Question For O/Os regarding expenses

Per mile is great for budgeting and figuring out what you need to run per mile. Best practice is to have an account balance that you feel comfortable with and stay at that level. We also have a very high line of credit that we will tape and then pay off ASAP. If the due date comes before we have it paid off we tap the reserves. Love using other peoples money free for 40-days.

 

I definitely appreciate your point of view and experience. It looks like doing it the way you, Mn, etc have chosen has it advantages. It doesn't have to be the newest or shiniest to make good money, as long as it's not a mechanical nightmare

Can I ask what kind of " breakdown reserve" or "oh crap" account you started with? Do you keep an account like that, or set a percentage aside? I'm assuming from what you said about your runs that you stay local or regional, if that's the case, if your runs were otr, would you have done it the same as far as the truck goes? Thanks for your response, and I apologize to OP if I'm hijacking, just very interested in this option.

Just so your maintenance $ post, sorry, thanks again.

 

BBB (and any others who care to reply): as far as a cpm number for a couple of years old truck like Volvodriver has done, would 17-23cpm be in the right ballpark to cover breakdown/maintenance/tires or am I missing the mark?

 

When I was running I used $.20/mile in my budget for truck and trailer. Now with someone in my truck and he is pulling a spread axle step I use $.25 in the budgeting. But have to be honest that we just have a general reserve fund for the company and really just tract actual expenses. And if a major breakdown did happen we would likely do some short-term financing on it. We get such a great return when our money is working compared to interest rates we pay it doesn't make sense for us to keep large amounts of money parked.

But would never suggest this for an independent O/O unless you are 110% certain of access to credit and a good rate. Too easy for that credit to go away.

 

So would it be fair to say that if someone was just getting started and didn't , for the sake of argument, have access to that credit line and didn't have a major issue right off the bat but did put 22 cents a mile back for those items, that person would be reasonably "safe" in that aspect? Thanks

 

If you start with a low reserve account, say 3-5k, your first few months should be dedicated to getting your maintenance account to where you feel comfortable, and then you can go on the CPM budgeting and tracking expenses. If you don't have access to lines of credit, or cheap credit cards, I'd want 15k cash on hand easy, before I stopped putting everything back into the business.

 

The problem with major repairs are that they rarely come all by themselves. For example, a few years ago I put drives on in Ontario, Oregon and when I pulled into the Pilot in Ogden UT, my clutch went out, requiring roadside service and a subsequent tow. $3,000 later including hotel, tow, etc right after I bought drives. Doing a 15,000 inframe on a 25,000 truck would require a lot of soul searching. However putting a set of steers on, blowing the motor and then putting a down payment on a newer truck could destroy a maintenance account or general fund super quick. Nothing is cheap when it comes to trucks.

Even with a paid for truck, after expenses and paying yourself what you'd make as a company driver including bennies, you'd be hard presses to be under 1.20 per real mile. The problem is, in this industry, very few know basic economics. Supply and demand is a foreign concept, much less calculating profit.

 

I bought my truck with $4000 in the bank. That's it.

Within 2 weeks, I had to put in a set of steer tires and king pins. About $2600 including the first oil change.

2 weeks later, I was looking at a $1000 APU service bill as I was totally lost finding why it would start and quit. 4 broken and corroded wires, a bad switch later, it was fixed. The killer was 5 hours of labor at $120 per hour for Thermo-King.

The night before, the dealer in Kent WA was kind enough to point out with me the "huffing" noise I was trying to figure out. Compliments of a VNT code in the computer. A bad exhaust manifold gasket. Another $1000.


That next week, I also decided to install a $450 pair of produce vents in my trailer.

Aug I had a bad trailer tire, $350, last week, because it was a different height, I scrubbed off the outside dual in about 6 weeks. I replaced the pair with a matched set with identical recap for $262.

I am setting aside about 17 cpm for maint with an additional 25% of that for daily "incidental" stuff. Washerfluids, oils, wiper blades, lights etc.

All in all, about $5000+ and it's gonna be another $1500+ to put grease seals, brakes from chambers to drum on the trailer.

I have $400 rear doors I want to replace in the next 12 months, shocks on the entire truck, another $480 (all 12 at $35-45 each)

Put together a list and then start to prioritize.

And then also plan for a catastrophic engine, tranny or diff failure as well.

But what ever you do, just peck away at all the little projects as you go. Don't be afraid to spend $1000 to repair only an exhaust manifold leak. Left long enough, it will take the EGR and the Turbo. Then you can make that $1000 manifold a $6-7000 exhaust project.

If you don't understand how to do something, talk to a mechanic and have a strong one or two shops you can work with. It's not likely that BOTH would be swamped at any given time that one or the other should be able to get you in on a moments notice.

 

I guess since I've spent a lot of time the last couple days tweaking my spreadsheets I could comment on this. Maybe the way I look at it isn't right for everybody, but I'll tell you how I figure expenses. There's a few types

I first have load specific expenses. tolls, CAT scales, permits, additional cargo insurance, or perhaps if I had to buy some 2x4's or something to brace the load. The other day I had to pay $10 to get 5 copies of the bill at the port to unload. In my spreadsheets all these expenses come directly off the gross of each load.

Secondly, I have timed expenses. Insurance, IRP, UCR, 2290, OOIDA and NASTC, drug consortium, load payment, cell phone, internet access, load boards, etc.. are all converted to cost per day and multiplied by the number of days for that quarter in my spreadsheets.

Then I have mileage expenses. Some of these can be figured precisely. My mileage and fuel data for IFTA keeps my fuel cost per mile up to date. PM's are very predictable.

So then I'm left with a few expenses that I have to estimate for now. For equipment, I have already figured in my loan payment, but I need to estimate depreciation. I figure you can buy a 300,000 mile truck for $80,000 and sell an 800,000 mile truck for $20,000; so it's $60,000/500,000= $0.12/mile. Equipment and tools is a big one for me. I 'budget' myself $8500.00 per year and my spreadsheet calculates this out to per day. That may be a lot higher than most people but I pride myself in having all the tarps, chains, wrenches, etc.. I need to do my job and this also includes like I just bought an A/C and generator for my truck. I realize I am going to spend a bundle on this stuff and have it accounted for. The last one is tires/repair. Like is noted in previous posts this is really the one that will get you in the beginning. I mean how much good does it do you if you budget $0.50 per mile but you need an engine overhaul next month ? You really just have to figure this over time but at the same time realize that that big repair can come any time and try to tighten your belt and get 20 or 30k saved up as quick as you can. I have mine figured on 10 cents per mile, but keep in mind that something like an engine overhaul is partially paid by this estimate and partially paid by the depreciation estimate.

So the way my spreadsheets work in the end is it takes my gross reciepts, subtracts the load expenses, subtracts the mileage expenses by how many miles I've run, subtracts the timed expenses by how many days into the quarter I am, and subtracts estimated expenses accordingly. I haven't really set anything up yet, but after a year or two I'll make it to adjust my estimated expenses compared to what I'm actually paying for these things.

EDIT: so I forgot to mention, but I am able to track fairly accurately my net per load, per mile, and per time (i.e.-per day, per week, per quarter, per year) whatever I want. I realize this system may not be right for everybody, but for me it does help when I'm considering changes or new opportunities. I can make accurate calculations and see if there is anything on the table which would improve what I'm doing now.