Working the numbers!!!

First off, kudos for "working the numbers" before making a commitment. May I offer a few suggestions.....

- Start with calculating Revenue, then pull out the expenses to see what is left over. If this is a "per mile" arrangement use that number as your base point for calculating that segment of pay. If it's a percentage arrangement, you still need to bring it back to "per mile" for projections. Be sure to address D/H miles....how many on average, are they paid? If "yes", what's the compensation structure for D/H miles? Be sure to account for D/H miles as they'll certainly affect your numbers overall in actual $$$ and "per mile". Any additional Revenue (detention, stops, etc.)? Bonus payment? Strive to hit a weekly revenue number that is in line with the miles based on as much factual information as possible. For annual calculations, I'd advise weekly revenue x 48 weeks to allow for at least 4 x weeks of downtime.
- FSC: Will vary according to fuel price, and your fuel price will obviously vary as well. Don't have a crystal ball so use today's numbers and over time FSC and fuel CPG should balance out.
- Fixed Expenses: They don't take time off so take your weekly x 52. If you haven't done it already, break them out by line item....truck, tags, permits, different types of insurance, escrows, all recurring weekly deductions that are going to hit you even if the truck doesn't move an inch. Just as you've done, add 'em up and calculate your "per mile". Fixed Expense CPM will vary depending on how many miles are run.
- Variable Expenses: Those expenses that are mostly affected by the amount of miles run, with the biggest two by far being Fuel and Maint/Repairs. I'd be cautious about 7 MPG in projections. Project conservatively, say 6.3 MPG to give yourself some cushion....Then knock it out of the park with 7 MPG+. Use current average fuel costs for CPG. You can be conservative there as well. Daily average CPG with/without tax can be found on the OOIDA website. You've got the calc to convert MPG to CPM nailed in your original post. In real life, .39/mile is realistic for $2.60/gal at 6.6 MPG. With newer trucks, I'd be conservative and go .12 - .14/mile. Emissions related stuff has driven up maintenance costs. Consider all possible variable expenses including things like office supplies, hotels, truck supplies, etc. Add up your variable expenses and calculate CPM.

In simple terms....Revenue - Expenses = Income Before Taxes/Miles = Net Pay Per Mile
Look at your weekly projection, and also look at your annual projection to see the impact of Fixed Expenses when Revenue is not earned all 52 weeks.

Be sure to consider your tax reserves.

 

Friendly reminders: Taxes will be due quarterly. Don't forget to file.

I would adjust your fuel down as said above. Also, many companies now run FSC as an adjustment so you pay X amount at 6.5 mpg. Get the skinny on that from your company.

As far as being careful on maintenance goes - I'm with you little brother, but that isn't how it will go down. As a new truck it will be under warranty. As such, when you have a problem they have a warranty check list to go down, replacing parts as they go. The leasing company is going to side with the manufacturer on that and you're going to wind up paddling against the tide sometimes. Check with your mechanic buddies, if they're working in a manufacturer's shop, they can give you a good idea how that works.

Overall, looks like you're doing a great job running the numbers and coming up with a business plan. Make sure you have plenty of available capital for a rainy day, keep that business attitude and you'll do just fine.

 

You did the numbers right. Only thing I have is to separate out the fuel from your fixed costs-- fuel is a variable.

So you multiply your fixed costs (including all bills at home and salary) into a yearly number (x52 weeks)

Work your variable numbers into a 40 week deal. So basically you need to earn in 40 weeks enough to cover 52 weeks worth of expenses.

Anything business related would be a write off against the 52 week fixed cost number and remember per diem write off. Lease payments can be written off too. Taxes shouldn't be too bad first few years. This is the time to max out your IRA and solo 401k.

 

Your break even amount is really high.
I'd consider elsewhere. My weekly fixed cost is $400. Total. Granted it's an older truck but , I'd be scared of an overhead so high I can't take a week off now and then.
Good luck!

 

It sounds like you have a fantastic plan for your business and future. Giving you friendly advice on rethinking not only a brand new truck but a lease purchase as well isn't being negative, it's saying hey there are a lot of factual info why most people fail at these kind of deals. Think in this, I leased a 2007 freightliner classic xl with a pre emissions Detroit series 60 with a single over 13 behind it. Now with a slightly older truck I'm almost guaranteed to be more profitable then someone who leased a brand new truck. Less down time, lower maintenance costs and most importantly way better mpg. Every 1mpg is an estimated $10000 in fuel a year so right now my 30 day average is 7.77mpg that's 29cpm. I drive 58 mph in 12th gear. When you buy a truck or lease one, you need to do everything possible to put the odds in your favor and frankly I don't and there are a lot of other people who don't think it's a smart business plan to lease a truck with all the facts laid out in front of you. Problems with new emission trucks vs pre emission trucks are 100 to1. I would get on fb and join some groups like "mpg master" and "9 mpg". Ask them the same questions you have laid out here. Call ten shops across the U.S. and ask what they think about the new emission engines. I guarantee you most of them will say don't buy one. I hope you do some serious thinking on what your about to do for your business and future. I think you have a great business plan, you seam extremely smart and, determined. So take that potential and put all the odds in your favor.