To those that work for low rates...

I don't think anybody believes that an OO or any business owner should spend the big amount of time it would take to calculate their break-even point down to the cent. That would require a lot of time, and to some extent, would still only be an estimate as the world in which we operate is not fixed/static.

However, it would be wise for a business owner to have an accurate range for the break-even point. For example, $2-$2.40/mile.

And when a business owner doesn't have that, and further isn't able to fully itemize all of the expenses that they incur because they either don't see them or choose not to acknowledge them, then that business owner really has no reasonable idea what their operating cost is by the mile. Because of that, they would not know how much money they are really making; how much money they are truly taking home every year.

I would think many are ok with operating that way, because they find comfort in the fact that they are grossing six figures annually; that their "revenue" is six figures. But those notions can be deceptive. Their is a big difference between gross vs net.

But, I can't help but think that if they really worked their numbers, they would find that they aren't doing as well as they think they are. Perhaps, not much better than a company driver, if that.

This thread has been interesting.

I have read about drivers who have paid off equipment, claiming that they can operate really low because of it. That is also a false truth. A cost for equipment always exists, even if the equipment is paid off. While you may not have to pay for interest on the loan, or for full coverage insurance to cover damage to your equipment, you still need to set aside a fair amount for the inevitable future replacement of that truck. It won't last forever. I'm not talking about breakdowns. I'm talking about full replacement. And if you aren't doing that, then your truck is being worked for free. In essence, you need to pay your truck.

I have also read about some drivers claiming that their breakeven is above $3.00/mile, while others is about $1.50/mile. An operating-cost spread that big, for businesses that are doing the same thing, should not exist.

While every business is different, and operating costs will not be exactly the same, that spread is excessive.

I don't know what Wendy's operating cost vs ChikfilA's is, but I would be willing to bet that the spread isn't as big as the ones you all are claiming at about 66%! Somebody referenced ChikfilA vs Wendy's. Yes, they do do things better. Yes, they are busier as a result. But while that may mean that they are considerably busier than Wendy's, it doesn't mean that their operating cost would be considerably lower to the amount of 66%. Breakeven point and volume of sales are 2 different items, and not fully dependent on each other.

What I think is happening, is that those who are claiming an operating cost by the mile around $1.50, just aren't accounting for all of their expenses as holistically as are those OOs that are claiming a considerably higher operating cost by the mile.

I don't think that they are setting aside money for the replacement of their equipment in the future. I don't think that they are setting aside a worthwhile amount of money to actually pay themselves, and I don't think they are fully considering every single expense associated with their business.

I think if they were to start doing those things, they would find themselves surprised, and disappointed.

They would realize that these rates they have been content with, really are low. They would also realize that the money isn't being made to the extent they thought it was.

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And don't criticize others for being smart. For doing things right and systematically. That is the premise for idiocracy.

If you choose to not do the math, or couldn't do the math even if you wanted to, there is no reason to criticize others for doing things unlike the way you do them.

 

Thanks.

 

Hypothetically speaking, if $2.00 is your operating cost per mile (not including paying yourself), and you take a load for less than that, then you would actually be losing money every mile of that job. Sure, money will come in, but more will go out resulting in a net loss.

Hypothetically speaking, if $2.63 is your operating cost per mile including pay for yourself, and you take a load less than $2.63 but about $2.00, then that means that you are being profitable, but at a pay rate of less than $.63/mile for the driver (in this case, you).

Now if the majority of your loads are at less than $2.63, then you would be doing a disservice to yourself as you could make just as much without all of the responsibility and risk of being an OO, were you to just be a company driver. Your average pay rate for yourself would be less than that of a company driver; less than $.63.

BUT, if the majority of your loads are greater than $2.63, and occasionally you did loads that were less than $2.63, then the rates would still give you an average pay rate in excess of $.63/mile for the driver; an average pay rate that exceeds what you would make as a company driver. At that point, it makes sense to be an OO, because your pay rate for yourself would exceed what you would make as a company driver; it would be more than $.63.

 

Let me also answer the question that has yet to be asked: But how can I be losing money if I am taking money home every week? This question is directed to that hypothetical driver, that would be operating below his hypothetical operating cost per mile of $2/mile.

The answer to that question has to do with the timing of cash flow. A business may seem alright today, because it has money coming in. But, the business is going to have debts in the future. And these debts are accrued debts. Debts that are paid in arrears. In other words, some of those dollars that you may get to hold today, aren't yours. You are just a trustee, and you are supposed to save them up, so that when the time comes, you are able to cover your debt. The concept is like the IRS's taxes that we have to pay.

And what makes these debts very deceptive in trucking, is that the timeline can be very extended. It could be months, a year, or years before these "debts" will become due. But when they become due, they are due.

Further, the large amounts of cash involved in trucking on a regular basis, can make it hard to keep track too.

 

Yeah. That's it.