One major mistake those just starting out make is under estimating costs and over estimating profit. There are a number of smaller expenses often over looked. While I don't think that one needs to make $2/mile to be profitable, unless you make a fair profit, you won't be able to stay in business very long. Whether you have payments or not, at some point your equipment will need to be replaced. Money should be set aside for that purpose. I don't put a load on my truck for less than a certain amount of money. There are those who will haul for much less than I will. They are like the guy I met several years ago who was hauling freight for $0.78/mile and thought he was making a killing. He didn't understand that he was going broke with every load. It has been a number of years since I have hauled for $1/mile. Fuel was about $0.80/gallon back then. From my perspective, unless I can make more money owning the truck than driving for someone, I don't see any reason to buy a truck. If you have a big truck payment your cost of operations will be higher than if you either have low or no payments. In both cases, money should still be set aside to replace your equipment or make major repairs. I have had 2 drivers work for me who lost their trucks when a major expense came along, because they failed to put money aside to take care of this type of expense. They were also running for rates that were too cheap. They made more money working for me than they did owning their own trucks.
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So 90cpm (rate) - 69cpm(cost) = 21cpm to the driver/owner :shock:
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Tires at one set of steers every 100,000 miles and one set of drives every 200,000 miles is .02 per mile. PM's at $220 every 15000 miles is .015 per miles Insurance at $8600 per year for an independent driving 100,000 miles per year is .086 per mile. Truck purchased two years old for $70,000 and sold traded in four years later for $25,000 equals depreciation of $11,250 per year or .113 per mile Interest on the loan for the truck assuming $50,000 is financed at 9% interest is .027 per mile. Fed 2290, Tag and Permits (varies by state of course( $2,400 per year or .024 per mile. We will assume you balance fuel purchases perfectly by state so no extra IFTA tax need be paid. Repairs other than PM and tires $800 per month on average per ATA is .096 per mile. If you have a newer truck or can do many repairs yourself reduce this amount. If you have an older truck or never even put in a lightbulb yourself increase this amount. Cell Phone, fax, document service, air cards, paper, postage, computer & computer software, accouting and tax service, etc. $250 per month or .025 per mile. Summary Fuel .40 Tires .02 PM's .015 Depreciation .113 Interest .027 Insurance .086 Vehicle tag and permits .024 Repairs .096 Phone, fax and other services .025 Total per mile .806 or round off to .81 per mile. Notice we have not included anything for driver pay, social security, workers comp, medicare, income tax, or health insurance. Adjust any of the above to reflect your actual situation if different. Please dont tell me this is not proper tax accounting. I have a background in economics. This is called management accounting acording to Financial Accounting Standards Board FASB rules which attempts as closely as possible to reflect real world cash events. |
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maybe some other owner but not me, I never said I ran for 90cpm only that it cost me 69cpm to run |
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So, what do you estimate the expenses at? To the original poster, I estimate truck maitenance at $10,000/year/truck. Some years it's less, but we just put a new cylinder head on a truck we bought two weeks ago. After the new head, Prestone went missing again so it's back in the shop to have the head off again. Twice in one week. I can't wait to see the bill for this. |
Nice explanation, Paul McGraw.
So if I understand. If you save from each payday, the tires,PM,Depreciation,and repairs or approx. $.25 a mile then you will always be prepared not only for the fixing but also the replacement costs. |
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This is a nice insight to what really goes on owning your own truck. The best scenario is to own a truck out right. Interest will kill ya, and after awhile, you'll feel like you are working for everyone else but yourself. all the responsibility, risk and a small reward(some will disagree about the reward part). Unlike other businesses, your truck depreciates. So, question for O/O's, why do it? |
Very few businesses get started without borrowing money from someone and they all have accounts payable. If the fact that you have interest expenses, maintenance expenses, depreciation, etc. makes you feel like you're working for everyone but yourself there's a simple explanation...you're working too cheap. Why do it? For the same reason that most businesses are started, to make a profit. Some will tell you it's about the freedom of working for yourself or being paid to be a tourist. That's all well and good but if they aren't making a profit they won't be enjoying those things very long. Not making a profit? Best find something else to do. I would.
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You are correct about most people borrowing money to start their business. However, most have money of their own to put into their venture. Business owners must be careful, especially starting out, to not over spend or over commit on monthly expenditures. If one person has a $500 monthly truck payment and another has $2,000, their cost of operations could be significantly different. That is why when we discuss operating costs that there could be differences between several different owners. There really is a difference in operating costs. Another factor to consider is the type of truck. If one buys a 379 Peterbilt and another buys a 387 Peterbilt or other type of aerodynamic truck, there could be a 20% or more difference in fuel costs. The 379 may not get more than 5-5.5 mpg, while the 387 may get 7 mpg. Over the course of a year, the costs can be significant.
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