In the last three articles in this series, we discussed the need for the owner-operator to know his or her costs. Now let’s talk about pulling it all together—to find the profit.

The case has been made that you must know:

1. Cost of Ownership (Fixed Costs)

2. Cost of Operations (Running Costs Per Mile)

3. Shipment Specific Costs (Variable Costs)

Now that you know these figures, what do you do with them?

The first step is to record the following factors:

a. How many days did you sit since you last unloaded?

b. How many deadhead miles to your next load?

c. How many miles will be required to complete your load?

d. How many days will be required to complete your load?

e. How much in Shipment Specific Costs (labor, tolls, etc.) will be required?

The second step is to:

a. Multiply your total actual miles by your Cost of Operations (Running Cost per Mile).

b. Multiply your total number of days from the day after you completed your last load to the day you unloaded this job by your daily Cost of Ownership.

c. Take the totals from those equations and add your Shipment Specific Costs.

d. Subtract that from your total revenue and… EUREKA—you get your gross profit or loss on that load!

Remember, the trick is knowing the Daily Cost of Ownership, the Operational Running Cost per Mile and the Shipment Specific Costs.

By knowing these answers, you help solve a major problem in the trucking industry. That is, the owner-operator knows he isn't making any money, but without supportive business information the owner-operator can’t prove it to the companies and brokers for which he or she hauls.

The reason is that not one of these parties (with very few exceptions) knows the true cost of providing the services they sell. Or if they know their costs, they have no knowledge of how it affects their customer-- they only know how it affects themselves. And frankly, the customer doesn't care how it affects the owner-operator, the trucking company or the broker, and doesn’t need to.

If trucking is to get back on the highway, it is up to the owner-operators. But they must know their costs and know how those costs affect the trucking company, broker and customer. And be able to prove it with hard data.

Once owner-operators have this hard data in hand, they will be able to say NO to non-profitable loads-- or negotiate for a profitable amount.

You can't do this unless you know your costs. If shipments that don’t contain a reasonable profit are posted, one of three things can happen:

1. They don’t get hauled.

2. Or revenue increases to an acceptable level.

3. Or customers attempt to do it themselves.

If you are waiting for trucking companies or brokers to do something, it's going to get pretty cold in hell first. The brokers and trucking companies are aware there’s a problem. They know what it is but don’t know how to solve it.

The word has always been, “It’s the guys in the trenches who win the battle.” To paraphrase General George S. Patton: Lead (Know your costs), Follow (Pray someone else solves the problem) or Get Out of the Way (Quit the industry). The choice is yours.

Remember---it’s your company, your truck!

Timothy D. Brady is a 20-year plus trucking veteran, AMSA’s 2002 Super Van Operator HHG, co-author of “Driven 4 Profits,” and serves as “The Trucker’s Financial Advisor on ABC’s Sirius Trucking Network’s “Open Road Café.” He is also available for speaking engagements. You may contact him at www.truckersbookstore.com; email tbrady@truckersbookstore.com or phone 800-292-8072.