Owner Operators - The Grapevine
Yearly Planning Saves Money
Now is the time to start planning your business strategy for the coming year. This is the time to start seriously thinking about how much money you're going to make this year and how much of that will you be able to keep your hands on.
The year 2006 has been a wild ride once again, with the rise and fall of fuel prices and the argument of "driver turnover" or "driver shortage"! 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 down trucks to 68 miles per hour, the Ultra Low Sulfur Diesel (ULSD) fuel hit the pumps and black boxes in the cab can be clearly seen on the horizon.
The idiom that comes to mind is: If you fail to plan, you plan to fail.
Of course, we know that you don't have a big staff. If you're an independent contractor, you will have to wear five or six hats. Most owner-operators feel intimidated because they have to do everything.
Then there 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 making the leap from owner-operator of a one-person outfit to a CEO of multimillion-dollar operation are as great as the rewards.
You do not have to have a college education to figure out what to do. But before making the next step with your company, be certain it is the right move for you and then get prepared for potential obstacles. Just as the president of the United States has his 15 Cabinet advisors, you also need someone in each of the fields that you feel is important to you, someone you can fall back upon for advice.
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. This is where joining the appropriate association comes into play. If you join the right one, you are surrounded by a multitude of properly educated people to help you; not only for survival, but to be successful in your business. The greatest thing about it is, you do not have to pay them a high salary.
The first thing to look at in deciding what association to join is, what do they offer? We all must realize we are in the Twenty First Century and Twentieth Century ways of hauling won't work. Like when the Nineteenth Century ended and most goods were hauled by wagons and horses. 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, based on your last year's gross figures, let's start planning about those dreaded taxes. It is never too late to start learning about how to legally reduce your taxes. In fact, in 1935, there was a court case called, "Gregory v. Helvering, 293 U.S. 454." This case 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 anyway you can.
The first thing you need is a bookkeeper, an accountant or a CPA so that you can prepare how you are going to protect your family and business. Look for an organization that has an in-house CPA that deals with the IRS on a monthly basis.
For instance, whom can you turn to about accounting? Did you know that the Internal Revenue Service (IRS) has 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 IRS standard mileage deduction because the IRS considers that amount to be wages.
Next, look for an organization that has not only one or two health plans, but several to choose from so you can find one that matches your pocketbook. 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 have a 100 % deduction for his family's medical costs?
With high fuel prices, look for a good fuel card. It should be one that is nationwide and has a rebate program, and most importantly does not charge you every time you use it.
Did you know that fuel has now passed vehicle expense as the biggest ongoing expense after the purchase price of the power unit itself? Typical truck payments are in the $2000 to $3500 a month range (for a new truck, depending on trade and/or down payment and length of financing, etc.) while fuel is running $3900+ for a truck getting 7 miles per gallon purchasing fuel at $2.75, up to $4900, or almost $5000 a month for a truck getting 6 miles per gallon paying $3.00 per gallon. That is based on 10,000 miles a month, which is "average." Owner-operators that run more miles are, of course, purchasing more fuel.
Next month we will tackle the prospects for increasing hauling rates and what can you do to beef up your hauling position in relation to your competitors.
If you have any questions, email firstname.lastname@example.org.