Can You Answer These Questions?

[ATeam]

From Thompson Financial News this morning:

"Oil prices have soared by almost 20 percent since the beginning of the month, extending a long-term rally that has seen prices more than double since the beginning of 2007."

At the pumps, diesel prices have not matched crude oil prices exactly but are following the same trend.

National average retail price per gallon for on-highway diesel fuel (all types):

$4.497 May 19, 2008
$2.803 May 21, 2007

In other words, you are paying 60.4% more for diesel fuel today than you were a year ago.

1. How many cents per mile does fuel add to your total cost per mile?

2. Of your total costs per mile, what percentage is now attributable to fuel?

3. A year ago, how much did you require your carrier or customers to pay per mile to move your truck?

4. Today, how much do you require your carrier or customers to pay per mile to move your truck?

5. How much does it cost you per day to sit (fixed costs)?

Say you delivered in a marginal freight center on Friday afternoon. It is unlikely that you will be dispatched on a load out of there over the weekend. If you do not relocate, you could be there until Tuesday or Wednesday before a pickup in that area is dispatched to you. Also say a busy freight center is 400 miles away. If you deadhead there, you might get a load dispatched to you over the weekend. If not, it is very likely that you will get freight to haul on Monday.

How will you decide what to do? Do you have the cost per mile and fixed cost numbers to use?

The business of expediting is not as forgiving as it used to be. Owner-operators who can answer these questions are better equipped to make money-making decisions. If you cannot answer these questions, your business may be swirling in the bowl and you may not even know it. By the time you realize you are going down the drain, it will be too late to do anything about it.

If you do not know what your cost per mile and fixed costs are, and how much you need to charge to earn a profit, one of the best things you can do with your spare time this week is figure it out.

Or, you can pass yet another day reading EO, watching TV,
talking on the phone, and talking with other drivers about how tough the times are. The choice is yours. Only, when you wash out of the business, don't talk only about how fuel prices increased. Talk also about how your business skills didn't.

Your free time is exactly that; free. It will not cost you a dime to study your expenses and figure out your fixed costs and cost per mile. But doing so can be one of the most lucrative things you ever do.

 

[jaminjim]

There are so many drivers out there that don't even know how to properly figure out the mpg let alone try and do the cost per mile for the truck. Unfortunately they either A.) don't know that they don't know or B.) don't care.

 

[always confused]

in a nutshell it costs way too much. and allthough you can't afford to move for too little, it costs even more to not move any freight at all. do i make money when moving freight.. yes. but but not moving, or not enough miles for the week means no cash for mama to pay the household bills, which show up regardless of income. now if i could only get my creditors to only send bills when i have a good week that would help... but thats nor going to happen.

 

[wlben66]

I've been str. truckin for 8 months now and have been keeping track of all the expences for the truck as well as me, cause I want my own truck.

For the last 3 months I've been talking to my finance expert (read: wife) and the word is NO your not getting another truck!

So with those word of wisdom I have to figure really good all the ups and downs so I can prove that I can make this one work. "Don't worry honey this time it will be different."

So I find a inexpensive truck. $14000
Go to my banker to get a really good rate. 6.25% 24 months
Get a far rate of insurance. $1200 / yr.
Plates for a year. $1200
My phone and air card. $1800

This came to about $25 per day fixed cost empty or loaded.

Then I figured all the variable costs of:
tires
PM
Maint
Wash
Tolls
Scales
Taxes (road, use, fuel, fed)
a little for misc.

And then fuel for ALL the miles I'm going to run.

This came to about $0.85 per mile.

With the previous info from what I'm doing now I know that I have about 35% DH overall.
I know milage is going to be between 8 and 10 mpg
The performance of the past 8 months shows that I have about 12.5 loads per month at about 300 miles per load.
I get approx. $1.84 per LD mile including FSC.

Now on the spreadsheet that figures out to be a wash, income to cost which included a profit for me.

The problum is the number of loads is dropping and the miles per load is dropping.

This month I've only had 6 loads so far and they have averaged 200 miles per load.

So I'm wondering... what can be my tactic to tell my finacial expert so I can get that truck???

Any help will be greatly appreciated. (not for the info above but with an story for my F.E.)

 

[always confused]

this is a business of time and place. if you're in the right place at the right time you get freight. with a little luck ( and some experence ) you will be sucessful in in the right place.

its been said "it ain't rocket science" yes you need to know if you're making money, but you don't need to examine every penny to recognize a dollar. if you don't know if you're making money.... find out quick.

 

[jaminjim]

A $14,000.00 truck??

 

[wlben66]

Jamin
I knew you'd wonder about that

 

[Jack_Berry]

i been here crunching numbers on the ooida ss. using van mileage i came up with 33 cents a mile JUST for fuel. that was a gasser gm/ford. if i switch to a sprint then the price plummets to 30 cents a mile. this is based on 100k miles. a year. this is based on an operating cost of 82 cents a mile. comes up to 40%. i can't give last years numbers as i was at a desk last year at this time.

maybe some else can give real figures rather than virtual ones.

