Rates go up and down. Fuel costs spike. Insurance gets higher every year.
Trucking also costs a lot of money to start and run day-to-day. Repair bills are astronomical.
It can seem like things need to be complicated to make any money in this business.
But you don’t need to be fancy to turn a profit.
Simple rules are easy to follow, especially if you are new to the business.
So let’s get to it.
Knowing your costs per mile lets you easily compare it with load rates to make sure you are earning enough.
Calculating cost per mile can be a bit tricky since you have to take into account fixed and variable costs and there’s a lot of categories to add up.
You also have to think about what might happen in the next couple years instead of right now. Your truck will get older and have more miles on it, and that needs to be figured in.
To make this easier for you, I’ve built a calculator tool to help you add them all up.
The calculator helps you gather all the numbers you need to figure out your cost per mile.
It will also help you figure in future repairs that may not happen this year but still need to be saved for now.
Then it will show you a range of cost per mile numbers in case the number of miles you run change or the price of fuel changes.
Here’s the Cost Per Mile Calculator.
It’s also helpful to update your calculations periodically to make sure you aren’t bidding and accepting loads using old numbers that are too low.
Once you have your costs per mile figured out, this is the important next step.
Make sure you are hauling loads that pay above your cost per mile.
I know that sometimes you don’t have a choice and have to take a cheap backhaul or avoid a deadhead, but you really need to focus on this to make sure your average revenue per mile ends up above your average costs per mile.
If your average revenue per mile consistently stays below your costs, then you aren’t profitable.
Even if it takes a year or two and a breakdown to find out.
If you are struggling to find freight you can haul for more than your costs allow, or just want to earn more, there are some ways to move up the revenue ladder.
Some of these methods may be easier if you have more experience in trucking or have more experienced drivers.
If you plan ahead the new revenue can outweigh the costs and increase your profits.
Growing revenue isn’t the only way to improve the bottom line, and in some cases cutting costs can be faster and more effective.
Trucking is typically a low margin business so that means you will spend almost every dollar you earn.
Here are some ways to lower your costs:
Some of my most costly decisions have been made to pinch pennies because I didn’t have enough cash on hand.
This can happen a lot of ways.
Stretch your tires out a little too much and have a blowout.
Push off a repair a little too long and have a breakdown. Then you’re out a tow bill and somehow you’re lucky enough to find the most expensive shop in the country.
Pay for your insurance monthly instead of getting the annual discount.
Put expenses on your credit card that you can’t pay off right away.
If you have cash on hand, you don’t have to make these tradeoffs. You can make the smart investment when you need to and save the over charges and headaches.
This is related to saving a cash buffer, but it’s so important it needs its own section.
You’ve got to save up for future maintenance and repairs. Especially the big ones.
The best time to start saving for an engine overhaul is 4 years ago.
The easiest way to make sure you are saving up for maintenance and repairs is budget for it and regularly sock money away in a separate bank account. A maintenance and repair budget typically runs between $0.10-$0.15 per mile, depending on the age of your truck and type of motor.
If you are leased on to a company, a lot of them will let you automatically deduct this from your settlements. If you don’t have this option, you should do it yourself.
Once the money is in the separate account, keep it there until you need it for maintenance costs. Don’t clear it out at the end of the year, save it until you need it.
This one doesn’t really affect your profitability, but it can definitely affect your peace of mind.
Nothing stings worse than Tax Time rolling around and you have to part ways with a big chunk of your savings account.
Even though you know it’s coming and it happens every year. It still hurts.
If you take a similar approach to the maintenance account and sock away 25-30% of your income into a special savings account, it helps once it’s time to pay the tax bill.
It never touches your “real” savings account so you always know it’s already money spent.
It still hurts but just not as much.
That’s it for now. I hope these tips help or spark your own ideas for improving your trucking business.
My name is Jason Forrest, and I’m the creator of Rigbooks. Rigbooks is a cloud-based software that makes it easier for small and medium-sized trucking companies run their business while keeping organized. We’ve been around since 2010.
A little about me: I grew up in a trucking family and from an early age I learned about the day-to-day problems that truck owner/operators have to deal with. I was into computers and programming as a kid so over the years I helped write small computer programs that helped my parents run their company better. Eventually that led to the idea of putting all those tools together in one package. And Rigbooks was born.
Should you get a new or used truck? We put together this article to help you decide if buying an 18 wheeler is a good investment.
The average independent owner-operator works at a 5% profit margin—not including salary. What does that mean? And how can you estimate yours?
To calculate your cost per mile, simply divide your total expenses by your total miles. Want examples? Click to see what this looks like.
Guide on how to start a trucking business as an owner operator, including getting paid, expected costs, and more.
If you're considering buying a new Semi Truck vs a used one, here's a quick breakdown of the pros and cons of each.