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Mike's Trucking Service

Executive Summary

Opportunity

Problem

The USA has grown to be prosperous with many huge cities over miles of land. The cities need food and supplies. Long-haul trucks are the fastest and most efficient way to get people food before it spoils and other supplies that people need.

Solution

Mike’s Trucking Service is a Dallas, TX-based trucking company that aims to be one of the largest trucking companies in the USA.  Mike’s is initially focusing on the food industry with plans to diversify with new industries served. Mike’s has chosen the trucking industry as the growth prospects are encouraging and stable, with trucking dominating the freight industry in this country.

Market

Mike’s will employ three distinct marketing efforts to raise awareness about the company and generate new customers. The first strategy is the use of promotions. This will focus on press releases and advertising using various different media. The second effort will be the use of incentives. The incentives will be offered to existing customers. The last effort will be social media to reach new and existing customers.

Mike’s Trucking Service is a customer-centric organization looking to become one of the premier trucking companies in the USA.  Profitability is forecasted to occur at month three. Mike’s has conservatively projected sales of $100,000 for year one and $400,000 for year three.

Competition

Although there are major players in each of the commercial carrier market segments, the market remains highly fragmented. According to a Google search of Dallas trucking, there are numerous companies providing different kinds of the trucking services. Major competitors for Mike’s Trucking are those companies who have comparable truck fleets and are also targeting the food industry.

Market research shows that customers in the food industry are price sensitive, and they value on-time deliveries, special handling capabilities, and less-than-truckload orders. Customer referrals and carrier’s reputation are believed to strongly influence the buying decision.

Why Us?

Mike’s Trucking enables someone to lease a truck, of any size, for any project that needs hauling. We will provide this service to the whole of the Dallas area, and hope to expand from this base area within the first five years of operation.

 

Expectations

Forecast

The company is raising $165,000 for the purpose of financing equipment purchases to meet a growing demand for its services. The company management has reason to believe that an increased truck fleet will assist the company in its effort to widen its market offering and increase sales.

Financial Highlights by Year

Chart visualizing the data for Financial Highlights by Year

Financing Needed

We will be raising $165,000. There will be $105,000 invested in cash for operations and $40,000 in equipment.

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Opportunity

Problem & Solution

Problem Worth Solving

The USA has grown to be prosperous with many huge cities over miles of land. The cities need food and supplies. Long-haul trucks are the fastest and most efficient way to get people food before it spoils and other supplies that people need. 

Our Solution

Mike’s will offer both for-hire trucking as well as private carriers. Most of their business will be derived from the private carriers.  For the private carrier segment, both truckload (TL) and less than truckload (LTL) will be offered.  Mike’s services will be especially attractive to the food industry, as participants in that industry typically use referrals, reputation, and customer service as purchasing variables. 

Target Market

Market Size & Segments

 Market Segmentation

There are several potential customer segments that we will provide our transportation services to. Major customer segments include the food industry, PC, and semiconductor manufacturers, and retailers. The chart and table below outline the current market size and growth estimates for these customer segments in Texas.

Large established companies in the afore-mentioned segments (especially in the food industry) have their own truck fleets, while smaller players outsource the transportation function. The latter vary in the scale of their operations but have a steady demand for reliable transportation solutions. We will actively solicit such customers.

Target Market Segment Strategy

Mike’s Trucking will focus its marketing budget on a selected industry niche. A narrow-served market focus will help strengthen the company’s reputation of a reliable transportation services provider and will generate favorable referrals.

The major customer segment the company is focusing on is the food industry. Companies in this segment have varying needs, and Mike’s Trucking has already gained valuable experience serving such customers. The company management believes that by increasing its truck fleet it can capture additional clients and provide better service to existing clients.

Competition

Current Alternatives

Private carriers

Although private carriers comprise the largest component of the motor carrier industry, financial information isn’t available for them. However, the industry is estimated to provide services valued at some $200 billion annually (or 58% of motor carrier revenues in 1998).

The American Trucking Association (ATA) estimates that there are more than three million trucks operated by private fleets transporting 3.5 billion tons of freight annually.

For-hire carriers

The for-hire category generated $144 billion in 1998, or 42% of the industry total. Of that $144 billion, some $105 billion (73% of the sector’s business) came from truckload shipments, and $39 billion (27%) was from less-than-truckload and package/express delivery.

  • Truckload (TL). The national for-hire truckload segment had total revenues of $65 billion in 1998. The TL sector has historically been mostly privately owned, with the exception of the top ten publicly-owned companies (For this reason, we focused on the LTL sector in this survey). Schneider National Carriers was the largest TL operator, with revenues of $2.8 billion in 1998, followed by J.B. Hunt Transport Services ($1.8 billion), and the Landstar family of truckload carriers ($1.3 billion). Of the 50,000 truckload carriers, perhaps 95% had annual revenues of less than $1 million.
  • Less-than-truckload (LTL). The ATA estimates that the less-than-truckload market garnered $20 billion in 1998. Of this amount, the fast-growing regional segment accounted for slightly more than the national market.

Our Advantages

Our major competitive advantage is the vast industry experience and solid reputation of its owner, Mike Smith. His company is also well known among its clients for going that extra mile in the customer-service department.

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Execution

Marketing & Sales

Marketing Plan

We market our services as solutions to the many companies requiring cargo to be transported promptly and efficiently. The company’s future marketing plans will be nationwide, emphasizing haulage capabilities for any cargo. The overall marketing plan for services is based on the following fundamentals:

  • The segment of the market(s) planned to reach.
  • Distribution channels planned to reach market segments: television, radio, sales associates, and mailings.
  • The share of the market expected to capture over a fixed period of time.

