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Knowing your cost per mile

Discussion in 'General Expediter Forum' started by mcclainlogis, May 25, 2008.

  1. mcclainlogis

    mcclainlogis New Recruit

    Someone, on one of my other threads, brought up the cost per mile factor.

    I thought we could start another thread and maybe discuss this issue - because to me, this is THE MOST CRITICAL step every owner of one truck or 500 trucks MUST KNOW!

    For instanance I know, that we have a sprinter that will have a cost per mile average of .67-cents per mile based upon driving 1,500 miles per week for 50 weeks.

    On the other hand, our straight truck will have a cost per mile average of $1.23 per mile based upon driving 1,500 miles per week for 50 weeks or an average of $1.13 per mile driving an average of 2,000 miles during 50 weeks.

    These figures represent truck payments, insurances, phones, permits, projected food cost, tolls, repairs, maintenance cost and all the other typical items you would use on a spread sheet to figure out these figures.

    These figures represent our cost before we pay ourself (or a driver) any salary.

    Without these figures you really do not have a grasp on what your operation is doing, weather you have one truck running under a carrier's authority or you have your own authority with several trucks.

    Do you know yours?
    :rolleyes:
     
  2. ds1450

    ds1450 New Recruit

    Good Post. I do know mine but it is amazing that most drivers do not. I try and keep it simple when I explain to drivers. Just add your fuel and divide by mileage and your cost and that is your running number, Add tolls, food, whatever and use the same formula. you would be surprised to see the faces of the guys who run 60/40 and split the FSC with an owner on how much it actually costs them to run. They think twice about accepting that 1.20 per mile load.
     
  3. LDB

    LDB Seasoned Expediter

    This has been discussed many times with good debate over what's included. I do not include food because eating isn't a cost that's only required because of being out in the truck. I do that at home too. I don't include my cell phone because I'd have it no matter what I was doing. Those costs are part of my personal budget not truck budget.
     
  4. ds1450

    ds1450 New Recruit

    Leo, my point was that you can add just about anything to calculate costs. I do not figure food... just fuel, oil, insurance, maintainance etc. I can tell you in each of the 4 categories I track what my costs are and guess what... they have all gone up a bunch ;) Have a nice holiday.
     
  5. ATeam

    ATeam Senior Member

    The obvious benefit of knowing your cost per mile is knowing your cost per mile. An additional benefit is it helps keep your eye on the ball.

    It is easy to get sidetracked with general talk about fuel prices, market trends, what other drivers are doing, what carriers are doing, etc. What may seem to be a business conversation yields no useful information at all.

    More to the point is the money you are making (or not making) relative to the money you spend to operate your truck or your fleet owner's truck. Cost per mile puts the business spotlight where it can be most useful; directly on you.

    Truck stop lunch counter visits, CB comments and telephone chats with like-minded people may provide some comfort. Taking the time and effort to calculate your cost per mile will provide the information you need to make profitable business decisions.
     
  6. greg334

    greg334 New Recruit

    Get an accountant.

    If you are going to be in this business as a business with trucks and all that, line up the professionals to advise you.

    Leo, I do include food on the road to a point and also my cell phone bill. I take a percentage of the cost of the food off the top of the total cost of food because it is far less for me to eat at home than it is on the road - the remainder is rolled into the overall operating cost of the truck. There is no need for me to have a cell phone or an air card at home, so it is rolled directly into the CPM as a needed expense.

    Now here is something that I have been asked, what do you do with those pesky accessorial fees? Are they counted against the actual operating cost of the truck or are they counted as part of the labor cost?
     
  7. terryandrene

    terryandrene Active Expediter

    Knowing your forecast CPM for an anticipated truck purchase, and your month to month CPM as you conduct your expedite business is one of the most important items needed to maintain an adequate profit margin.

    How you determine your CPM is often disputed. I don't believe the use of monthly payments alone is an accurate factor. If it was, your CPM would drop dramatically upon completion of loan payments.

    I use the cost of the truck over it's life cycle as an expediter. and for the purpose of discussion, I'll say five years and use the same 75,000 miles per year as used by mcclainlogis. A $50,000 Sprinter, financed at 6% for 5 years would have a total cost of $58,000. The Sprinter could be sold for $15,000 at the end of five years (the average price of 6 Sprinters listed in the EO classifieds). The Sprinter would have cost $43,000 or $8,600 annually, or 11.5 cents per mile. If, at some time you decide to keep the Sprinter in operation for six years, your CPM would be 9.5 cents.

    These CPM are a sharp contrast to using just payments which would be 15.5 cents for the first five years and 00.0 cents thereafter.

    Like Leo, I don't use food in my calculation because I would eat regardless. If you want to be a purist, add the difference between home cooked and restaurant cooked. Since we get a substantial tax deduction for standard meal allowance, the difference between home and restaurant isn't worth the time and effort to calculate.

    Unlike Leo. I deduct the base price of my cell phone as a must have business accessory.
     
  8. pjjjjj

    pjjjjj New Recruit

    Are you talking about the accessorial 'revenues'? The added on things? Or are you talking about a fee you get charged, an expense?
     
