It’s amazing how a majority of owner-operators only look at their revenue per mile. What about your revenue per day? What is your fixed cost per day? What is your cost per mile? What shipment-specific costs come into play?

Every mile a truck is driven costs money, whether loaded or not. Once a load is delivered, both the number of days from that delivery date and the number of miles required to complete the next load (from the point of delivery of the previous load) all belong to the new load. If you don't factor your cost in this manner, the profit amount you'll come up with will be incorrect-- a false profit or no profit!

Example: If you had a load going from Dallas, TX to Little Rock, AR that would pay to the truck $1600, is it a good load?

That depends on several questions: 1) Where did you drop the previous load? (how many total actual miles will you have invested in this load?) 2) How many days will you invest in the load from point of last drop to Dallas and then to Little Rock? 3) Are there any special handling requirements you have to pay out of your pocket? (labor, tolls, permits, etc.)

If you'd delivered your last load in Dallas and the delivery in LR was the next day, it would be a great load. If you were in El Paso for your last delivery, and you ran one and a half days to get to Dallas, and had to sit over a weekend to pick up the load in Dallas and couldn't deliver until the following Friday, the load would not look so good. Or if you were in Dallas for your last drop on a Thursday, but you have to wait until Monday to load and can't deliver until the following Friday in L.R. No longer is this a great load. In the second example both miles and time made a difference in the “profit quality” of the load. In the third example, time alone made the load lose value.

Now let’s work the numbers on the above examples. We’ll assume the fixed cost is $100 per day + $100 driver salary per day (incidentally, that salary is only $36,500 per year) equaling $200 per day fixed cost and for the cost per mile, let’s use 0.65 per mile.

El Paso to LR is 955 miles at 0.65 per mile, which equals $620.75 + 10 days at $200 equals $2000.00. Total trip cost: $2620.75. So total LOSS is $1020.75 for 10 days’ work!

For the Dallas to LR load with sitting over the weekend, the figures are 0.65 per mile times 320 equals $208.00, + 9 days at $200 per day equals $1,800 fixed cost, with a total trip cost of $2008.00. Then the total LOSS is $408 for the 9 days.

In the first example, where you pick the load up on the afternoon you dropped the last load and deliver it the next day, your total cost would be 0.65 per mile times 320 miles equals $208.00 1.5 days times $200 per day fixed cost equals $300. So total profit on this load is $1,092.

All of these examples used the same load with the same pay-- the difference in profitability is determined by the time required or a combination of time and miles.

Without the right factors and the proper equations, it’s easy to see how simple it is to go broke in a very short period.

As you can see, it is necessary not only to know your costs, but to have the correct formula to apply them before you accept any load. Keep in mind that the cost factors are different for every truck. A formula is only as good as the numbers you place into the formula.

If you take the cost of ownership, cost of operation, and shipment-specific costs for a brand-new truck and use them to determine load profitability for a five-year-old truck, it will not work. The newer truck will have a higher cost of ownership and lower per-mile costs than the older truck, and vice-versa.

In addition, two different drivers are going to have different driving styles when compared over a hundred thousand miles per year. This will either add or subtract significantly to the costs incurred in each operation. That’s why it’s imperative for an owner-operator to use data derived specifically from his or her own operation.

If you want to run a successful business in the current trucking environment, take the time to know your numbers!

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

Note: I’m just completing my next trucking business book, Gearing Up 4 Profit$ An O/O Guide to Determining Load Profitability and its companion software Load Profit Analy$i$ v2.02. This book will instruct how to set up your own load-profit analysis system and the software will instantaneously calculate the profitability (or lack of) on each load you’re offered. This software utilizes the Time vs. Miles-Revenue vs. Costs formula I used successfully in my trucking operation for many years.

For those who entered our contest last month, thank you for the tremendous response. Our winner was a Director of Safety and Recruiting from a small trucking concern in Kansas City, MO. The correct answers to the questions: (1.) What’s the four-letter word for Success? PLAN. (2.) What’s the two-letter word for Profit? NO.

New Contest: The first person to answer correctly the question listed below by email to contest@truckersbookstore.com will receive an author-signed copy of Gearing Up 4 Profit$! by Tim Brady ©2005

If you want to run a successful business in the current trucking environment, what are the three categories of costs you must know? You can find the answers in the article above…

All entrants will receive a discount coupon towards the purchase of both the book Gearing Up 4 Profit$ and software subscription for Load Profit Analy$i$ v2.02. And all entrants will be registered to be one of five lucky recipients of a free copy of Gearing Up 4 Profit$, and a one-year free subscription to Load Profit Analy$i$ v2.02 software.