Sales Plan

At the time of this writing, Mike’s Trucking has a lease arrangement with various companies. The company’s pricing is based on miles per thousands of pounds of cargo transported. We will be able to charge competitive rates, as we have minimal overhead compared to our competition. The table below sketches out the pricing structure; for a key to this table please see asterisks at the bottom of the page.

Operations

Locations & Facilities

Mike’s will offer both for-hire trucking as well as private carriers. Most of their business will be derived from the private carriers.  For the private carrier segment, both truckload (TL) and less than truckload (LTL) will be offered.  Mike’s services will be especially attractive to the food industry, as participants in that industry typically use referrals, reputation, and customer service as purchasing variables. 

 

Milestones & Metrics

Key Metrics

  • Freight cost per unit shipped
  • Outbound freight costs
  • Inbound freight costs as percentage of purchases
  • Transit time
  • Claims as % of freight costs
  • sales
  • loads
  • maintenance
  • driver commissions
  • leads
  • closes
  • clients
  • repeat clients
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Company

Overview

Ownership & Structure

Mike’s Trucking has been in business for one year. We have maintained financial stability during the first year of operation due to the extensive industry experience of our management team.

The company’s management is minimal in order to reduce the overhead. Mike Smith, the company owner, and president makes all executive decisions. At the moment, he also generates most of the sales leads. Joan Rose works as an executive secretary who answers phone inquiries and maintains the customer database. A part-time sales representative will be hired to solicit new business once the company acquires new trucks. In year 2 the administrative staff is planned to increase in order to handle the higher sales volume. In the future, a sales manager will be hired to allow Mr. Smith more time to dedicate himself to company management.

 

Team

Management Team

The management of Mike’s Trucking is highly experienced and qualified. Mike Smith, president and CEO, has been involved in the trucking industry for 15 years. He is well respected by the trucking professionals with whom he has worked. All administrative functions are performed by Joan Rose, who has worked with Mr. Smith for the last seven years. She possesses extraordinary customer service and database management skills.

The company’s management philosophy is based on responsibility and mutual respect. Mike’s Trucking maintains an environment that stimulates productivity and emphasizes respect for customers and fellow employees. The company structure is linear, which leads the staff responsibilities and decision-making power.

Our truckers on salary earn about $50K per year, which is close to the national average. Our two own-operators earn less because we are building a company. 

Personnel Table

2020 2021 2022
Mike Smith $43,200 $44,064 $44,945
Joan Rose $36,000 $36,720 $37,454
Truckers $51,408 $104,872
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Financial Plan

Forecast

Key Assumptions

Our assumptions:

  • Trucks are the best way to get food and supplies 
  • The market will pay the prices needed to support the trucks 

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Sources of Funds

This business is owner operated and owner funded. 

Statements

Projected Profit & Loss

2020 2021 2022
Gross Margin $122,400 $178,800 $291,600
Operating Expenses
Salaries & Wages $79,200 $132,192 $187,271
Employee Related Expenses $15,840 $26,438 $37,455
Sales and Marketing $2,380 $1,500 $1,500
Utilities $2,400 $2,400 $2,400
Insurance $4,800 $4,800 $4,800
Interest Incurred $1,949 $1,183 $950
Depreciation and Amortization $3,600 $3,600 $3,600
Gain or Loss from Sale of Assets
Income Taxes $1,835 $1,003 $8,043
Total Expenses $193,604 $292,316 $440,418
Net Profit $10,396 $5,684 $45,582

Projected Balance Sheet

Starting Balances 2020 2021 2022
Cash $105,000 $91,370 $93,711 $131,140
Accounts Receivable $10,000 $26,400 $29,800 $48,600
Inventory
Other Current Assets
Total Current Assets $115,000 $117,770 $123,511 $179,740
Long-Term Assets $40,000 $40,000 $40,000 $40,000
Accumulated Depreciation ($4,000) ($7,600) ($11,200) ($14,800)
Total Long-Term Assets $36,000 $32,400 $28,800 $25,200
Accounts Payable $3,500 $14,167 $15,828 $25,134
Income Taxes Payable $1,672 $254 $2,013
Sales Taxes Payable $0 $0 $0
Short-Term Debt $23,565 $3,785 $4,018 $4,266
Prepaid Revenue
Total Current Liabilities $27,065 $19,624 $20,100 $31,413
Long-Term Debt $21,435 $17,650 $13,632 $9,366
Long-Term Liabilities $21,435 $17,650 $13,632 $9,366
Paid-In Capital $105,000 $105,000 $105,000 $105,000
Retained Earnings ($2,500) ($2,500) $7,896 $13,580
Earnings $10,396 $5,683 $45,582

Projected Cash Flow Statement

2020 2021 2022
Net Cash Flow from Operations
Net Profit $10,396 $5,684 $45,582
Depreciation & Amortization $3,600 $3,600 $3,600
Change in Accounts Receivable ($16,400) ($3,400) ($18,800)
Change in Inventory
Change in Accounts Payable $10,667 $1,661 $9,306
Change in Income Tax Payable $1,672 ($1,418) $1,759
Change in Sales Tax Payable $0 $0 $0
Change in Prepaid Revenue
Investing & Financing
Assets Purchased or Sold
Investments Received
Dividends & Distributions
Change in Short-Term Debt ($19,780) $233 $248
Change in Long-Term Debt ($3,785) ($4,018) ($4,266)
Cash at Beginning of Period $105,000 $91,370 $93,711
Net Change in Cash ($13,630) $2,341 $37,429
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