April 22nd, 2008 → 4:43 am @ admin // 2 Comments
I know what you’re thinking, “I have to get home” or “If I’m parked I’m not making money.” You’re right, and we are all guilty of using those reasons to take loads that we shouldn’t take. But there are other things to consider, the main one being the cost to operate. As an owner/operator or a small trucking company, you must run your business as a business, which starts at turning a profit.
Let me ask a simple question, what does it cost you to run? You should have the answer to that question on the top of your mind each and every day. You should be able to answer that question cold, without thinking, exactly how much it takes to operate. And when I say exactly how much, I don’t mean just for fuel and labor. I mean for insurance, taxes, licensing, maintenance, labor and fuel all bundled together. As a long distance truck, the number might be by the mile. As a more local truck, it might be by the day. Either way, you should know those figures and be able to determine in about 10 seconds if that next load is worth taking. When you see a load posted to a load board, you should be able to do the math and determine the profitability. Profitability = Total Revenue – Total Cost, where Total Revenue is the load pay plus any fees and the fuel surcharge.
So, how much does it take to be profitable? To some degree, that is up to each of us as individuals. However, I would recommend a minimum of 10%, but 15% is a more comfortable zone. Here’s a typical example: If you determine your cost to operate as $1.42/mile (which should include your driver pay, even if that is you in the seat), then to maintain 10% profitability you need $1.58/mile for every mile, loaded or empty (divide 1.42 by .90). You can make adjustments to the math to compensate for empty and loaded miles. If you know that over the course of the year you drive on average 87% loaded and 13% empty, then increase your loaded price by 13% to cover the miles you won’t get paid for.
We all know the phrase “Say no to cheap freight.” But how many of us actually live by it every day? It starts with each of us as individuals. We must operate our businesses in a successful manner in order to survive in this highly competitive industry. Find your cost number, add your profitability, and commit it to memory. And remember, if the load you are looking at doesn’t meet your profitability minimum, then help yourself and the rest of us – don’t take it!
Tags: fuel prices, truck loads, trucker strike, trucking
Trucking Company Failures Highest in 5 Years | Trucking Business Software
2 years ago
[...] Profits are so thin that most small time truckers have very little margin to sustain the losses. This is partly because of the millions of truck drivers available and the administrative costs. So any small increase in the price of fuel makes it difficult for the small carriers to exist. Transmitting the higher costs of fuel to customers does not normally work as the customers usually go somewhere else, see Don’t Take that Load Part II [...]
Trucking News » Blog Archive » Trucking Company Failures Highest in 5 Years
2 years ago
[...] Profits are so thin that most small time truckers have very little margin to sustain the losses. This is partly because of the millions of truck drivers available and the administrative costs. So any small increase in the price of fuel makes it difficult for the small carriers to exist. Transmitting the higher costs of fuel to customers does not normally work as the customers usually go somewhere else, see Don’t Take that Load Part II [...]