Essential Steps after Buying a Trucking Business
Know your roles
You now have two distinct important primary roles in your business:
- The first one is the governance role
- The second is the day to day doing
Both are important but it is common that most business owners spend most of their time on the doing and not the governance, for most this is their comfort zone!
This is especially the case when the business has just been acquired. It’s new and fun, the honeymoon period!
It’s important that you take time to govern the business especially in the early days, that is to take an ariel view and see the business as a whole from above.
Do you :
- have a business plan
- have a current Transport Service Licence?
- understand your customer base
- have a marketing plan
- know the condition of the fleet
- know how the cash flow is going to flow
- is your health and safety up to scratch
- have a comprehensive payroll with policies and procedures
Good governance requires time set aside from the busyness of the day:
What are your goals for the business – growth – profit – capital growth – life style?
Do you understand the cash flow pressure points going forward?
How are you going to service existing clients?
What is your growth marketing plan?
Know your fleet
Assuming the rig/s you have purchased will operate as you expect is a trap.
If you haven’t carefully checked the condition of the rigs you have purchased, prepurchase, you need to do this ASAP.
“She’ll be right” has a habit of coming back to bite you.
Is the current fleet fit for purpose?
I have had experience with a fleet operator who purchased a fleet that was once “state of the art” but was totally wrong for the current market being old and oversize
A new fleet of smaller more reliable and fuel efficient rigs turned the business around almost immediately.
Plan the timing and cash flow requirements of maintenance and fleet upgrade.
Speak with your financial advisor and they will help you model your cash flow and advise how best to fund the project along with tax advice.
Its best to take time to put these plans into action as rushing in can also come back and bite you.
Having a new rig can be very satisfying but time may take the shine off if you don’t manage the cash flow properly.
If you know the current fleet is no longer fit for purpose put together a simple business case around the upgrade of the fleet this should include:
- summary of reasons for the upgrade
- cost of the upgrade
- expected market value of rig being replaced
- cost and time savings of new rig
- opportunities the new rig may open up
Know your customers
Getting to know your customers asap is critical.
Your most important asset for your business is your customers.
As principal of your business it’s your primary responsibility to have a working relationship with at least your key clients.
Don’t assign this responsibility to anyone else even if your purchase includes existing key staff taken over from the vendor.
Don’t forget that the relationship with your customer may extend from the owner/CEO as the key day to day interaction between your firms will be delegated.
Not managing these key relationships can leave you exposed to losing your customers to the competition or worse to a disgruntled employee and your dismissal of this responsibility will bite you again.
Make time for your customers.
While your time is precious and can be consumed by the doing the day to day stuff, the risk of losing customers has a double cost to the business.
1.0 Revenue drops as does Profit
2.0 The value of your business suffers as most businesses are valued on the return on investment (super profits).
In addition the loss of customers, especially if they are key to the business, can cause cash flow stress not only from the lost income but also having to payout on commitments you might have such as finance charges on assets you dedicate to that customer.
You don’t have to get weighed down doing stuff for your customers, this can be delegated.
Having a relationship with your customer where they understand they can contact you if they have a problem is gold.
Leaving key relationships totally in the hands of anyone other than you as the owner puts your investment at risk.
Know your staff
Having the right staff in place will ensure you, the owner, can concentrate on running the business.
Make sure you have sufficient staff trained across various roles to ensure you have coverage for leave and illness as well as the inevitable unexpected departure of a team member.
All staff need to be covered by employment agreements and NRC have templates for you to use.
Ensure anyone that may drive any vehicle in your business is registered with NZTA TORO.
Understand the career aspirations of your team and establish training plans to help them develop.
Have plans in place to manage return to work of any staff on ACC.
Do the financial planning
If you don’t understand the financial outcomes of your decisions then you are at risk
You need to partner with your accountant or financial advisor.
A lot of business people either try and do this themselves or put it in the too hard basket. The failure to do this planning can come back to bite you.
A good advisor should have access to programs which can model the business going forward including the Revenue Budget as well as what the Balance Sheet will look like and projects the Cash Flow as well.
These budgets need not be expensive with a simple business investing around $2500 for these full reports.
This will be money well invested as you will get a preview on the financial outcomes of your business as you expect it to roll out.
A benefit of the cash flow budget is it puts you in a position of not suffering from sudden surprises such as having to fund a GST payment and you can get reports which compare your actual performance against budget.
Bank managers and finance executives love forecasts
When it comes to raising capital for your business whether it be to purchase the business, purchase assets or as working capital your funding advisor needs good information to base their decision as to whether they are going to support you or not.
The more data you can give them the better.
This should include:
- Historic financial performance data if available
- Forecasts for the next 12 months (minimum) 36 months (ideal)
- Plant valuation
- A business plan which does not have to be complicated or long
- Back ground on you and your expertise you are offering the business
- Other assets to be used as security with valuations (if required)
What is the financier looking for?
Its simple!
- security
- ability to repay
- personal ability to manage the business
NRC Cost Model Tool
Predict your business costs for up to 12 months
The NRC Cost Model is New Zealand’s most advanced cost forecasting tool for commercial transport operators.
Key features and benefits:
- Predict the annual cost up to 12 months ahead of any size of transport business, from single vehicles to large complex fleets.
- Test scenarios to see how different business decisions for the same scenario affect your bottom line.
- Track emissions with accurate CO₂ output data for your vehicles.
- Review easy-to-read graphs to help you see important results at a glance, as well as detailed figures to help you and your accountant undertake in-depth analysis.
The report is fully confidential to the person submitting the data and not used by NRC for any other purposes.
How to get the best results
Like any predictive tool, the Cost Model is only as good as the information you provide. The more accurate that information, the more useful the subsequent report will be.
However, NRC is on hand to assist and a team member will review each submitted model within 3 working days and contact you to discuss and provide further guidance if required.
Information you’ll need
Financial information:
- Financial information including general overheads and expected annual turnover.
- Vehicle loan and finance details and any loans not associated with a vehicle.
- Costs and revenue entered in this section are distributed among the vehicles you operate.
Operational details:
- Vehicles, trailers and any items of plant.
- Items of plant can be entered separately. This is useful if you want to separate things like fridge motors, cranes or machinery such as bobcats.
- Fuel use, RUC vehicle type and weight, annual kilometres travelled and wage details.
Plan before you start
There are experts that can help you future proof your investment.
The key is to engage with your professional advisors at the earliest stage on your journey to invest in a business. The money invested here need not be expensive but could be the difference between success or failure. Even worse, battling on without the benefit of independent advice could result in your business just tracking along as opposed to growing and flourishing.
The industry experts at National Road Carriers are there to help, its their job! If they don’t know they know people who can assist and are happy to refer you.
Become a Member
Enjoy a wide array of valuable benefits including access to a vast network of industry, exclusive discounts and offers, ranging from fuel discounts to legal advice.
Join NRC in 3 easy steps.
