Look beyond money per mile
By Timothy D. Brady
There’s a misconception in the trucking industry that says: “The only thing that counts is how much money I’m making per mile.” If you measure the health of your financial life by what you’re making per mile, the questions are: “Do you have the required funds in the bank for the expected and the unexpected? Are you consistently able to send the required dollars to the house?” Most truckers who look at how much they’re making a mile as the most important benchmark of their financial success are the ones who tend to run out of money before they run out of month.
Look at a typical per-mile scenario: Say you have fixed costs of $100 per day, including your truck payment — that’s $36,500 per year. You also pay yourself, as driver, $36,500 per year, making your fixed costs $200 per day. For argument’s sake, we’ll say your truck operates at 25¢ per mile, not counting fuel or tolls, and it gets 6 miles per gallon.
With those figures in mind, look at what happens if you take a load paying $5 per mile, going 332 paid miles, for a total of $1,660, including fuel surcharges and all extras. Add in the fact that you have to travel 68 miles from your last drop to where you’ll put this load on your truck. Now you have a total trip of 400 miles.
Your operational cost per mile is 25¢ times 400 miles, or $100. Let’s say that fuel costs $3 per gallon, which comes to a total of $200 for the trip.
Take a look at the chart below to see your Break-Even Point (the point where your costs are covered) and profit or loss for the trip, based on total days and miles involved in the load from destination to destination. If the type of load or scheduling circumstances add days to the trip, the revenue that seemed reasonable may not actually be adequate for the job. Time, not miles, count.
By the seventh day you’ve lost $40 on the load. It’s costing you 12¢ more per mile to run the load than you’re receiving. The reason is because each day your fixed costs keep mounting, even if the truck is sitting still. In order to maximize your per-mile rate of revenue (pay), you must turn your per-mile rate into a per-day and total trip amount; then subtract your Break-Even Point to determine your potential profit.
By figuring your trip and daily Break-Even Points, you will instantly know if the load pays enough to make it worth your time. Keep in mind it’s necessary to know the actual cost of fuel on the trip in order to correctly calculate your trip and daily Break-Even Points. Whether you are paid by mile or percentage, you need to deduce your Break-Even Point and revenue to per-day amounts to provide a healthier picture of your financial life.
For more information about operating your truck as a successful business, contact Timothy Brady at www.truckersu.com or by calling (800) 292-8072.
Load Profit Analysis Software, ©2005 Write Up The Road Publishing,
was used to calculate the figures in this article.