jobs and messages board – and is voice-activated, so it’s more comprehensive than Trucker Path, but may be a bit more glitchy as well. Reviews on Android’s app store average a bit lower for Trucker Tools and the app scores more negative reviews on average than Trucker Path.

AllStays Truck and Travel is $10, but doesn’t require wireless service to function and is ad-free. Data is a bit more reliable and comprehensive as well. Includes truck stops, rest areas, weigh stations, WalMarts, Lowe’s, UPS and FedEx outlets.

Want to Find More?

Try App Crawler to find more apps for truckers. It categorizes user reviews by “positive,” “minor pains,” and “issues” to make it relatively easy to compare options. App Crawler’s engine will also suggest alternatives.

Marketing for Owner-Operators

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You’ve just left your carrier and gone to a new one – that uses agents. First step? Make up a brochure. That’s what TeamRunSmart Pro Linda Caffee’s friends did. The brochure showed a picture of the drivers and their truck, and listed all their qualifications. “In no time, they were busy with agents that needed what they had,” Caffee says. That’s job one in marketing any business – make your customers aware of what you’ve got and keep them thinking of you.

Make Sure Your Price is Right

But before you start spreading the word that you’re available, you have to be crystal clear about exactly what you offer – and what you can afford to offer. In this article, Kevin Rutherford recommends a thorough evaluation of all your expenses, what it costs you to run shorter- and longer-mileage hauls, particular lanes and cities. Based on those numbers, create a pricing structure with levels for each type of haul, lane and city. Over time, track your costs and continue to fine-tune.

Now you know what it costs for you to operate, you’re ready to hit the load boards, right? Probably not. Rutherford reminds us that “just because you set a price doesn’t mean anyone will pay it. Your competitors might outbid you.”

So before you get the word out, you need to get your ideas down on paper:

  • Where do you want to haul?
  • What areas or lanes do you specialize in?
  • What types of freight do you like to haul?
  • What makes you different from competitors?
  • What things do you do well?
  • What’s your special equipment or technology?
  • What’s your on-time record?

Your goal is to show that you offer something that’s of special benefit to your customers. “Ask yourself,” Rutherford says, “’if I were the customer, why would I choose me to ship the product? Would I be willing to pay extra?’”

That’s differentiation, and that’s what allows you to charge enough to make a reasonable living as a driver.

Get the Word Out

With your pricing and differentiation foundation laid, you’re ready to start getting people’s attention about what you have to offer.

Start simple, by calling or emailing everyone you know in trucking. As you discuss what you’re offering, you’ll learn more about what the market wants. Revise your message accordingly.

But all the contacts you have now probably won’t be enough to sustain your business over the long-term. You’ll need a promotions plan to broadcast your presence to a wider audience. The more people who are aware you’re available – and remember that when they have a need – the better your odds of surviving.

One way to make sure they’ll remember is to give them something with your company’s name on it. Henry Albert, another TeamRunSmart Pro, is proud of the fact that his company is the source of one of his customers’ favorite coffee mugs. Albert Transport invested in the mugs and printed them with the company’s name and contact info. He gives them to dispatchers and other contacts at the carriers he works with. Every time someone pours their joe in one his mugs, they’re reminded of Albert’s company. And they’ll remember that they appreciated getting something free, which everyone loves.

One dispatcher would get very upset if anyone removed his Albert Transport mug from his desk. “He drank his coffee right before making calls to schedule shipments for the following day,” Albert says. “So we were the first carrier he thought of every morning!”

Another owner operator uses his homemade barbecue sauce to make an impression, but you could also apply your company’s name to hats, jackets, key chains, calendars – things that are durable and are unlikely to be thrown out.

The thing is less important than the business relationship it allows you to begin to build – and continue to build by being a high quality carrier. Once you have that relationship, you can begin to anticipate customers’ requirements, which allows you to communicate exactly how you satisfy their wants and needs, and why they should use your company.

Three Ways to Get the Maximum Miles Out of Your Tires

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Can you get 400,000+ miles out of your tires?

In Three Top Ways to Preserve Tire Life in the March 2014 issue of Heavy Duty Trucking, Jim Park writes about a retired maintenance specialist who accomplished this feat regularly.

Ron Szapacs, former maintenance specialist for Air Products and Chemicals, admits the goal is too ambitious for some applications but says in long-haul situations and in the service of maintenance-focused owner-operators, tires can get close to the half-million miles mark before being retired. He says there are three keys to making that happen:

1. Identity the Proper Inflation Level and Keep it There

Consult your manufacturer Load & Inflation tables to help determine precisely where your pressure should be. And it is important to settle on a precise number. The practice of over-inflating just a tad to boost gas mileage and hedge against tire damage, according to the experts interviewed in Parks’ article, does neither.

