In the trucking industry, the key numbers to watch are your metrics – your revenues, expenses and profits. Everyone understands that.
But in the trucking industry, everything is done in a per mile basis, so when customers ask us to haul loads, we’re always trying to evaluate what the rates ought to be, based on a per mile revenue.
We need to be able to break those numbers down to a per mile basis, to be able to apply it to the work we’re doing in the trucking industry. When you’re able to focus and know your revenues per mile are, your expenses per mile are, and of course, your profits per mile are, then you’ll find out if you’re a profitable operation.
All the big operations know these numbers inside and out. What I’ve found is that most owner-operators don’t know their overall expenses per mile are. Generally, there’s a one thing they know – fuel cost per mile. They may have some ballpark idea of the overall expense is, but most owner operators don’t know exactly.
The reason that’s so important is when you’re out there, bidding on freight, it’s a very hectic environment. You have to be able to make decisions quickly. Every operator knows that when they’re taking a load from a primary carrier, they’re moving a load at three or four dollars a mile, it’s easy to see they’re making plenty of money to cover the fuel costs and the labor costs. But you need to know you’re covering your other expenses, like truck payments and maintenance.
We all find ourselves in places where rates are tough. Maybe you’re in a market that’s weak, or your primary load fell apart, and you have to go to Plan B. You’re on the load board and they’re offering rates that are much, much lower. When you’re running those lower rates, you have to know what your break-off point is, where you’re going to start losing money. Some loads you might make money, some loads you might lose money. But you need to know where you’re at and make sure you’re staying above that expenses per mile number even when you’re in a weak market area.
This often fluctuates month to month. Some carriers run seasonal freight, such as lumber or produce, especially in the north, so your revenue per mile or your expenses per mile are much lower. You need to be able to find that balance.
You need to take all the expenses into account, as well as all the miles.
On the mileage side, you have loaded miles and you have empty miles – all miles traveled by the truck. The expenses then need to include everything. Oftentimes, we think about the operational expenses, like fuel expenses, labor expenses, driver expenses, tolls, but there’s also maintenance, truck payments, insurance, all those things too have to be figured in. It’s a little bit harder to figure those things in a mileage basis.
Your fixed expenses, like your insurance, rent for an office or a garage, all those kinds of things you don’t think about when the trucks are out there, running on the road. When the trucks are on the road, you think about those costs running down the highway, but you have to think about enough money to cover the rent and the electric and all of the fixed expenses that the truck has to cover too.
What you need to do is look at your overall expenses for the whole month, including all those other expenses, and then look at all the miles you drove over that month, and figure out what the expenses are across the board. I like to take it one step farther and look at what the expenses are per loaded mile, because when you’re out there, doing the work, you only get paid for the loaded miles. There shouldn’t be a big disparity between the two numbers, but there is a little bit of a difference.
How does TruckingOffice help the owner operator figure this all out?
TruckingOffice does all of this automatically, in the background as a system. The miles are all calculated using PC Miler. Every load that gets entered into TruckingOffice, the program automatically runs the miles for each trip as you go. Then at the end of every month, we can easily calculate all the miles for all the trips for all your trucks, so you can separate that out or lump it together. In this case, we lump it all together to give you a good overall for the month. Once the expenses are input there for the month, then you’ll know the expenses per mile. With TruckingOffice, there is no extra work involved.
You can know how you’re doing month to month.
Then, when you’re in the fast-paced environment of booking freight for the trucks, you know exactly where you need to be. If your expenses per load are $1.35 per mile, then you need to know that you’re above that. When you’re in a tough market, and you take a load, you can at least know that you’re covering your expenses.
TruckingOffice is available whenever you have Internet access. A smart phone can pull it up or open it in a browser to see what you’re doing. Try our free one month trial today.