How much money do you make? How green is your grass?

Well what is profit? I never could nail this down as different people have different meaning for it. Is it the money left over after the break even point? Or money left over after accounting for all present and potential future business expenses?

 

In my case, profit is the amount on schedule K, that “profit” is my pay. If I had a Driver in the Truck, I’d have to pay Him less than that amount, to see “profit”.

 

The one thing that’s constantly overlooked, when talking about revenue, is all the different factors involved. Mainly Equipment cost, and fluctuations in rates and fuel costs. Add unexpected repairs. Typically I’ll see Guys make a killing, right off the bat. They couldn’t be happier. Each year their enthusiasm drops. Eventually their disappointed. Usually it’s because, “ Things aren’t like they used to be”. Truth is things never were that great, and the Law of averages caught up with them.

 

So true. @Transportacion R&R read this.

 

Yes that is correct.

 

Everyone is like a fisherman. You need to have your well upkept boat and you sail out hoping for the best. One day is better than the other, or the opposite. One day a guy you resent the worst will catch fish bigger than yours, the other day you catch your fish and they can only kiss your feet arse, like you would care at all. The most important thing is to keep your boat afloat and fish will come your way. If it comes for them, it will come to you as well. Only you are the judge of how good a fisherman you are. I do remember what you once said abou the very few saying how cheap hauling a dog food is and nobody says nothing about it. Yet all these trucks are aligning in those docks to get loaded. That's the ultimate summary of any rate talk.
Sometimes it may go days or years on end but finally something clicks... be it a bribe or nepotism with a little bit of luck and you have your good run too. Better to be able to run 1.5 per mile in a few years stretch. If they run for 3, sure you will too. Yet if they cannot handle 1.5 per mile and you can, you are so much better than them. They will say that you will sink but you will not sink before them, and that's what gives you more power.

 

Everyone does it differently and there are a great many on here that feel anything after the expenses of their truck is profit. There is nothing “wrong” with that, it just gives a false impression of how well they are doing or how cheap per mile they can run.

You are far better off setting up your business like it’s a full blown trucking company that hires drivers, has staff, runs multiple trucks, etc. One that you as the owner are not a driver.

You then, decide to HIRE yourself as a driver of the truck that your company owns. You pay yourself as the employee of the company. Think of your company as it’s own being or entity that has nothing to do with you. It’s own bank account, it’s own taxes, it owns the equipment, everything is it’s own deal. So, the money leftover in the company technically is what your actual profit is for the business. However, it’s trickier yet. The 2nd area you can get in trouble is not accounting for your equipment wearing out. So, your bank account goes up but .30 per mile needs to be kept back for repairs and/or truck replacement. It’s only after accounting for things like that do you figure up what’s left over and that’s your real profit that is in the business for growth or whatever you deem it to be as steward of the company. Many take that money out and spend it on toys which is your own prerogative but I recommend letting it build up and being financially sound to where you have maximum options with the business.

Hope this helps.

 

Good write up. The company set up seems to be the proper way to do it. But don't think many set it up that way. The money for replacement equipment should not be part of profit but expense. But how much should one set aside for such a thing? What is the depreciation rate of trucks. Am sure different brands or older trucks have different rates.

 

That’s how it’s supposed to be done, alright. Most Single Truck Operators don’t though. The closest they get, is an escroll fund for repairs.

 

But, just because most don’t do that doesn’t mean you shouldn’t. Most also go out of business.

Like I said, I’d go with 30 cents per mile. Create a whole separate account if you need to in order to keep it straight. Or, at the very least separate it in quick books. I pay 149,000 for new trucks and run them 500,000 miles. That’s 30 cents per mile. Now, you should be able to get around 65 to 70,000 for it when your ready to sell. So, there is no reason whatsoever you shouldn’t be able to pay cash for the next one. If you remain a 1 truck operator then the first truck loan you get should be the last one IMO. With the 30 cents you can put tires on it, shocks, alignments, services, and any other costs that creep up towards the later years of the life cycle you have it on. You will actually have money left over after paying cash for your next one but that’s a good thing and how a snowball starts over time completely separate even to the profit of the company.

BTW.. you can also use 30k per year depreciation as needed to lower your companies tax burden on the profits you do make. Some years you may use more then others depending on how good of a year it was.