Struggling with operating cost formula!

It sounds to me like a good part of your business is non-driving time i.e. load/unload etc...

Q. how much does your truck work? Is it pretty much a full time deal? If so, 18k per year = really short trips so..... cost per mile is not really a good standard of reference. You might look at cost per hour of operation and think about your billing/profit accordingly.


A lot of small local operations in my area do it that way and rates are typically around $90/hour (for a dump truck) to about $150/hour for an RGN. One company that I used to work for ran Landolls at $105 per hour and most of the trucks ran about 25k miles per year, obviously a very localized operation.


just my $0.02

............ Jim

 

So the next question would be ...... even though it's only 91 miles, how long does the run take? That is portal to portal including load and unload time?

Then what are your expenses for each trip, inclusive (truck payment, fuel, insurance, maintenance, wages, overhead, profit, etc..)

Now you can use these figures as a comparison to your cost per mile figures to see exactly where you stand as far as profitability and charge accordingly.

.......Jim

 

so... total non-driving time per run is 3 hours. Driving time for 91 miles should be two hours allowing for traffic etc.... so 5 hours per run.

The easiest way to get your cost per hour is to take last years figures in total...... not just actual cost but everything including profit divide by the number of runs made and then you have cost per run.

Finally take the cost per run and divide by 5 (hours per run) and you will arrive at a cost per hour figure.

As long as the load/unload times remain consistent, you should be able to use the figure even if the destinations change or if you pick up a new client.

Traditionally this type of formula is used to quote a flat rate price to the customer when the load/unload and drive times are known. Based on my previous experience and what you posted with your mileage calcs... I'm guessing you'll need to charge the customer $450-$500 per run, based on 5 hours. Work your own numbers though.

Even though you should quote the price to your customer as a flat rate, if they want to try and negotiate it down, you have solid figures that show a cost of "X" per hour to operate your truck which, btw, is not your average freight truck, it is a piece of specialized equipment and should be treated accordingly.

Which brings me to one last point. Even if you are a vendor providing transportation, your trucking operation should be considered a profit making entity. Customers will want to negotiate on a basis of you getting paid to provide product and, want the transportation at a token rate. No. You have a capital expenditure for equipment and ongoing expenses to operate the equipment. You are entitled to seek a reasonable return.


sorry to be so long winded.....


........... Jim

 

No problem ........ when you get it worked out, let us know what you come up with (if you're comfortable posting the numbers) I'm kind of curious at this point.


........ Jim