You learn lessons that stick with you all your life at the school of hard knocks. Just ask Bill Hampton, who began his trucking career in 1953 at his father’s company, an Alberta warehouse distributor that, in the early 1970s, fell victim to tumbling freight rates. A few years later, Hampton founded his own business-a successful oil field service company, specializing in hauling explosives. But that enterprise succumbed to the oil bust of the late ’80s.

Along the way, Hampton honed his analytical skills in nearly every job that involves truck-fleet operations-from dispatcher and dock foreman to claims manager and operations manager. Five years ago, he founded his own company-KISS Transportation Inc., a 16-truck dedicated and less-than-truckload carrier based in Calgary.

Four-plus decades in the business taught Hampton the most important lesson of all: start out with a well-reasoned business plan, one that explores where your revenue is coming from, where it’s going, and how you want the company to grow.

“I was pretty good at the trucking part of the business early on,” says Hampton. “It’s the business part of the business that keeps you up at night: how are you going to collect from that customer who’s 90 days out, what are you going to do with that driver who’s giving you trouble, what’s happening with that warranty claim on the truck?

“All these little details cry out for your attention every day, and it’s easy to lose track of the bigger picture: how are you going to manage growth, and where are you going to get the resources to pay for it?”

So Hampton developed a sort of roadmap for his company, which does about $2 million in revenues: a comprehensive business plan to show to potential creditors-and to remind himself of how the company should be progressing.

To make up for a less-than-stellar track record and a noticeable shortage of assets, Hampton emphasized his firm’s potentially lucrative niche and customer contracts-“We’re a clean-up crew; our tractors haul the trailers other fleets can’t manage,” he says. To demonstrate his ability to tackle financial matters , he included a comprehensive costing analysis that shows the bottom line for each truck and driver. “Costed out on an individual basis per month, our analysis takes into account all expenses and is projected against the life of the truck,” he explains. It breaks down each unit’s route and revenue generated, miles traveled by jurisdiction, hours worked, stops per hour, and pounds per hour.

This meticulous recordkeeping, says Hampton, allows him to accurately track each vehicle’s productivity and profit/loss on a monthly basis. Over time, it allows him to easily identify trends and take corrective measures.

And it inspires confidence among potential sources of capital.

“What trucking company owners lack in assets or a formal business background they have to make up for in savvy management,” Hampton says. “I’m no genius, but your knowledge and character are strong assets. A good plan is an indication that you have your act together. Otherwise, the likelihood goes up that you’ll be left scrambling to put up your home, your grandfather’s antique watch, or your first-born to extend that line of credit.”

Indeed, when it comes to looking for capital, your financial plans and history are a selling tool: they must help convince someone that you’re capable of success and worth the risk. That’s an especially tough sell if you own a small trucking company.

“It’s a challenge for small fleets and owner-operators to show that they have the potential to succeed,” says Chris Bennett of Transport Financial Services, a Waterloo, Ont., accounting firm that specializes in the trucking industry. “The concern for the lender is not in the ‘today’ of the operation, but in showing that it’ll be alive and kicking four years from now.”

If one element looks out of sorts, it’s probably enough to justify turning you down or jacking up your interest rate.

So what do the plans on the reject pile have in common?

First, the obvious: even the best proposal can be muddled by a poor presentation, and a good-looking package that’s short on substance won’t inspire confidence any more than if you’d presented a shoebox full of receipts.

Have your plan neatly typed-better yet, generated by a computerized word-processing or spreadsheet program so you can make corrections easily-and bound in a three-ring binder so it’s easy to read and handle.

Next: your executive summary should walk potential lenders or investors through the basics of your proposal-what your company does; who your customers are; how and when the company makes money; how much money you need and how you plan to use it; and why and how the investment will pay off.

Third: the readers of your business plan will go straight to your financials because that’s what interests them most. Every business plan should include financial statements for at least the last three to five years, if you’ve been in business that long. Some examples: cash flow statements, income statements, and balance sheets.

Cash flow statements should be done on a month-by-month basis going back two years, and in quarterly increments before then. The reader will also want to see a statement that looks ahead at your income for the next three to five years-and, ideally, matching balance sheets and cash flow projections.

“We’re also interested in seeing how you’ve reacted to financial conditions in the past,” explains Gino Cozza, manager of sales and marketing at Mercedes Benz Credit Corp. in Mississauga, Ont. “We want to see how you tried to control costs, make adjustments, meet targets. How did you respond when you were falling short on revenue, or when your repair expenses were so much higher one month than another?”

Some key warning signs lenders look for: lack of operating cash, overuse of easy, short-term credit, and long-term debt levels that far outpace the growth of sales in percentage terms. If you don’t know what financial information you need, or you’re not sure you can produce everything the lender wants to see, ask. Many banks have kits that outline exactly what they want.

Says Bennett: “It’s better to be up front than to go in with the wrong information.”

Having all the necessary elements of a business plan isn’t enough. Plans usually fail to make the next cut because of one of the following flaws:

1. Unrealistic Goals

Writing a business plan forces you to set goals and explain how you will work toward them. Lenders use them to help define your success. “If you don’t have targets to shoot for, how can you look back each month and evaluate how well you performed?” Cozza asks. “Be specific: if you want to reduce your repair expenses, say by how much and by when. If you want to reduce your cost per mile, set a target. We want to see how you adjust to problems.”

