Where the money goes

What’s left for you
If you take home much less than 36 percent of your revenue, examine your records. Chances are costs are out of whack or your revenue is too low.

Also, be aware of other income variables. For example, though revenue has been similar in most types of trucking, flatbed haulers’ net income has led the pack for two years.

Those good flatbed rates are due to heavy construction in an upbeat economy and Katrina-related rebuilding, says Todd Amen of American Truck Business Services. More recently, though, that construction bubble has popped.

One big incentive to becoming an owner-operator is all that revenue. One big challenge is keeping up with where it goes. Keeping track of all costs and their share of revenue can be helpful in seeing whether any part of your operation is abnormal compared to other operators. This is useful not just for cost cutting but for making business decisions – for example, whether you can afford the $2,500 payment that would come with that new rig.

Here are four key expenses on which it’s often possible to save some serious money. The averages are based on about 15,000 leased operator clients of American Truck Business Services in Denver.

FUEL. This once accounted for about a fourth of revenue, a far cry from today’s 39 percent, says Todd Amen of ATBS. A good fuel surcharge, of course, brings that number back down, but fuel’s still the thousand-pound gorilla in the room. If you’re spending much more than 39 percent at the pump, first make sure your surcharge is adequate. Then check the major fuel savers: idling less and driving slower. After that, proper tire inflation, smooth acceleration and braking, and reduced out-of-route miles hold the most potential.

TRUCK PAYMENT. This tends to vary with the truck’s age, Amen says, but “for anything over 14 percent of revenue, you need to take a hard look.” A new truck’s note easily could exceed that, but it doesn’t have to. “You should have enough money to put down to where it will be down to around 14 percent,” he says.

PHYSICAL DAMAGE INSURANCE. Check with your agent every six months to see how much your truck’s value has dropped, Amen suggests. “If a guy buys $70,000 in physical damage insurance, and two years later he’s paying on $70,000, but it’s only worth $45,000, he’s overpaying.” Physical damage insurance should average 1.5 percent to 2 percent of revenue, though it can be more or less for a very new or very old truck.

COMMUNICATIONS. This should account for no more than 1 percent of revenue. “We see guys with $400, $800 a month cell phone bills because they don’t pay attention or they’ve got some terrible plan,” Amen says. Owner-operators can find nationwide, unlimited calling plans for under $125, he says.

The Business Manual for Owner-Operators
Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the 2021 edition of Partners in Business.
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