In fact, most tires function best inflated only to the L&I minimums, which allows tires to maintain a larger area of contact with the road and reduces impact damage. Herman Miller, president of HJM Fleet Maintenance, says higher pressure may produce some “small increase in fuel economy, but I could never quantify it.”

And tires that are at higher pressure “are too hard to function the way they were designed to function – that is, having enough give in the casing to absorb impacts like pot holes and road debris, having the optimum footprint or contact patch.” he says.

2. Maintain Alignment, Balance and Keep an Eye Out for Other Mechanical Threats

The way your tires are wearing can tell you a lot about your truck’s overall condition, Park explains in Extend Tire Life: Learn How to Tell When Your Trucks are Killing Your Tires.

Suspension, steering, wheel mounting studs, bearings, alignment, balance, shock absorbers – problems in all these areas will show up in tire wear.

The American Trucking Association’s “Radial Tire Wear Conditions and Causes: A Guide to Wear Pattern Analysis” offers detailed categories to identify wear and track back to possible causes.

One of the most common culprits is running a truck out of alignment, a problem that can cost up to a third or more of a tire’s life expectancy, according to Mike McCoy, national accounts sales manager at Beeline. “If you’re seeing irregular wear, don’t wait until the tires are destroyed. A $200 alignment could repay itself several times over in reduced steer and drive tire wear.”

Balancing is also as “maintenance tough sell,” according to Park, especially since with new tires it’s rarely a problem anymore. “But what about hubs and brake drums that might be out of balance, or worn hub pilots that could cause an out-of-round condition with wheel or tire?” he asks. Plus, a new tire that starts out balanced can be knocked out of balance in as little as a month.

He recommends dynamic balancing compounds or balancing rings to help maintain balance, even where wear is already irregular.

3. Retread

Important as proper inflation and maintenance are for extending the life of your tires, nothing beats retreading to maximize your tire investment. According to Modern Tire Dealer magazine, a retread is about $140 less than the average price of a new replacement tire.

And, Park points out, “when you factor in as many as two retreads on a single casing, you’re tripling the value of that casing – but effectively getting three times the mileage from it.”

Bill Sweatman, president and CEO of Marangoni Tread North America says that using modern retread technologies from initial to final inspection is key. He says it’s important to commit to using a system that “makes the retread decisions or you and your tires based on optimizing total cost of ownership.” Do those two things and he says post-retread performance can actually be superior to original new tire life.

Why Owner-Operators Need a Truck Maintenance Plan

guy working on truck

That truck you drive every day isn’t just a tool. It’s an asset that can make your business more successful if you treat it well. A regular oil change for example, removes iron particles from your engine. “Having iron particles in your oil is like having sandpaper in your engine: It’ll wear out parts quickly,” says engine repair shop owner Bruce Mallinson.

To Satisfy Regulations

If the idea of sandpaper on your engine parts isn’t enough to make you uncomfortable, the fact that the government can take you off the road if your maintenance isn’t done and documented may motivate you some more.

Getting your authority means you’re also getting a DOT number, which means you’re on the FMCSA’s radar for a new-entrant safety audit. Sometime between your sixth and eighteenth month of operation, you’ll be subject to a thorough once-over by the Feds, according to Thomas Bray, Editor, J.J. Keller & Associates.

In “How Safety Audits Apply to New Owner-Operators,” Bray explains that the audit includes a check of six factors, including driver(s), operational, hazardous materials, accidents, general – and vehicle. The vehicle factor requires that the carrier be able to show a program for systematic inspections, maintenance, and repairs, and records of annual inspection requirement compliance.

If you’re operating more than one truck, the auditor will also check your driver vehicle inspection reports (DVIRs) and will request inspection, maintenance, and repair records for every truck.

To Save Money and be a More Reliable Carrier for Your Customers

But if all you’re doing is satisfying regulations, you’re leaving a lot of money on the table, says Mel Kirk, vice president of maintenance operations for Ryder Systems. “You’re not running an effective preventive maintenance program if you see it only as an exercise mandated by the law,” Kirk says in this article on avoiding common maintenance mistakes. Maintenance should be seen as an exercise to assess the vehicle’s condition and resolve any issues before they create more expensive problems in the future.

