Have you ever wonder how a particular trucking company can operate for a particular price? How are they making a profit at hauling all those loads?
Well, believe it or not, many trucking companies part of the U.S. trucking industry nowadays are calculating their revenue and profit per mile.
Since they have started incorporating this method many trucking company owners have stated that now they know the real price and profit for which they are running for. Also, they are well aware at what price they cannot run their trucks- when they are not going to make a profit.
Actually, incorporating and running a trucking company is not an easy process to take. Trucking company owners who have decided to run a trucking company without being aware of the real situation in their company, that is to say without knowing their real costs are in fact leading their trucking company with their eyes closed.
If a trucking company owner does not know the cost of each mile that his trucks are driving then he won’t be in the situation to decide the best per mile rate to charge their shippers.
Unfortunately, this has led many trucking companies to failure. The ones who are not tracking and controlling their operating expenses and processes might soon face going out of business.
Remember: The trucking industry is a tough market, and in order for your trucking company to stay the longest in this industry you will have to pay attention on your bookkeeping and on the calculation of your costs per mile.
Thereupon, the best way for trucking companies to calculate their revenue and profit per mile is by calculating all the costs per mile- including the fixed costs, variable costs, salaries and so on. If you try to calculate just one cost per mile you won’t be in the position to see the real picture.
Thanks to the technology nowadays trucking company owners can enjoy the benefit of using accounting software or similar products that will help in reporting all costs for a small amount of money.
Further, in this article, you will have the chance to read and to learn more information how you can calculate the revenue and profit per mile for your trucking company. So, let’s see!
Know Your Fixed Costs
Running a trucking company and not knowing what your real costs are can lead you to improper calculation of the real revenue and profit that your fleet is making.
Thereupon, the actual calculation of the revenue and profit per mile can be done in a lot simpler and easier way that one might think. Thanks to the numerous technology improvements trucking companies nowadays can perform this calculation process via specialized software.
Hence, fixed costs are the actual expenses that your trucking company has regardless if your class 8 trucks are in the parking lot or are hauling loads right now.
But, which are in fact the real fixed costs that a trucking company might face?
Well, the fixed costs of a trucking company are:
Moreover, it is important for trucking company owners to realize the fact that motor carrier operational costs can be impacted on a large scale by a number of externalities and influences.
Nevertheless, we can notice as well that some line-item costs are easily measured than others, most often it refers to fuel and tire costs.
Further you can take a look at a fictive chart of the fictional costs that a trucking company can face with:
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I have prepared these fictive costs as an example for a truck that is 2005. But, you should never forget the fact that if you own older trucks then the maintenance bills would increase.
As you can see, in this fictive chart I did not include work such as bookkeeping, office job, vehicle payment as well as filling.
This would be enough for the fixed costs.
How To Reduce Your Fixed Costs
In general, there are not many ways and means that you can take in order to reduce the fixed costs that your trucking company has.
But, what you can try and do is the following:
- Study up on ways to save money on a particular purchase;
- Try to lower the interest rate on your truck loan;
- Shop insurance to reduce the premiums;
Variable costs can be interconnected with the money that a trucking company is spending in the process of operating its trucks.
What can a trucking company classify as variable costs?
The variable costs of a trucking company are the following: repairs, fuel, meals, maintenance, lodging and many other expenses that might come up while trucks are rolling on the road.
So, unlike fixed costs, variable costs can change greatly from time to time.
Thereupon, the best way for a trucking company to calculate its variable costs it should perform a calculation of these costs on a monthly basis.
This way the trucking company will be able to get the most up-to-date information about the real expenses that they are spending.
First and foremost, if a trucking company is engaging its fleet into putting more mileage on the trucks, then straight proportionally should be expecting to see how the variable costs are increasing.
As we can see by now, the variable costs of a trucking company are all those expenses that come altogether with the movement of the class 8 truck.
The biggest factors that are contributing to these expenses are the number of miles that a truck has traveled as well as the fuel mileage.
In the past few years, we had the chance to experience a drastic fluctuation of fuel prices.
For example: The fuel prices in July 2008 reached a price of $145, later on this price range dropped at $36 dollars per barrel just few months later. Just 7 years later we got to experience a steady fall of the fuel prices- early in the year the average diesel price reached $3.14 per gallon, whereas by the end of 2015 the price was $2.24 per gallon.