  9. EagleRiverWI

    EagleRiverWI New Recruit

    Last edited: May 25, 2008
  10. pjjjjj

    pjjjjj New Recruit

    I have a stupid question.
    If those 'cost per mile' or 'cents per mile' sheets are used, an expectation of miles driven must be given.
    If you're new, you won't necessarily know what to expect as far as miles offered, deadhead, etc.
    Even if you're not new, things can change..
    So how are these forms accurate?
     
  11. ratwell71

    ratwell71 New Recruit

    Add GOOD TIME MANAGEMENT.

    How does time management affect your bottom line? This is controlled by none other than the person stopping and going. This must be entered into the equation because it will vary your cost per mile. Think about it.
     
  12. terryandrene

    terryandrene Active Expediter

    pjjjjj.

    The CPM calculations are only as accurate as your last entry. In order for stay current you must frequently recalculate. People that haven't yet bought their first truck must research the industry as a whole and their preferred carrier specifically. Talk to recruiters and ask each of them for the mileage average you need to know; talk to owners of that carrier for their opinion of average mileage. You'll need to have a forecast cost per mile to know if the truck type and carrier will provide the revenues you need to maintain a profitable business.

    After you have a forecast CPM, you will continually adjust your working CPM as you develop real time figures for your particular circumstances; no two operators are likely to have identical CPM, so you need to develop your own data.
     
  13. EagleRiverWI

    EagleRiverWI New Recruit

    On the downloadable worksheet you can lower the miles used, but you also will have to subtract a percentage of fuel and maitenance (variable expenses). New people will have to estimate on some things. It is a free and interesting tool to experiment with your numbers to see how low or high miles affect your cost. Look for the Excel links on the bottom to download.
     
  14. pjjjjj

    pjjjjj New Recruit

    Thanks.
    So in effect, a real cpm can't be determined accurately until after the fact.
    How often would you adjust your figures to meet with reality? Monthly? Weekly? Quarterly?
     
  15. EagleRiverWI

    EagleRiverWI New Recruit

    You don't have to adjust your figures after a month (or week) in the business. You can use actual figures. On the OOIDA sheet you can take a month and multiply your variable costs by 12 to get your yearly totals.
     
  16. pjjjjj

    pjjjjj New Recruit

    Yes, but if things change, month to month, week to week, it makes a difference, so how often would one consider appropriate to adjust the figures to their most recent reality?
     
  17. wlben66

    wlben66 New Recruit

    PJJJJ

    As a newbe I can relate to your questions of how to figure what we don't know about the past to guess about the future.

    That's why here and other places on this forum it is said that everyone should spend some time driving for someone else before putting our foot into that new shinning cab and watching the fuel gage drop quickly.

    I would only add that the miles that Greg used at the start of this thread be used after finding them to be an average that you have experianced.

    Sometimes those miles can be less than half and once in a while you might have a week that out does those numbers by a few.

    Another number that isn't talked about much is the dead head miles. The ones that cost the most. Some carriers give DH pay after 50 miles to the pick-up and some after 100. None of them give anything for the miles that you drive to a place to wait for your next load.

    Good luck on your drive.

    w.
     
  18. ratwell71

    ratwell71 New Recruit

    You guys/gals are forgetting to factor into all this the PRESENT VALUE of MONEY. What is the value of the dollar if you are not factoring in what it is worth from day to day? If your dollar is not worth a dollar then your real cost will not be covered with just that dollar but more dollars. Because of its value today.
     
  19. ratwell71

    ratwell71 New Recruit

    Inflation - 1950 Dollar
    Worth Only 12 Cents Today
    DailyPaul.com
    11-18-7

    A dollar in 1950 will buy only 12 cents worth of goods today, 88% less than before. Inflation in my adult years increased average prices 1,000% or more:

    Example 1: a postage stamp in the 1950s cost 3 cents; today's cost is 41 cents - 1,266% inflation

    Example 2: a gallon of 90 Octane full-service gasoline cost 18 cents before; today it is $3.05 for self-service - 1,870 % inflation

    Example 3: a house in 1959 cost $14,100; today's median price is $213,000 - 1,400% inflation

    Example 4: a dental crown used to cost $40; today it's $1,100 - 2,750% inflation

    Example 5: an ice cream cone in 1950 cost 5 cents; today its $2.50 - 4,900% inflation

    Example 6: monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $93.50 - 1,664% inflation; (and up 70% past 5 years)

    Example 7: several generations ago a person worked 1.4 months per year to pay for government; he now works 5 months.


    Inflation. You must take into account the real costs involved by considering inflation. How is inflation created? Our gov't spending what it does not have and in turn the Fed. Reserve inflating our money supply which in turn devalues our wonderful dollar. Which is worth what in present value terms? NOT MUCH... So you have to work harder for what you believe to be a dollar value which is buying less.
     
  20. Moot

    Moot Expert Expediter

    Rantwell, in your haste to cut and paste you forgot one very important statistic that would put your little piece into prospective. Maybe you should re-read your last post and add an example #8. Of course then it wouldn't be much of a rant; well would it?
     
    Last edited: May 25, 2008

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