2. Pie-in-the-Sky Financials

An experienced lender or investor can spot cooked numbers right away, and your credibility will be gone.

Instead, provide sound projections of profit and loss, cash flow, income, and cash projections, and show how your numbers are based on your actual experience or research.

Account for any changes that might affect your budget-for example, a lost or gained freight contract, a change in interest rates or fuel prices, or an investment in new equipment.

You don’t have to highlight worst-case scenarios, or feel compelled to project a rosy outlook in order to impress. Your plan should portray an accurate, profit-making, middle-of-the-road picture, complete with anticipations of peaks and valleys.

3. No Plan For Bumps In the Road

Everyone knows that lending money to a small trucking company is risky. So it might pay to provide a thorough description of the risks for the potential lender and show how your company plans to confront them. Such an approach might inspire confidence in your understanding of the industry and the economics of trucking, and your ability to solve problems.

Explain how and why your business will or won’t conform to industry trends. Also, some of the larger investment companies, consulting firms, and chartered accounting offices have transportation divisions that compile detailed reports on the industry. Often, these are available and free.

4. Inexperience at the Top

What kind of practical business experience do you have to back up your well-researched business plan? How long have you been in trucking? How much money have you personally invested in the business? What do you do at your company? How much time do you spend on activities that produce income, and how much on administration? Have you been involved in other successful ventures? Who helps you make financial planning decisions for your company?

The character question is usually answered when you meet your potential lender face to face: you can win points with sincerity, enthusiasm, and professionalism.

5. Your Request Doesn’t Match Your Needs

To crystallize your needs in the mind of your reader, your need to demonstrate exactly how much money you need and how you plan to use it. For example, if you need new equipment, what exactly will you require? How much will it cost? Where can you buy it? Is a purchase a good idea, or is leasing a better option? Be thorough, precise, and prepared to explain your intentions fully.

6. Poor Delivery

For all the hours spent researching what goes into a proper business plan, presenting the plan takes work, too. Here are four tips for a top presentation:

o Write it yourself. You’ll need to know your business plan inside and out when you make your presentation-and your audience starts asking questions.

o Polish your executive summary. The reader will decide whether to read the rest of your business plan based on the first few paragraphs. Walk your reader through the basics: what your company does, how much money you need, why you need it, and how you plan to repay it.

o Make it look professional. But remember that a fancy presentation won’t make up for insufficient information.

o Practice. Ask someone who isn’t close to the company to check your work: anything from spelling and grammar to your delivery during a mock Q&A session. Also, don’t approach your best prospects first. Work out the rough spots with those who are already longshots.

______

SIDEBR: Trucking 101: How two OEMs urge buyers to look beyond the chrome

It’s in their best interest for truck makers and their dealers to help owner-operators stay in business. They’re high-margin buyers who more often than not seek financing.

Unfortunately, they’re too often out of business before they’re ready to trade in their truck for another one. A brand new truck, fully warranted, can make a lot of money in the first few years. After they’ve bought the boat and the Ski-doo and the pickup truck, when the repair costs hit owner-operators don’t have anything left over and wonder why.

There’s no business school for owner-operators, but two OEMs are trying to provide management help.

Last month, Freightliner Trucks introduced Route to Success through its SelecTrucks used-truck network. The plan is to offer used equipment coming back in to the Freightliner system from its truckload carrier customers, many of which are spec’ing owner-operator-type trucks to attract drivers. These trucks are typically three years old, and the Route to Success program sets out to make them as reliable as possible by equipping them with new rubber and overhauling the electrical system with new batteries and remanufactured Alliance components such as starters and alternators. The trucks will also carry a full warranty for one year or 100,000 miles, with major mechanical coverage for a further year up to 200,000 miles.

Although a modest down payment is required, financing will be designed to be flexible and creative. “We’re not looking for people with perfect credit ratings,” says Freightliner president and CEO Jim Hebe, adding that it would be possible to design a package that would allow for several missed payments over the life of the financing package.

The program includes a business education package titled Destination: Success, which has a manual on budgeting, recordkeeping, taxes, and regulatory compliance. At the end of the manual is a test, with a certificate awarded for completing the course.

Earlier this year, Road Manager Financial Services (the commercial finance division of Volvo Trucks-336/931-3885.) introduced OTR Advantage, a menu of financial services ranging from accounting to tax preparation, audit representation, as well as quarterly financial report preparation.

“Our team will manage the complete paperwork regimen,” says Stephen Roy, who oversees the program. “We can look at a customer’s tax planning one day and determine overall insurance needs the next. We have access to financing, insurance, extended warranty, breakdown service, and group purchasing power.”

Customers choose which services they need performed, or sign up for an all-inclusive package. The program operates under a monthly fee structure based on the services rendered, as well as the customer’s type of business and fleet size.

For now, OTR Advantage is available to owners of Volvo vehicles only, although the company may offer a similar program to owners of other vehicle makes, Roy says.