I posted this on another website(
www.kevononxm.com) but thought I'd post it here too:
I want to have a constructive debate regarding this formerly "hot topic".
First, the numbers:
Average yearly profit in CPM of owner operators 45 CPM
Average fuel mileage 6 mpg.
Average fuel price of $2.24 per gallon
I'm guessing at these numbers, but I remember seeing the profit in a magazine, straight from ATBS. It was around there.
Now let's make him an "above average" owner operator. Suddenly he averages 7.5 mpg:
37 cpm for the 6 mpg driver
30 cpm for the 7.5 mpg driver
A difference of 7 CPM. Let's add a couple more "differences" and push it up to 10 CPM. Say he extends oil drains, and does some work himself.
So the "average" o/o makes a profit of 45 CPM, and the above average makes a profit of 55 cpm. Now let's compare that to a company driver. I'd say the average company driver makes about 45 cpm including all benefits.
Do we feel that the increased financial risk, essentially zero job security(most o/o contracts I've seen have a 30 day "either party can cancel" clause) is worth 0-10 CPM? I don't think it is.
Now get ready for this. I'm going to toss a nice number out there. I feel most o/o's should profit somewhere in the range of 80-100 CPM. Considering our increased financial risk and complete lack of job security, this isn't out of the question. Especially if one has a paid off truck and gets good fuel mileage. In our current "average" or "above average" situation this kind of profit is almost impossible.
That's where increased revenue comes in. Open any o/o recruiting magazine and you'll notice a huge variation of pay, from 85 CPM + FSC all the way up to 85% etc...
So to me, cutting costs is always easy. But I feel it is not very rewarding. The "tough" part of making that extra 30-40 CPM is always increasing your revenue. That may mean searching for the "perfect job". When I was laid off in October, I spent about 5-6 weeks looking for a new job. I simply didn't want to work for a buck a mile plus FSC any more. I found that job and it pays better then any other job I've had in my life. Even during this so called "recession"!
So what do you folks think?
That's not to say that cost cutting will help anyone save money. Of course it will. It's just that you hit a wall very quickly. After that, you simply have to focus on revenue. My truck averaged 7.7 mpg in 4th quarter 08, is paid off and I do about 95% of the work on the truck. Where else can I cut cost?
Of course the best businesses out there always focus on BOTH sides of the spectrum. Having the largest spread between "cost" and "revenue" equals the largest amount of profit!