Dollars and Sense
4 keys to maximizing your loads
Most owner operators focus primarily on two factors when deciding which load to haul: mileage pay rate and length of haul. However, you shouldn’t care much about gross revenue, but rather how much of that revenue you get to keep after expenses.
For example, when comparing loads, most operators gravitate to the higher mileage pay and the longer length of haul. But there are more factors to consider. Here are four of the top ones:
FIXED COSTS PER DAY
Fuel is not the only major cost to consider in choosing a load. Most loads take more than one day, and you have considerable fixed costs per day that need to be accounted for. Don’t know yours? Calculate fixed cost per day by adding all operating costs incurred even if you never turn a single mile. That includes equipment payments, licenses, permits, insurance, accounting and administration fees, HVUT, etc. Divide that total by 365.
If you choose to pass up a low-paying load and sit for a day, be aware that you will lose this amount. This also means the load you eventually choose needs to pay enough to cover the fixed cost of sitting.
FUEL COST PER LANE
As I write, the average fuel cost from Los Angeles to Denver is $3.08 per gallon. Between Houston and Mobile, it’s $2.84. That means if I get 6 miles to the gallon, my fuel cost to run between Los Angeles and Denver will be 51 cents per mile. My fuel cost to run between Houston and Mobile will be 47 cents per mile.
Take that one step further and look at geography and terrain. If you average 6 mpg, then you will more than likely be able to achieve only 5.5 mpg on a run from Los Angeles to Denver, but 6.5 mpg from Houston to Mobile, all because of terrain differences. If you recalculate your cost per mile, you’re paying 56 cents per mile on the West Coast load and 43 cents per mile along the Gulf. That difference of 13 cents per mile might more than compensate for a smaller rate spread.
BACKHAUL RATE AND LOAD AVAILABILITY
Don’t base a decision just on a high rate. Check rates in the cities you will be emptying into. In a recent search, I found the range of rates for flatbed loads from Chicago to Denver was $2.01 to $2.19 per mile. The range of rates from Chicago to Dallas was $1.60 to $1.89.
A search revealed I had a choice of 129 loads out of Dallas but only 43 loads out of Denver, and rates were much better from Dallas. If you are going to a destination with little load availability, make sure you consider deadhead cost to get to the next load.
Reducing weight by 10,000 pounds will increase fuel mileage by 4 percent. If your fuel mileage is 6 mpg at 80,000 pounds, it will be 6.5 at 60,000 pounds. That’s another 4 cents per mile difference in fuel cost.
Not every one of these factors can be applied to every situation. But the more you study rates and lanes and understand how they affect bottom line profit, the better you will become at choosing the most profitable loads.
Learn more about Rutherford’s insights on this topic by visiting TruckerWebinars.com to view “Load selection for profit,” a one-hour webinar held last month
Kevin Rutherford is an accountant, small-fleet owner and the host of “Trucking Business & Beyond,” which airs on Sirius XM Radio’s Road Dog Trucking Radio. Contact Rutherford through his website, www.LetsTruck.com.