Waynes World - January 2007

PLANNING NOW FOR THE NEW YEAR
WILL SAVE YOU TIME & MONEY, AND…

THE IMPORTANCE OF
BUSINESS ADVISORS
By Wayne Schooling

Now is the time to start planning your business strategy for the New Year. This is the time to start seriously thinking about how much money you are going to make this year and how much of it you will be able to keep your hands on. With the rise and fall of fuel prices, along with the ongoing issues of driver turnover and driver shortages, 2006 has been a very wild ride. So what’s on the horizon for 2007? Well, we have had a change at the helm of both the DOT and the FMCSA, the ATA wants to slow trucks down to 68 miles per hour, Ultra Low Sulfur Diesel (ULSD) fuel will be hitting the pumps and Black Boxes will surely start finding their way into the cabs of trucks.

We all must realize we are in the 21st Century, and 20th Century ways of hauling won’t work. When the 19th Century ended, most goods were hauled by wagons and horses. At that time, people were saying, “Those infernal internal combustion engine contraptions will never work. They are unreliable and dangerous.” But you won’t see any wagons and horses pulling freight today. Trucking is an ever-evolving industry so you, too, must evolve and adapt.

When thinking about starting another new year, the idiom that comes to mind is, “If you fail to plan, you plan to fail.” Of course, I know that most of you do not have a big staff working for you. In fact, if you are an independent contractor, you have to wear five or six hats. Most owner operators can feel a little intimidated because they have to do everything. Then there usually comes a time when most independent contractors are faced with the challenge of growing their business beyond what they can do alone. The risks of growing from a one-person outfit to the CEO of a multimillion-dollar operation are as great as the rewards. But you do not need to have a college education to figure out what to do.

Before taking that “next step” with your company, be certain it is the right move for you, at the right time, and then get prepared for potential obstacles. Just as the President of the United States has his cabinet, you too will need someone in each of the fields that you feel are important to fall back on for advice and help. In this day and age, it is almost impossible for you to think that you will be able to handle everything that life throws at you by yourself. This is where joining the appropriate association comes into play. If you join the right one, you will be surrounded by a multitude of educated people to help you – not only to survive but to be successful in your business – and the greatest part about it is that you do not have to pay them a high salary.

For instance, whom can you turn to about your accounting? Did you know that the Internal Revenue Service (IRS) has now increased the standard mileage deduction for business use of a motor vehicle to 48.5 cents per mile in 2007? Employees or the self-employed may use this optional amount in computing the deductible cost of operating an automobile, van, pickup or panel truck for business purposes. The rate for 2006 was 44.5 cents per mile. Employers that use the IRS rate or lower may deduct that amount as a business expense. However, employees who are reimbursed at a higher rate may be required to pay taxes on the difference between their reimbursement rate and the standard mileage deduction because the IRS considers that amount to be wages.

So, the first thing you will need is a bookkeeper, an accountant or CPA so that you can prepare on how you are going to protect your family and growing business. Look for an organization that has an in-house CPA that deals with the IRS on a monthly basis and start planning for those dreaded taxes now. This may be the most important part of your plan. It is never too late to start learning about how to legally reduce your taxes. In fact, in 1935 there was a court case (Gregory vs. Helvering, 293 U.S. 454) that basically said “The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.” Simply put, it is YOUR RIGHT to legally reduce your taxes any way you can.

Next, look for an organization that has several health plans to choose from so you can find the one that meets your family’s needs (and budget). Do you know that there are medical benefit programs out there that offer 100% return of premium no matter how much you use the program? Did you know that a self-employed business owner can take a 100% deduction for his entire family’s medical costs? These are good things to know when preparing your business plan, and a reputable association will help you to make the right decisions.

Here is an amazing fact: fuel has now become the biggest ongoing expense for owner operators, surpassing even the cost of a truck payment. Typical truck payments are in the $2,000 to $3,500 a month range (for a new truck, depending on trade and/or down payment and length of financing, etc.) while fuel is running about $3,900+ a month for a truck getting 7 mpg and fuel at $2.75 per gallon, and as much as $5,000 a month for a truck getting 6 mpg paying $3.00 per gallon for fuel. That is based on 10,000 miles a month, which is fairly average for most owner operators. Those that run more miles are, of course, purchasing more fuel. With these high fuel prices and huge monthly expenses, look for an association that offers a fuel card that can be used nationwide, has a rebate program and, most importantly, does not charge you every time you use it.

Next month I will tackle the prospects of increasing your hauling rates and what you can do to beef up your hauling position in relation to your competitors. If you have any questions, call me at (562) 279-0557 or send me an e-mail to wayne@ntassoc.com. Until next month, “Drive Safe – Drive Smart!”