The danger in putting off preventative maintenance is that it gets to be a habit, according to Bob Merrill, operation analyst for W.W. Williams. And every time it gets put off, the risk of breakdowns increase. Your maintenance plan should set standard intervals for component maintenance and include frequent checks so that breakdowns are eliminated. If you can do that, the program pays for itself, Merrill says.

Merrill’s sentiment is echoed in this article “How Much Should You Put Away for Maintenance?” by Bill McClusky, a 23-year veteran of the trucking industry. “Preventative maintenance can be expensive, but neglect is even more costly. Systematic PM saves you money in the long run by reducing the chances of equipment failure on the road and reducing time lost to repairs,” he says.

Again, “systematic” is a key concept and it’s easier to have the discipline to be systematic when you have funds available specifically for maintenance. The question then is how much to set aside to take care of your truck. McClusky recommends that for a new truck, you earmark five cents per mile. For older trucks, save more – a four-year-old truck or one with more than 600,000 miles needs 10 cents for every mile.

Once your maintenance costs reach the 13 or 14 cents per mile threshold, it’s probably a good time to look into investing in a new truck. Check out Team Run Smart’s “Upgrade vs Rebuild: When’s the Right Time to Invest in a New Truck?” to see a payment and maintenance cost analysis.

As another preventative tactic, establish an account with a truck rental company, which should reduce the time needed to get a substitute truck in case your truck needs major repairs. You’ll be able to keep your commitments to your customers, keep working and earning income, and reduce your stress level as well.

Questions to Ask When Hiring a Tax Preparer

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This guest blog post comes from Esta Klatzkin, EA, a tax and financial consultant who specializes in providing tax accounting and financial services to Owner/Operators, contract haulers, and other long-distance truck drivers in the transportation industry. Learn more about Esta and her company, kNOw TAXES, by clicking here.

The key to finding the best tax preparer for you, as with hiring any professional, is to find out about more than just the prices. Here’s a list of questions you should ask anyone offering to prepare your taxes:

1. Do you have a PTIN (preparer tax identification number)?

Anyone who prepares federal tax returns for compensation must have a valid 20 L4 PTIN before preparing tax returns. Without a PTIN, the preparer is not allowed to prepare your return.

2. What is your tax background?

Take a look at the preparer’s business card and the letters after his or her name. Here’s a guide to what they mean:
An Enrolled Agent (EA) has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three part comprehensive IRS test or through experience as a former IRS employee. EA status is the highest credential the IRS awards. EAs must adhere to ethical standards and complete 72 hours of continuing education courses every three years.

A certified public accountant (CPA) is certified by the state to act as a public accountant. A CPA is the only licensed qualification in accounting. To be certified, candidates are required to pass an exam.

3. Have you prepared a tax return for truckers before?

Tax preparers may focus on small businesses, corporations, partnerships, etc. There are as many variations as there are schedules and forms. But nobody can do it all.

4. Do you know the requirements of the states and localities where I am required to file?

Yes, federal income taxes know no boundaries- those rules don ‘t change from one state to the next. But that’s not true when it comes to states and localities. Make sure that your preparer knows – and can handle- all of those state and local filing requirements.

5. What records and other documentation will you need from me?

A reputable preparer should insist that you provide your forms W-2, 1099, 1098 and other verification of income and expenses in order to prepare a proper return. The tax preparer should provide a tax organizer. A tax preparer should be able to explain what will be needed for special schedules, forms or circumstances.

6. How do you determine your fees?

Prices may vary based on the complexity of your return, whether you require additional schedules, supporting forms or whether your return has “out of the ordinary” line items. Avoid preparers who base their fee on a percentage of your anticipated refund: they have a financial incentive to encourage them to create credits and deductions.

7. Can I file electronically?

It’s the fastest way to get your refund and tends to result in fewer math errors. It may also be required: a paid preparer who prepares and files more than ten client returns must file electronically unless client opts out.

8. Who will sign my return?

Remember that your preparer must have a PTlN. The PTlN and the preparer’s signature need to appear on your tax return. Don ‘t trust a preparer who refuses to sign a return. And be wary of any preparer or service who won ‘t tell you in advance who will actually be preparing the return.

9. When will I receive a copy of my return?

It’s not unreasonable to leave your preparer’s office without a copy of your completed return; assembly may be required. However, you should receive a complete copy of your return within a reasonable amount of time following your appointment. If your preparer can’t promise you a copy at all, run, you will need a copy for your own records. The law states that the preparer provide you with a copy.

