By the Numbers
Knowing the cost per mile for all your expenses adds up to success.
Robert Saberhagen of Lehigh Acres, Fla., has been in the moving business 30 years, an owner-operator the past three. Leased to Bekins, he moves household goods in the summer, trade shows in the winter and a steady stream of numbers all year long.
Those numbers are his costs, his revenues and his miles. In order to manage them, Saberhagen tracks them religiously. He passes them to his accountant, who sends him more numbers in the form of monthly profit-and-loss statements. Saberhagen scrutinizes those numbers as well in order to better manage his operation. To Saberhagen, trucking is a numbers game.
“Your accounting is your No. 1 priority,” Saberhagen says. “If you don’t know where your money is going, you’re going to go broke. It’s that simple.”
Knowing your overall cost per mile and all your subsidiary costs per mile – fuel costs, maintenance costs, insurance costs, even food and drink costs – is vital to running a successful business, says Indianapolis accountant Gary Aitken, who has specialized in owner-operators for 36 years.
“It affects your operation of the truck, your payment of estimated taxes, your retirement planning – every aspect of your business,” Aitken says. “And yet, most owner-operators don’t have any idea of their cost per mile.”
Saberhagen agrees. “Most drivers don’t have a clue what their costs are, and when they do, they lie.”
Too many owner-operators just pass all their receipts to their tax preparer without studying them year-round and using the information to run their business, Aitken says.
Owner-operators who pride themselves on independence should realize that if they don’t know their cost per mile, they’re letting other people run their business. “They’re running like they work for the company, just going wherever they’re sent and not thinking about their costs,” Aitken says.
Understanding how much each run will cost, on the other hand, tells you how much profit you’ll make or whether you’ll make any profit at all. Many owner-operators use their CPM to set a target PPM, or profit per mile. If a haul won’t earn enough profit, they pass it up for a better haul.
If you know your cpm is greater in Appalachia than on the Great Plains, or greater when hauling office paper than when hauling breakfast cereal, you can select loads more wisely and make more money, even if your miles stay the same.
Realizing that your fuel cpm is creeping up faster than the price at the pump might indicate your truck needs maintenance. Better to find this out in advance by tracking costs than to find it out through a breakdown.
If you keep your truck in good condition, yet your maintenance cost per mile keeps creeping upward, it might be time to buy a new truck.