Profit per mile

We as drivers get paid by the mile not by the day or week, thats why it goes off milage pay but nomatter how you figure it up you have to set a goal

 

My ROI is .10 per mile.

 

When deciding to pick a load I will do quick calculations working on about 1.50 to the truck to make it worth my while. I'm not set on a minimuim rate. I factor in four things when selecting a load. Distance, time, weight and the biggy is always fuel. A lighter load with more miles at a lower rate can yield more profit than a heavier shorter higher paying load. The load before and what I think I can get after delivery also factors. However, to really know the numbers is to reconcile once a month. Trying to do it by the load, day to day is just too much work. Time that could be spent on load selection. I try to run on a cash positive system. Meaning I don't touch the money I'm making until the end of the month. I will take advances on fsc to front the fuel costs as that is it's purpose, but no other revenue. Thus at the end of the month you have all your revenue piled together and it gives a true representation of your mileage to revenue ratio. As you start to write the checks and the pile deminshes you really get to know where the money is going and so it's easier to identify the problem areas. Which is normally either fuel or maintenance. Everyone's rate per mile is going to be different. As we all have different truck payments, get different mpg and have access to different discounts. I'm not a load snob, if I can make money on it I'll pull it. I subscribe to the saying ' it's not what we make but what we keep'.

 

While I am new to trucking I have worked with many businesses. There is no way to put everything in a post. I would have to charge you to sit down and go throught everything. But here is my shortened free advice:
Do not ever look at anything only one way. Question everything from as many ways as possible and then try to figure out what you missed. How much would you have to get paid to flip a burger? I bet there is someone that would need more and someone that would do it for less. But why? There are many factors. Like cost of living. Would you flip a burger even if you would never get a paycheck for it? I would bet you would say, "no way." But what if you flipped burgers for a year and then would own the burger place? I have disagreed with many educated people on how to figure profit. Now always do your taxes like the IRS says. But when planning and setting prices you need to really think about all the factors. Your insurance is not by the mile. To me thinking profit by the mile is like thinking getting paid by the hour. There is nothing wrong with that at all. But you can also think about how much do I need a week, month, year, ...?

I hope that helps.

 

As a company owner you have two ways to pay yourself. The first is as an employee. This is done with before tax money in the company and helps reduce what the overall tax burden on the business. The flip side is that you owe personal income tax.

The other way is that you pay yourself a dividend as the shareholder of the business. This money is done with aftertax money from the business. I am not sure how all of the taxes work in the US but in Canada we have a different tax rate for small business dividends which are taxed at a lesser rate then income but the theory behind it is that the taxes paid to the government combined between the business and the dividend tax would be the same as straight income tax. It doesn't work out perfectly and you are slightly further ahead by paying yourself the dividend.

There are other considerations to make but at the surface this is how it works in Canada. However always consulte a tax/accounting professional.

 

Insurance, plates, financing are fixed costs because they are the same regardless of how much or how little you drive. If your truck is in the shop for half the month because the engine blew up you still have to make your payments on it. Where as your fuel costs will drop to zero. You can translate everything into a fixed or variable cost it is a conversion based on estimations and averages and not an actual variable cost.

It is hard to calculate everything on a per load basis. That is why I believe you need to really look at your expenses based on a weekly or monthly total. Know what you need per mile your variable costs plus how per day or week for your fixed costs and factor that into how long it will take to deliver the load.

I base my business on a 20 day working month. I know my fixed costs are around $500 per day per unit. The average load pays me around $1000 with variable costs of around $500 per load. I am in the cement business and the way it operates is you are profitable for 8 months of the year and hope to break even the other 4. Today is too cold so both of my trucks are sitting but they both hauled two loads yesterday so it means that what was profit to me yesterday now covers my fixed expenses today. Some weeks I will be ahead and some behind, I can't measure things on a day to day basis and on a weekly basis is still pushing it, but my average for the winter is 6 loads a week so I have one profit load and 5 to cover my expenses.

 

Dividends are taxed at a lower rate in the us, that's why Mit Romney and all the other rich people want to keep the Bush tax breaks.

 

That is what I figured but I wasn't going to try to wade through the tax code to confirm that, its already confusing enough as it is.

 

One thing that you can do is total up the miles you drove last year, and use that as a basis to work from for calculating your costs. Whether you're set up as a sole proprietorship, S corp or LLC (most flexibility for taxing entity), you need to have a grasp of your operating expenses and what you are going to need to be able to pay yourself so you don't go broke. You hopefully have money going into a separate account to pay for repairs, and a plan in place for replacing the truck and trailer at some point. You also need to understand and know your personal living expenses and an estimate on your taxes that you will need to pay to the feds and state (if you have state income taxes).

If you are set up as a sole proprietorship (NOT recommended) or LLC taxed as a partnership, you can just take a set draw per month to cover your personal living expenses and leave everything else in the business account. Two separate accounts is a MUST if one is going to be in business, no matter what the business.If you are being taxed as a sole proprietorship or partnership, you will be paying taxes on the entire amount that isn't expensed out (fuel, log books, repairs, maintenance, registration, etc). Find a good accountant to help you out the first year if you need the help understanding the tax stuff (depreciation is the one I still have some trouble with, but I'm getting there).

 

Rich people want to keep the tax cuts which they can reinvest. Middle class people want to keep the Bush tax cuts also. Would you rather your taxes go from 15% bracket to 20% bracket. So more of your money can be taken away from your trucking business. We all need some tax relief. Wouldn't you agree?