This is something that's been bugging me, as I've been thinking about getting a truck sometime in my future.
Why does everyone only seem to have a single cpm break even point, and no other way of figuring what they need to make?
The way I see it (and I could easily be wrong) is that this cpm break even point would only be relevant if you run a consistant amount of miles every week. Many of these costs (truck payment, insurance, tags, etc.) are fixed and don't care if the truck moves or not. The other costs do relate to the truck moving (fuel, maintenance, etc.), but would also have very small relations to sitting if there is idle time involved. Simplified, your break even cpm is going to be very different if you drive 500 miles a week vs. 3000.
At least, that's the way I'm seeing it, and would appreciate someone explaining things to me if I am wrong.
Now, in my mind I'm thinking that you need to start with a cost per month on your fixed costs, then break that down to a daily amount. What you end up with at that point is a dollar amount that you have to make if that truck doesn't move an inch.
Next you would have to figure out what it costs to move the truck. This would not take into consideration any of your fixed costs, like most people add into their cpm figures.
Now, when you look for a load you look for something that covers your cpm for however many miles you'd be driving, then just add your daily rate to it for however many days it will take to get your break even. You could add drivers pay to either of these figures, depending on how you want to pay yourself.
Just to make it easy, using numbers that have no basis in reality other than just trying to make the math easy, let's make an example where you need to make $100 per day and $1 per mile. On a 100 mile load you would need to make your $100 fixed, plus $100 to cover your cpm for a total of $200 or $2 per mile. But, with a 1000 mile run over two days you'd need two days of fixed costs at $200, plus $1000 worth of cpm costs, so your break even on this run would be $1200 or $1.20 cpm.
Like I said, I have no experience as an owner/op and do not present my ideas to have any relationship to fact. This is just what's going through my head and I'm curious as to if it makes sense to anyone else.
Why cpm?
Discussion in 'Ask An Owner Operator' started by davenjeip, Jul 30, 2010.
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I treat the truck as it's own profit center
If I don't work very hard my CPM goes up
If I buy tires the CPM goes up.You get the idea
I don't change my rates based on the current CPM
All my cost are in my CPM including the wage I pay myself
CPM lets me know if I'm flying or falling
There are many ways to measure profitability
CPM works for me
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