Cost analysis for a trucking business

*(This doesn’t include any debt such as credit cards or charge accounts. This also doesn’t include any recreational toys like boats, jet skis, motorcycles, campers or R.V.s. nor does it include a 2-week paid vacation.)

Using these figures as guidelines to assess the cost of a self-sustaining business, the costs need to be combined and divided by the miles to produce a minimum cost per mile.

This figure of $2.22 per mile is the cost of operation if all miles are revenue-producing miles or loaded miles. If you include the empty miles or “deadhead” miles at a rate of 15%, that means you have to produce:

$22,150. in 8500 loaded miles = $ 2.61 per mile.

This becomes the rate per mile you need to have on your freight to average $ 2.22 per mile.

These numbers represent dollars needed to maintain a safe operation and pay a driver working 63 hours per week (if you include overtime pay, that is equal to 74.5 regular time hours a week) and driving an average of only 11 hours per day with only 6 days a week on duty. Some drivers may feel they should try to get creative with their logbook 2-3 hours in a day to accommodate wait time or down time so they can allow the most to be accomplished each day. (I want to make clear that I do not advise this practice but for the purpose of this discussion, it is important to illustrate the point). This adds another 10 hours a week. Even after that, a driver will exhaust the maximum log book hours at least once a month producing closer to 70 hours a week rather than 60. Each driver basically has to work 2 full time jobs to get credit for 1 job. If you also include another 10 hours per week of administrative duties, (finding freight, billing, paper processing, accounting, etc.) this adds another 40 hours per month. This creates 73 real time hours per week. If transportation of your own freight on your own company trucks were to be considered, you would be looking at the same numbers. By paying someone else to move the freight, you are not paying the whole bill, just the portion of the time that you use the truck, thus creating a savings on your overall transportation needs. If you think this rate is too expensive, compare this cost with the total cost of in-house transportation.

When these rates are not met there has to be a compromise on the needs of either the equipment or the driver. Which one do you cut to make up the shortage of revenue? Sometimes it’s the equipment which is evidenced by the number of “out of service” or “defective equipment” violations as recorded by the FMCSA. Other cuts are made to the driver forcing that driver to work longer hours to produce the needed revenue to support his/her family. Overtime, this pattern takes a toll on a driver’s health and often relationships suffer as well. A driver should expect to be paid for every hour he/she works. I’m sure your employees are not willing to work overtime without pay. These are the issues that law enforcement is attempting to address with new or updated ‘Hours or Service’ (HOS) rules. Tired and under experienced drivers cause accidents. Because of the seriousness of an accident with a semi-truck, every effort is being made to reduce accidents regardless of the cost to shipping.

In the industry, retirement and health benefits are usually the first to go. All the while, there are no limits to the amount of money that can be taken from the rate a customer pays to move freight before it actually gets to the driver. You as a consumer of freight services should be aware of where your freight dollars are being spent. Often times the truck and driver only receive 70% of the freight rate from the last brokered rate.

Reputable brokers will not double broker your freight. If the truck carrying your freight is a company truck, it should be leased to the broker or be an Independent trucker. Much of the freight is brokered two; three, and sometimes four times before it gets to the person moving the freight. When this happens, you are paying for more middle men and less quality on the receiving end. All of this is legal or accepted practice with no protections for the driver coming from the government. Yet the government imposes more rules and taxes on the people who can least afford it, the driver. The most effective tool you have is to tell the driver how much you paid to have the freight moved.

While these numbers may not fit your exact situation, all the numbers can be substituted with your own numbers. If you are a company driver, just use the driver portion. If you are an owner/operator that is leased to a company, adjust the expenses to fit your situation. If you have expenses not listed here, include them. The formula still works.

The regulators must realize that there is a price for safety and quality drivers. If you are paid a substandard wage, you have to take responsibility and demand a living wage. The senior drivers are retiring or taking other jobs and the newer generation has not been trained in the business of the trucking business. I think you have to ask yourself, “What are you worth?” If you were a truck driver, would you settle for a life style that offered you less than a standard living?

Expenses by Percentages

The numbers applied to the different categories have a range that is an acceptable margin of the total expenses. Because “fuel” or “energy cost” is part of just about every expense in our lives, you can use it as an “Economic Indicator” to establish the price needed to maintain a business and a personal income that is acceptable and reasonable. If energy cost go up you need to produce more revenue in order to simply maintain a standard of living.

As you break down and analyze the costs, you will see that fuel cost in the example is at 25% of the total cost. Ideal fuel cost of gross revenue should be between 18-22%. That allows for some discretionary spending such as recreational toys or vacations or any other interest you prefer. After 22% is exceeded, cuts start in the discretionary spending. At 25% cost, cuts in other areas must start being considered. Therefore 25% becomes the maximum fuel cost a trucking business can allow and still provide a reasonable living or lifestyle. I personally think hard working people should expect that. Please note the following is a list of amounts by percent from the example figures used.