10. How do I find you if l have a question or a problem after tax season is over?

Make sure that you know how to contact the tax preparer after your return has been filed. If your tax preparer won ‘t be around, consider taking your business elsewhere.

11. What happens if l get audited?

Nobody wants to think about an audit when filing a return. Find out how the tax preparer handles audits or examinations from IRS: will he or she respond to those questions? Represent you in front of the IRS or Tax Court? And what about the cost to fix any mistakes? How is that calculated?

Choosing a good tax preparer does require a bit of research and effort on your part but it’s worth it. Just as you stick with other professionals from year to year, the goal here isn’t just to fill out a form but to create a working relationship. A good tax preparer won’t mind answering your questions.

Are You Cut Out to Be an Owner-Operator?

semi in the front yard

Google “How to become an owner-operator,” and there’s plenty to discourage you from considering the question for long. 

Brett Aquilla, a former company driver, says “you have to be crazy” to take on buying your own truck and becoming a business owner. He advocates the employee route and letting your employer hassle with the financial strain, licensing, permits, breakdowns, insurance, etc.

“Kick back, earn $55K, and make a killer living viewing the sites across North America in your company’s dream machine,” he says. “And if you get tired of trucking – quit. A company driver can always just quit and return later at any time.”

Some drivers, though, have been down the employee road and haven’t found it to be the walk in the park Aquilla describes. Company drivers have their own hassles including company politics, power-tripping dispatchers, and having to haul loads and run lanes that don’t suit them.

And some are just more interested in having their independence and the sense of satisfaction that comes from succeeding on their own guts, wits and hard work.

If you’re thinking about it, here are some sources for the tough questions you’ll need to ask yourself.

Make Sure You’re Doing it for the Right Reasons

Small fleet owner and radio show host Kevin Rutherford says most people considering the move to being an owner-operator will list three reasons they want to do it: First, usually is “to make more money. Then it’s more ‘freedom’, ‘less hassle’, ‘fewer rules’. If your answers sound like these,” he says, “think again before you proceed,” because you’re likely to be disappointed.

According to Rutherford there are better reasons for taking on the additional work and away-from-home hours. Drivers who transition successfully to owner-operators are usually those who do so because they want the additional responsibility and challenges of being a business owner, and want to build a business that will support better lives for them and their families. Read the list of questions Rutherford suggests you ask yourself to further test your assumptions about being an owner-operator.

It’s a Whole Lot More than “Steering and Gearing”

Truckie D is an owner-operator with 1 million+ consecutive safe over-the-road miles who blogs at TruckieD.wordpress.com. His advice, if you haven’t driven a truck before, is first to slow the heck down and get hired somewhere first, drive for a year and then see if you’re still in love with the idea of being an owner-operator.

“But”, he says, “do NOT get sucked into getting trained and buying/leasing a truck immediately. That’s a recipe for going broke quickly. Trucking as an owner-operator is a whole lot more than just ‘steering and gearing.’ The important point to remember is, you’re not buying a truck — you’re buying a business. You need experience in the trucking business, and some general business experience if you want to be successful at it.” Being able to understand a profit and loss statement and understanding how to do a cost benefit analysis of say, adding an APU to your truck, are just a couple of the business skills you’ll need to master.

See his blog post, “So, You Want to Be an Owner Operator,” for more some more sobering reality checks about owning your own truck driving business.

If You’re Still Not Scared Off…

Samuel Barradas readers through 6 steps to becoming an owner-operator on The Trucker’s Report blog. First, is a personal assessment – how much time you need at home, health considerations, career goals, etc. Next is a list of financial considerations to mull: the risks of personal debt, establishing an emergency fund and whether your credit score is going to help or hurt you. He also addresses the questions of whether to go independent or lease to a company, what types of equipment to shop and run, and what legal and accounting structures you should have in place.

Increase Your Odds of Succeeding

According to the National Assoc. of Small Trucking Cos (NASTC), the failure rate of small, start-up trucking companies is about 85%. Only 15% make it to the second year of operation. The organization offers training to help aspiring fleet owners beat the odds. On their website you can find more info about their training.

On that page you can also find a list of 20 new authority concerns, just the tip of the iceberg as far as the kind of business planning you’ll need to do: How do you plan to find freight? Where do you plan to run? How will you find insurance? How are you going to keep the books? How are you going to do log audits, fuel taxes, and driver qualification files? How are you going to manage and interpret data and information?

Lots to think about, but looking at it all before you leap will save you a lot of stress, debt and disappointment.