The 2005 Mid America Truck Show (MATS) is over. The booths have all been crated and removed from the halls, the carpets have been rolled up and put in storage until next year, and the floors have been swept clean of all the cups, brochures and debris all trade shows leave behind. The fleet of trade show trucks has headed out, returning their loads to warehouses to await their next show.

Having the opportunity to be both a journalist and an exhibitor at this year’s show, provided me with a different perspective. The amount of information as well as new and existing products and services presented at MATS this year was staggering.

For the first time in my trucking career, I was tied to a single booth with little time to venture out to see the hundreds of other booths. The release of my new Load Profit Analysis Software provided me with the opportunity to have conversations with hundreds of lease/operators, owner/operators and small fleet owners. The tremendous interest in the software indicated to me that although the economy is improving, the majority of lease/owners, owner/operators and small fleet owners are still struggling to make a small profit. As fuel prices continue to skyrocket, the concern of these truckers to just break even is becoming the topic of the moment. The need for up-to-the-moment, real-time revenue/to cost/to profit information is critical.

In the many conversations I had with these trucking businesspersons, the consensus is there are very few tools available to the small trucking company owner, lease/operators and owner/operators that provide them with the critical numbers to make the necessary decisions for profitability on a load-by-load, trip-by-trip basis.

In my discussions with all these truckers, there was 100% agreement with the statement “There is no such thing as “Deadhead Miles” (unless you’re a traveling groupie of the “Grateful Dead”). When you have unloaded the last shipment of your current trip and closed the trailer doors, this is the point and time your next load and trip begin. Somehow, the term “deadheading” has eased its way into the vocabulary of load planners, dispatchers, brokers, agents, and operations departments throughout the industry.

The term needs to be removed from our trucking lexicon and returned to the ‘60s-‘70s rock n’ roll group. The point that was explained to me repeatedly by these truckers is the people or companies doing load-planning need to consider and look at the total miles and time required to complete a load. This must include the miles and time from the last delivery of the last trip, to the point of the first pickup of the new trip, then on to the destination of this load.

Another point explained to me by many of these fine men and women was that, irregardless of whether one uses HHG miles, the way the crow flies, or any other means to determine the shortest distance between two points to figure the amount a shipper is paying to have their load hauled, it is imperative when this rate is compared to the actual destination-to-destination miles and time the truck is going to travel it is actually creating a profit for the trucker hauling it. This must be done utilizing the costs of the truck and driver that is actually going to haul the load.

Another problem brought to my attention by many of these truckers is that formulas and programs currently available for figuring cost per mile are flawed-- they try to figure cost per mile over an extended period (six months to a year). The other problem is these programs attempt to utilize the truck’s entire cost categories against total miles traveled to obtain the “cost per mile” factor in calculating profitability of a single load.

The reason this doesn’t work is the cost per mile figure that includes fuel costs, which were paid months ago, will diminish the quality of the number to determine your cost per mile today. Example: If fuel was $1.40/9 five months ago and it’s $2.23/9 today, the average over the period will be $1.82/4 or $0.41/5 less than the actual price being paid today. This, as you can see, would degrade any calculation attempting to determine profitability on a load being priced today.

Another mistake programs and formulas make is by trying to use the same spreadsheet totals used to create Profit/Loss statements and financial statements to determine rates. While the information contained in these spreadsheets is needed to calculate rates, the categories must be separated into three different areas: Cost of Ownership (Fixed Costs), Cost of Operations (Cost per Mile) and Shipment Specific Costs.

Your Cost of Ownership is completed over a twelve-month spreadsheet. The totals from this spreadsheet are used to determine the truck’s cost per day or “break-even point.”

Cost of Operations is based on the past three months, with the cost per mile being calculated at the end of each month so the trucker can see a pattern over a period of time, but the number used in determining profitability must be the most recent cost per mile figure to be effective.

The Shipment Specific Costs are the costs directly related to a specific shipment or load (tolls, labor, trip permits, etc.). These costs must be calculated against the revenue of the shipment with which they are connected in order for the actual load profit to be determined correctly.

With all the new products, services, and information available at MATS, what was most important to lease/operators, owner/operators, and small fleet owners was finding a tool to assist them in determining the profit on a load-by-load basis. A tool that takes into consideration the actual costs of the unit and driver that is going to haul a specific load, and compares these costs against the actual revenue the load will produce.

With costs rocketing up, it is imperative shippers, brokers, and companies are prepared to meet those costs with surcharges, detention fees, and other revenue to be passed directly to the one hauling the load.

According to the most recent statistics, the CDL driver shortage is getting worse. Six months ago, the annual turnover average for drivers in the U.S. was 116%-- now it has climbed to 135%. At the show, several trucking company recruiting VPs told me out of one hundred applicants applying for CDL positions, they were able to find 10 drivers who met the requirements to go through the hiring or contracting process.

Truckers I talked with during the show explained the number-one reason they will leave a company or abandon the industry altogether can be summed up in a single word: “Money.” The reason owner/operators and lease/operators jump the industry ship, sell, or even abandon their truck is they realize they are sending less money to the house than a company driver.

These truckers have discovered when they own a business, they need to make a reasonable salary as the driver of the truck and a profit beyond the driver’s salary for the company that owns the truck-- regardless of whether the driver and trucking company owner is the same person.

As I stated before, this MATS provided me with a very different perspective. Being able to talk to so many truckers, individuals and groups (as large as ten at a time), the consensus is “It’s the MONEY.”

As owner/operators and lease/operators, it is your responsibility to be sure you know your costs. That means knowing your daily, weekly, and monthly break-even points; your most recent cost per mile; what shipment-specific costs apply to which loads, and how these compare to the revenue you will receive on the load. This lets you know your Profit per Day, Profit per Mile and Profit per Trip. With these figures, you will know what your shipping rates need to be. This will empower you to know when to say yes to a load, when to ask for more revenue, and when to just say NO.

Look at it this way: When was the last time you called a plumber and told them what you’re going to pay for his service? Why let customers come to your trucking company telling you what they are going to pay for your hauling service? Something to think about.

Remember, it’s your company, your truck.

For those who entered our contest last month, thank you for the tremendous response. Our winner was a trucker. The correct answer to the question: What is truck to load saturation? And what is the best position to be in, regarding ‘truck to load saturation?’

ANSWER: Truck load saturation is the point when there are more trucks than loads to haul. The best position to be in is a market that is not saturated; more loads than trucks to haul them.

New Contest: The first person to answer correctly the questions listed below by email to info@truckersbookstore.com will receive a one-year free subscription to “Load Profit Analy$i$ $oftware.”

1. What Cost per Mile number must be used in determining profitability of a load?
2. Name three cost categories that would be included in Shipment Specific Costs?

All entrants will receive a discount coupon towards the purchase of both the book Gearing Up 4 Profit$ and software subscription Load Profit Analy$i$, both of which are available now.

Gearing Up 4 Profit$, An Owner/Operator’s Guide to Load Profitability. ©2005 Tim Brady
Also Load Profit Analy$i$ $oftware
©2005 Tim Brady
along with
Quick & Simple Record Keeping for Owner/Operators, ©2005 Tim Brady and Esta Klatzkin, E.A.
is now available for purchase.
Or for more information go to www.truckersbookstore.com now expanded to include items from Smart Trucker, LLC; and American Moving Supplies, Inc.