[fl_char]

I been doing allot of reading here..Wish someone will help me figure out what my cost is for the truck prior to me even accepting a load..must be a formular to do this...thank you

[Rev.Vassago]

Your expenses fall in to two categories: Fixed and variable. Fixed expenses happen whether you haul a load with your truck or not. These include, but are not limited to, insurance, truck payment, cell phone, subscriptions, dues, internet, wages, etc.

Variable expenses only happen when the truck is moving. These include, but are not limited to, fuel, repairs, maintenance, etc.

To figure out what your costs are, you should take all your fixed expenses for the month, and divide them by the number of days per month. That will tell you what the truck costs you per day no matter what. Then, prior to accepting a load, you calculate out your variable expenses by the mile. This will give you two expense numbers: one calculated by the day, and one calculated by the mile. You can then determine if a load is paying enough to cover your expenses.

[GMAN]

It is difficult to make exact cost calculations until you have been in business for about a year. However, in addition to what Rev stated I would add a couple of things. I would count on about $0.025/mile for oil changes and pm's and $0.05/mile for tires. Some people figure maintenance costs at somewhere between $0.08-0.15/mile. If you want to check the average fuel prices the government posts those each Monday. I use 5 mpg when doing my calculations. If you get 6 mpg then you could use that to calculate your fuel costs by the mile. You will likely not be running 7 days per week. I would do my calculations on a five day work week if you are going to do some of the calculations based upon a daily rate, as suggested by Rev. Personally, I prefer to break down my costs totally by the mile. In doing mileage calculations I use an average of 10,000 miles per month. You could run more or less but this is a good average amount of miles you should be able to run in an average economy. If you want to consider the current economic situation then you could lower those to about 2,000-2,200 miles per week rather than 2,500. Remember, it is always better to figure costs at a higher rate and income at a lower rate when doing projections. If I were you I would probably use an average number of miles at 2,000-2,200 per week. It will raise your cost per mile of your operation would more reflect the current economic environment.

[Rev.Vassago]

Originally Posted by GMAN

I would do my calculations on a five day work week if you are going to do some of the calculations based upon a daily rate, as suggested by Rev.

I disagree. Doing it this way introduces an assumption that you will be operating 5 days per week, which is introducing an unknown. It is essentially the same reason I do not advocate calculating fixed costs by the mile. One can only assume what ones' future mileage will be, and past performance does not reflect future performance, especially in trucking. If you don't operate 5 days per week, then your calculations are suddenly screwed up, just like if you're not running 100,000 miles per year, your calculations get screwed up if you're calculating based on a "per mile" figure using 100,000 as the base.

By calculating by something that never changes (the calendar), it eliminates the need for speculation on how many days you will operate, just as calculating variable costs only when one is moving eliminates much of the speculation of what your variable costs will be.

If your fixed costs are $100 per day (just an even figure I'm throwing out there), and a load is going to take 3 days to run, you know that you need to earn $300 to cover your fixed costs for that load. If you had 2 days prior that you didn't earn anything, then you know you need to earn $500 to cover your fixed costs on that load. Then once you've removed your fixed costs from the revenue, you can then determine if the load will meet your variable costs, based on the projected mileage.

Calculating based on a 5 day week isn't serving any positive purpose.

n doing mileage calculations I use an average of 10,000 miles per month. You could run more or less but this is a good average amount of miles you should be able to run in an average economy.

In the past month, I've run approx. 6000 miles due to getting stuck in dead areas. If I were calculating based on 10,000 miles per month, my calculations would be 40% off. That is huge, and it certainly isn't something I could have predicted.

[GMAN]

There are times when one could get stalled in a bad area. With this economy it can be difficult to make realistic projections. If you only use a cost per day your calculations will be skewed if you sit for 2 or 3 days. Those days in which you sit should be calculated in your projections if you are going to use a daily cost factor. The travel time for a particular load may only be 2 days, but if you sit for 3 days then those costs should be included in either the load you just dropped or the one you just took. For instance, if your daily fixed costs are $100 and you sit for 3 days prior to getting your next load then you will need to account for the cost of sitting. Your fixed costs will be $300 to sit for 3 days. Unfortunately, you won't know how much sitting you will do until you start running. Fixed costs go on whether the truck moves or not. With the current economy you will do some sitting. You may not sit each week or could sit a day or more per week, depending on whether you can find a load that meets your minimum haul rate. One other expense many forget to include in their projections is the cost of a driver. It would be good to calculate the cost of hiring a driver and put them in your truck. Some just take what is left after expenses without including the cost of a driver and that is their profit.

