Once you know your fixed costs of operation (see “Time vs. Miles”), the next factor to be keenly aware of to stay on the road to prosperity is the one set of costs we drivers are most familiar with—rolling costs (or costs of operation).
Rolling costs are everything it costs once the truck is running. Items such as fuel, tires, oil, maintenance, truck washes, parts, per-mile maintenance plans, log books, any expense required for the truck to start and roll down the highway.
Now, each type of truck operation has different expenses to be included in its cost of operation. Rolling costs for a flatbed operation would include items such as tarp repair, bungee straps and cargo straps. A car carrier would have such expenses as graphite paint, hydraulic system repairs and so on. You know your operation. Be sure you don’t exclude any expenses specific to your business.
But where do you find these expense numbers and how do you figure them? This is relatively simple. Take each of your rolling expenses over a period of time (best is by the quarter, that is every three months). Add all the dollars spent during the quarter for items or services for costs of operation as I have outlined above. Next, take the total odometer miles driven during the same period of time and divide by your total costs of operation. You now know your rolling costs per mile.
A major mistake made in the trucking industry is to view this cost per mile as your total cost. Remember, this is not the case. Cost per mile is only one factor among several that all add up to your total cost. As I have mentioned in earlier DRIVERS columns, your total cost must include cost of ownership (fixed costs), cost of operation (rolling costs), and variable costs (shipment-specific costs). NOTE: Variable costs are ones that don’t occur on every shipment or load but come up from time to time; i.e. tolls, scale tickets, labor, special equipment rental, etc. You should know when these expenses apply and the cost associated with each.
Now that we have all this “expense” information, how is it going to help us? Knowing all of our costs will allow us to set a value on both our time and our investment of dollars.
To figure both the value and quality of a load, follow this process.
First, ask yourself:
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What is the total revenue I will receive for the entire load?
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How many days/hours will it take me to complete this load?
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How long will I sit between loads? (days/hours)
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What are the actual rolling miles to be covered by this load?
What are the shipment-specific costs (if any)?
By having correct answers to these questions, you will begin to put together a “Load Cost Analysis.” This will enable you to make the thumbs up or down decision on whether the load is worth your time and effort.
Keep in mind you, as the owner-Operator, are a trucking business executive. To run your truck as a business, you must understand your costs in relation to the revenue you receive for hauling each load.
Remember--it’s your company, your truck! To contact Timothy Brady, co-author of Driven 4 Profits, go to www.truckersbookstore.com; email [email protected] or phone 800-292-8072.
