Last time we talked about the importance of setting goals for your business. A budget is an important tool in helping you determine how much money will be needed to meet those goals and can help you understand when to make changes in your business.
Creating a budget can be a great source of personal satisfaction as well as an important contributor to the success of your business. A budget also allows you to know when you have reached your break-even point.

Break-even is the point at which all of your trucking and personal fixed expenses are effectively met, and every extra mile driven puts extra money in your pocket.

By knowing the number of miles you need on a weekly basis to meet your expenses, you’ll know immediately whether your week has contributed to your profitability before you even get your settlement check. You’ll be relieved of the stress of worrying about your income and be able to take time off with greater peace of mind, knowing you have met your financial needs.

Determining your break-even point requires a thorough understanding of all your revenue and expenses as well as your tax liability. The budget should identify all of your revenue (gross income) and expenses, both fixed and variable. Your projected net income can then be calculated from this information.

All of your personal household expenses should also be included in your budget. While your numbers may reflect a profitable business operation, you will fall short of overall financial success if can’t meet your personal needs and household requirements. In addition, understanding your total financial picture will allow you to set and attain personal goals, such as saving to buy a house or putting money aside for retirement.

Don’t forget to include tax considerations when looking at your budget. Depending on your situation, state and federal taxes combined are usually 20-25% of your net income. Use your budget to determine what to set aside from your business to cover your quarterly estimated payments throughout the year so you can avoid IRS penalties for late payments or non-payment.

A budget helps you determine the money you’ll need to meet both business and personal expenses. Over time, you’ll be able to build your business while learning how to increase your revenue and control costs.

Next time, we’ll talk about ways to manage your expenses.