[Rev.Vassago]

Originally Posted by GMAN

Unfortunately, you won't know how much sitting you will do until you start running.

That's why you include the days you sat prior to taking the load in the calculation. No projections needed.

[GMAN]

The op wanted to have a formula to use in calculating costs. I still think it is easier for someone starting out to break down expenses by the mile. Your miles can vary from one week to another but if you project based upon a monthly average you should get close to what your actual expenses should run. I think that if you use daily expenses by the day on some expenses it makes it more complicated for someone new to this industry. If they can break it down by the mile it makes it much easier for them to make a decision on whether a load can be profitable. This industry mostly pays by the mile. If we can break down costs by the mile then it will be much easier for someone to find their actual operating expenses. If someone only runs 20 days per month then their daily costs will be greater than if they ran 30 days, providing they ran each of those days. On the other hand, if you project that you will run 8,000 miles per month then your daily costs don't really make much difference as long as you run 8,000 during the month. You per mile costs will remain the same as long as you run the miles you projected. Granted, your per mile costs can be reduced if you run more miles since your fixed costs will be spread over more miles. I just think it is easier to calculate costs by the mile. You can adjust your operating costs based upon any change in your projections.

[Rev.Vassago]

Originally Posted by GMAN

I think that if you use daily expenses by the day on some expenses it makes it more complicated for someone new to this industry. If they can break it down by the mile it makes it much easier for them to make a decision on whether a load can be profitable. This industry mostly pays by the mile. If we can break down costs by the mile then it will be much easier for someone to find their actual operating expenses.

Once again, I disagree. It doesn't matter if loads pay by the mile. Anyone with a calculator can determine the gross revenue for a load by multiplying the miles times the rate per mile. They can then easily determine if the load will cover their expenses. If someone isn't capable of doing the basic math needed to divide your fixed costs into a daily rate, then they probably shouldn't be an O/O.

If someone only runs 20 days per month then their daily costs will be greater than if they ran 30 days, providing they ran each of those days.

Why would the amount of days you run have any effect on your fixed costs? That's why they are called FIXED COSTS. They don't change. If your fixed costs are $100 per day, they will ALWAYS be $100 per day.

If you are, however, calculating by the mile and you don't meet your mileage projections, your fixed costs per mile can suddenly change after the fact, and you won't know what they will change to until the set time period is already over, thereby limiting your ability to compensate.

On the other hand, if you project that you will run 8,000 miles per month then your daily costs don't really make much difference as long as you run 8,000 during the month. You per mile costs will remain the same as long as you run the miles you projected.

And what do you do when you don't run the 8000 miles per month? Get out the time machine and go back and alter your projections at the beginning of the month?

I just think it is easier to calculate costs by the mile. You can adjust your operating costs based upon any change in your projections.

Look, I totally understand why calculating all costs based on something variable like a per-mile rate is attractive. It's easy to do. But I will go to my deathbed insisting that FIXED costs be calculated on something that is FIXED, and VARIABLE costs be calculated on something that is VARIABLE.

[RostyC]

Originally Posted by Rev.Vassago

That's why you include the days you sat prior to taking the load in the calculation. No projections needed.

Ok, here's my question with this method, which by the way, I don't disagree with it, it makes a lot of sense, but none the less here's what popped into my head.

Fixed expenses are 10500.00 per year. (I used some my numbers off the top of my head for example only) So 10500 divided by 365 days = 28.76 per day. I'll use an example also of when your truck was damaged and went to the shop. (It's an extreme case to use I know but it can happen) Say your down three weeks. (I can't remember), that's 21 days X 28.76= $603.96

You can't get that out of the first load you run, you'll price yourself out of the market. So you must spread it out. Like I said it's extreme example but you get my point. Even three days off and you might not get a decent paying load because you need the extra money from the days off.

So do you recalculate how many days are left in the month/year and spread it out over a longer period? That could lead to a lot of refiguring over the course of a year.

[chris1]

Run YTD and carry forward.