The trucking market might be booming, but just owning a trucking company isn’t enough to keep you in business. As an entrepreneur, you always have to look at the bottom line and make sure that your costs are managed effectively enough to provide a profit. To really know understand how much you’re making, it’s important to look at the cost per mile. Calculating this figure isn’t complicated, but you do need to have all the expenses of your business at your fingertips. It’s recommended that you use a software program to track your finances for best results. There are three categories of expenses to track.
Categories of Expenses to Calculate
Fixed costs are the payments you make each month no matter what the trucks are doing. Even when trucks are just sitting in the parking lot, you have to pay insurance, rent or mortgage, permits, and utilities.
Variable costs are the operating expenses of your business. Fuel, maintenance, meals, and repairs are costs that vary from month to month. The more you drive, the more these costs go up.
Salaries are the third category of expenses. In many businesses, salaries are often the largest expense your trucking company has. This includes the driver’s salaries, but it could also include any support staff you keep on payroll.
Calculating Cost Per Mile
Once you have the total expense for your trucking company for a certain time frame, maybe a month, you need to know how many miles were driven during the same time frame. Add up the fixed costs, variable costs and salaries. Divide that number by the number of miles. The answer is your cost per mile.
Using this figure, you can identify spending patterns and places where you may want to cut back. You may also find ways to increase your revenue, possibly taking on more work, which does increase variable costs, but not fixed costs. This does increase your bottom line. Do the math and find out for yourself.