Knowing how much it costs to keep your truck (or trucks) rolling down the highway is the single most important calculation you can do for your trucking business. Yet, it’s something a lot of truckers and carriers aren’t keeping track of. Don’t be one of them!
Identifying your cost per mile helps your business by allowing you to see spending patterns and areas you can cut costs.
It means you know what a fair rate is to move a load so you don’t operate at a loss. It also helps with a business plan if you’re getting your own trucking authority.
Start by identifying the three types of expenses:
- Fixed costs: These are expenses incurred whether a truck is hauling or not. It includes things like insurance, the truck lease or loan, permits, accounting services, load board usage, etc.
- Variable costs: These are the costs of operating a truck. It includes fuel, truck maintenance and repair, meals and lodging when you’re on the road, etc. These costs vary from one month to the next, and they typically increase the more you’re running a truck (more fuel = higher costs). On the other hand, some variable expenses become less per mile as you run more miles.
- Salary: This is what you pay drivers or yourself. It will likely be your biggest expense.
Tip: Some costs, like truck maintenance and repair, are harder to calculate because they change from month to month. You may not even know you need a repair until your truck is on the side of the road! To make sure you’re prepared to cover these expenses, plan for the worst by building up a reserve in your business account. If you’re including it in your calculation of cost per mile, you won’t miss it in your salary.
Let’s begin by calculating costs incurred from the previous month. Once you get a handle on how easy the process is, you can go back as far as you want for a more in-depth analysis based on a longer period of time.
To calculate the cost per mile, you’ll need:
- All of your expense receipts for a month (fuel, food, lodging, etc.)
- All of your bills for a month (insurance, truck lease/loan, phone, etc.)
- Salary costs for a month
- Odometer readings from your truck(s) for a month
Determine the total monthly cost per mile by adding the fixed, variable, and salary costs together, then divide them by the total number of miles the truck traveled that month.
Total of expenses ÷ truck miles = Your cost per mile
You’re shooting for an area in which you are being paid more than your costs of operation. If it seems high, you may need to take on additional loads to increase your profit and help drive down the cost per mile. In general, the cost per mile decreases as the miles increase.
If increasing the miles being driven isn’t feasible, look for other ways to cut your operating costs. Instead of eating out three times a day, eat out once and rely more heavily on sandwiches and protein bars. Call your cell phone company to get your bill lowered. Reduce the amount of time you spend idling or drive 5 mph slower to save on fuel costs.
If you’re having trouble finding time to calculate or keep track of the numbers, try using an accounting software (like QuickBooks) or talk to an accountant. You have nothing to lose and everything to gain (especially in profits) by calculating your rate per mile. Do the calculations, and start using what you learn to increase your bottom line.
Calculating your cost per mile is the single most important calculation you can do for your trucking business.
Download our “Cost Per Mile” worksheet to see spending patterns and areas you can cut costs.Download Today
For additional questions and a great worksheet to get started, visit the Owner-Operator Independent Drivers Association website.
Interested in how Truckstop.com can help you and your trucking business? Check out what we have to offer!