Your operating cost per mile?

You didn't get what I meant. My cost per mile of my lease varies. I am well aware that it is a fixed cost. My $1300 lease payment with 5200 miles equals around .25 per mile. The same payment over 6900 miles results in a .18 per mile lease cost.

 

Thanks to the OP for posting this thread. I've been trying to wrap my mind around this question as well. Here's what I've been thinking, using $4 / gallon and 6 mpg:

$0.67 / mile - fuel
$0.13 / mile - maintenance
$0.20 to $0.30 / mile - depreciation or replacement *
$0.50 / mile - salary (don't forget to pay yourself)
$0.10 / mile - insurance
$0.10 / mile - permits, fees, misc

$1.70 to $1.90 per mile total

* To buy a truck every 3 years.

Does this seem like it is in the ballpark? Seems like some of the more experienced O/O's on this board are talking in terms of needing to cover $2.00 per mile at a minimum in order to accept a load. At $3.00 per mile you are making a profit (over and above paying yourself a salary or $/mile).

I know I forgot taxes, medical insurance, 401K, etc. as well....

 

Then you are NOT grasping what a FIXED overhead cost is.

Your cost is FIXED at $1300 PER month. End of calculation. Your mileage VARIES every month. It will never change the amount of your lease payment so it is NOT dependent on that EVER.

Same with your salary, insurance, phone, load board and other fixed expenses.

That is so drilled into you in accounting 101 you can never forget it.

And this is where I personally think SO MANY O/O's really screw themselves. They are SOOOO set on basing everything off of mileage. You are doing NOTHING at that point but setting yourself up for failure.

Maximize revenue and minimize variable expenses.

Is it better to run 600 miles a day and make $1000 revenue or 300 miles a day and get $780 revenue?

Because what you are telling me is it's better to run MORE miles to have them reduce your lease cost over a larger revenue base. And that's wrong.

You lease (Fixed costs) is STILL going to cost you the same whether you move that truck or not.

But you just saved yourself $x.xx dollars (fuel and maintenance variable expense that day just sitting there. On a "typical" truck, that might be $370 if you average 500 miles a day and $0.74 cpm for fuel and maint)

Myself, I "work" 19 days a month. I have ~$5500 in FIXED expenses That means to me, it's costing me about $290 per day just to have that truck. If I sit in a truckstop some place for a day, I still spent $290 I HAVE to earn some how to cover that expense. I can sit all month. I STILL have to earn that $5500 to cover my expenses. Drive 1 mile, that mile cost me $0.74. Nothing else.

 

You have to know both your cost per mile AND your fixed cost. I figure mine per day on the fixed cost and also have a rough CPM figure based on the miles I expect to run. If I run more miles I know it will increase my variable cost and reduce my fixed cost per mile. My CPM is about $1.18 give or take BEFORE I pay myself and the cost per day is similar to MN Driver - roughly $250ish. So I guess my point would be that it's not always about per mile rates - you have to figure out if you actually made any money today. Doesn't do me any good to haul a $300/100 mile load today if I can't do something else or position to a great load tomorrow.

 

I've always felt like a cost per day was a useless number that hindered the way I operated. If you think you have to meet that number daily and work to do that you'll quickly find yourself at the mercy of whatever is out here. I don't even have a weekly minimum, it has the same affect. As long as I meet a minimum monthly goal, in my case $10K gross revenue on as few miles as possible, everything else falls into place. Anything above $10K is gravy but we can do ok on that minimum, it's also attainable. And sitting here looking at the fact I have not rolled already for 4 days into June I am not worried at all. There is still ample time in the month and $10K is normally easy to swing. If I had daily or weekly minimums I'd be really frustrated, almost every week. Granted those 4 days have all been at home. Were I out on the road it would really be aggravating to sit for 4 days and not have anything to show for it. Ideally one wants to maximize what they do while they are on the road, making every dollar possible, not putting themselves in a bad kind of way. Home time is just that, home time, a bonus, sure it costs that truck to sit but you make it count when you do roll.. ...and then you are not at the mercy of anyone or thing...

 

I started, that "daily" number was important. It's not anymore. It's more for figuring out what's realistic to charge for a load.

But you are correct, so long as the big number is covered at the end of the month and the miles are minimized, the rest is golden.

 

A daily number is still somewhat important as it will give you what it costs you every day that truck sits idle. That is an important number to know IMO. If it costs you $200/day for your truck just to sit idle you don't want to be hauling a load for $500 once you factor in fuel your you won't cover much of anything unless its short haul and you can run 2 or 3 of those loads in a day. Although its not as important as knowing the total cost of your business operation its still a nice number to know at least for me personally.

 

I've had $500 gross days. I wasn't exactly jumping for the clouds like the folks in the Toyota commercial but it happens. In the big picture I didn't lose out. That day or load always hooked into another and another.... Some days you pull a thousand, 1500, or sometimes even 2000. Some days you may only pull 500, doesn't mean you lost money that day. It's all about the averages over time..

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80k miles a year? Is it a hobby?

 

Seems that way!!! I'm only at 22,000 miles so far this year so I'm way under that 80,000/mi mark