 

[terryandrene]

Jack:

I come up with greatly different numbers that you. I use the current average fuel costs at the top of this EO page of $4.33 diesel and $3.72 for gas.

A Gasoline GMC / Chevy / Ford should easily average 15 mpg so today's fuel CPM would be 24.8 cents. A 22 mpg Sprinter diesel should expect to pay 19.7 cents per mile.

I recently posted some CPM figures that may be helpful to determine the CPM for a five life of a cargo van. See http://www.expeditersonline.com/forum/general-expediter-forum/29963-cargo-van-owners-cpm.html

 

[greg334]

Now wait a minute, this is a good thing but there seems to be something missing.

1. How many cents per mile does fuel add to your total cost per mile?

2. Of your total costs per mile, what percentage is now attributable to fuel?

These are two very valid questions but are these with the FSC adjusted to the cost of fuel or does it exclude the adjustments that are made?

Remember that many operators don’t account for the FSC on loaded miles (and in FedEx’s case ‘authorized’ miles) but rather roll it into the total cost of the load and make decisions based on that compensation included. The problem with this is without adjusting the cost with a FSC program and then adjusting the remaining costs based on record keeping due to all uncompensated dh miles, non-paid loaded miles and so on, you can’t come up with an accurate number to base a real cost per mile for fuel or a percentage and everything can be construed as cheap freight at one point.

I see here is that there are two different issues involved when you use these 5 questions as part of the decision making process, one is that the load you take in a dead zone may pay for your DH to a better or more lucrative area where your chances of being loaded are quicker which for some they only see the immediate money that the load brings. And the other is if you base your decision on costs, without looking at the bigger picture with the nature of the industry in mind, you may sit longer than most waiting for those great $2 a mile loads even if there are trucks moving freight in the area you are in.

It is about moving the truck and generating revenue.

I won’t go into the details with numbers because what works for me may not work for you and I don’t want to hear I am wrong. What I have done was consult with my accountant on what I need to do, and that is the advice I give to others.

In all honestly micro accounting of things can be very good to a point but the problem is that when you get this idea that everything has to be accounted for when deciding to take a load, then you will spend more time worrying about the details of the loads you get offered than actually doing the work.

The same can be said about people who are worried about weekly revenue, which is not a good way to measure any success that one has, it should be looked at monthly (or if possible quarterly) to give a better picture of performance – which is rarely mentioned anymore.

Now there is something else that is starting to bug me and I hear from a few others who have been on the same page as I have been - the premise that people are failing because of their business skills are not up to speed is not all that factual as some want people to generally believe.

The reason I am saying this is we had a past thread where the question if this was an easy business to learn, while most of the ‘successful’ people have said it is easy, I say it is not for most. The ‘most’ of who I am speaking of are the majority of people who are not independent (own authority, or an experienced fleet owner) or specialize who demand higher rates but are the more common expediter.

Many of these expediters can be the greatest business people out there, even have successful and lucrative brick and mortar businesses but fail at expediting.

Why?

Well the majority of people in this business are completely dependent on the company to find loads and to offer those loads to them, something that a lot will not or don’t want to mention at all. Most of the time this dependency works out, but there are times that it does not work at all or the company fails to hold up its part of the relationship for what ever reason.

To add to that, there are a few companies who allow backhauls and/or access to load board(s) but outside of that they control things but that again is not the norm. The same goes for some reasoning behind what rules the companies bend or decide to apply. No company is worth its salt if it does not do things for the company first and the contractor second. As cruel as that sounds, this is all about business.

Sure there are people who don’t look at a thing, who just put gas (fuel) into the van (truck) and go. Many of them were told this is an easy thing to do, just do what they are doing and still make it. I don’t think that we should rule that anyone who does not know what it cost to move their truck is a failure, it will increase the likeliness of failure but not to the point it is an automatic - which seems to be a recurring theme for some reason lately.

As much as this sounds like a broken record, I find that the few who are the ones with all these formulas and advice with the comments about failure, may not experience things from the bottom up and don’t see where the other half lives or how they have to live. Sure enough this leads people to think that expediting is elitist, for the few and only someone with a grip on everything business can make the right decision to generate revenue but in reality some, not all don't have that struggled point of view to fall back on.

Because I am in broken record mood, my advice is simple for anyone who wants to get into this business; get professional help before you do anything else. Get an accountant and a lawyer first; learn from them first before you listen to anyone else’s business advice. They won’t make you successful but they will keep you out of trouble and give you a realistic point of view that will ground you right from the start.Tailor your business around your needs and look for a company first that fits your needs before you commit to something, even if you are going to drive for someone else. Many will say none of that is not needed, but you know once you get into trouble, it is more expensive than getting out of it.