The Business of Trucking
Cut expenses in order to boost bottom line
Last month I explained how to calculate and track your income per mile, but you shouldn’t focus on it because you can’t do very much to change your income. Instead, I’d like to see you focus on your expenses, because expenses are something you can control to positively impact your bottom line.
I look forward to the day when you hear owner-operators talking on the CB about their fuel cost per mile or how they lowered their maintenance cost per mile instead of how much a certain company pays per mile. Everybody knows what their contract pays, but very few have actually calculated their true income per mile. So let’s get back to what’s important.
In order to track your expense per mile, you need a couple of numbers and a timeframe. Start by using last month’s figures. You should already have your odometer readings from the first day and the last day of last month, so we know your total miles. Now we need to choose an expense to track. Let’s start with fuel because that is where we have the opportunity to save the most money. Add up all of your fuel receipts for last month, then take the total and divide it by your total miles for last month. The calculation for cost per mile is simple; just remember cost per mile is cost divided by mileage. If you drove 10,500 miles last month and your total fuel cost was $4,200, then your cost per mile for fuel is 40 cents (4,200 divided by 10,500).
Every mile your truck rolls, you have to allocate 40 cents of your income to fuel cost. You can also use this information to track your fuel cost in different scenarios or for different loads or to see what happens to your fuel cost when you slow down or idle less. You can start to see how tracking these numbers will help you learn about your business and identify ways to lower your costs and put more money back in your pocket where it belongs.
You can use this formula and method for tracking any of your business costs: truck payment, maintenance, insurance, etc. Before we move on, I want to say a few more things we can do to cut fuel costs, so be sure to read next month’s article. In the meantime, start writing your odometer miles on every fuel receipt.
Remember, be safe, be profitable and “Master the Journey.” For more info, check out www.masterthejourney.com.