>>>$1.25 for all miles for an o/o ain't likely to happen though....
>>Rank, why do you say that? I'm a little confused, given your other posts on the subject of rates.
>Specialized freight. Just sayin'.
Yep. We have steps and double drops and most of our better loads wouldn't fit on a flat.

I don't know if an o/o, with only a truck and no trailer could do $1.25 for all miles.

>If all you want to earn is $0.35 per mile, there are plenty of company jobs..
True, but I get the impression that it ain't always about the money with o/o's. I think many of them would take less to be an o/o. Alot less I bet. Probably $.25.

 

Perhaps I can explain it in more simple terms:

Can you do the job without paying yourself? Can you do the job without a cell phone? Can you do the job without washing your clothes? Can you do the job without buying food?

If not, then they are EXPENSES, and should be included in your costs. It doesn't matter if you would have the same expenses as a company driver, because they are still EXPENSES. The more you include in your cost to operate, the better off you'll be, as nothing will be left to question.

I include EVERYTHING in my costs, including my mortgage, my auto payments, my family's home expenses, my utilities - EVERYTHING. That way, I know how much PROFIT I am making, and I know how much I need to earn to cover ALL MY EXPENSES.

And, to answer the original question, my fixed costs run about $291 per day, and my variable costs run about $0.71 per mile. The only costs that are not included in that are trip-specific costs, such as tolls and lumpers.

Using those figures above, I know that a trip that takes 5 days (including down time) and covers 2000 miles will have to pay me $2875 MINIMUM to cover my costs, or $1.43 per mile. Anything above that is profit. If I have any trip-specific costs (which I certainly will), they are added to that total, and then I can see if the load is worth accepting.

When you skip over expenses (including your home expenses), you aren't getting the full picture on what you need to earn to turn a profit - which should be the goal of operating a business. I know that I'm not in this business to break even - I do it to earn a PROFIT. If your projected expenses don't cover all your costs, then your profit really isn't profit.

 

I understand what you're getting at Rev, and if it works for you great, however that system seems to have a flaw. If someone is living beyond their means, they could price themselves out of the market.

Also, if your looking at cost of business you can't throw home expenses in with it, it blurs the picture. Do you put those home expenses on your business tax return? :shock:

 

If your rate doesn't cover all your expenses, including your home expenses, then it doesn't really matter what you are earning, as you will simply get deeper and deeper in the hole. If that prices you out of the market, then that is something you should know, so you can try to remedy the situation.

The difference is, that doing it the way I explained, you will know FOR A FACT how much you need to earn, rather then having to guess at how much you need to earn. It doesn't matter if your total expenses are $1.25 per mile, or $1250.00 per mile - if you aren't calculating all your expenses in, then you don't really know how much you have to earn to turn a profit.

Remember - profit is defined as "the excess of revenues over outlays in a given period of time (including depreciation and other non-cash expenses)". Outlays are defined as "An amount spent; an expenditure". Since home bills are an expenditure, and profit is considered the excess money after expenditures, then to calculate how much you need to earn to turn a profit HAS to include all expenditures.

No, I don't. But that doesn't change the fact that the expenses still exist, and must be paid each month by the money that I earn with the truck. Therefore, they should be included in calculating your fixed costs, as they need to be paid EVEN IF THE TRUCK ISN'T MOVING.

What I deduct with the IRS is irrelevant. After all, I cannot deduct my truck payments, only the interest paid on the loan, and the depreciation of the truck. Does that mean that my truck payment shouldn't be included in my costs? I can, however, deduct my home office, and all utilities for that portion of my home. Does that mean that I should include ONLY THAT PORTION of my home expenses in my costs?

 

I gotcha Rank. I didn't realize you were talking about someone just leasing a tractor to a company. I was going to say, if I got down anywhere near $1.25 it'd be time to close up shop.

Rev, I can see the logic of including those things on an individual basis. You've simply combined your personal income with your profit in order to simplify things. Hey, whatever works best for you. However, including those personal items is not proper business accounting and does not give an accurate picture as to the performance of the business when measured using generally accepted metrics. I'm familiar with your posts so I know you know this, so this is for the benefit of others. The only way to properly gauge the profitability of your business is to include a salary component. This is the only point where your business and personal financial pictures should converge. Out of that salary all personal and household expenses are paid including taxes. What's left in the business after paying a salary and all other operating expenses is your profit.

There's nothing wrong with how Rev computes his profit. But it does make it more difficult to compare because his list of expenses includes many more things, although I now he takes this into account when posting.

Someone asked what everyone's expenses were, not including salary. I can't remember if it was this thread or another one now. There's nothing wrong with this as it actually allows for a more accurate comparison of operating costs. The single largest variance in expenses will most likely be in driver compensation. I have to make alot more living where I do than I would to live in another part of the country and that's assuming that everything is equal. We all know that what one person considers a good living may be peanuts to someone else. So by eliminating driver pay when comparing costs we arrive at a much more accurate basis. Of course, that's only for comparison. You still have to include driver compensation when determining profitability.

As far as the cell phone, laundry, whatever. If the cost of those things is exactly the same whether you are in this business or not, then it's perfectly ok to leave them out of the business expenses. However, if you take a deduction, you should include them. But it won't make any difference in your profitability analysis for the following reason. I pay a $100/month cell bill. I start trucking and use my phone for business but stay within my current plan. I now claim the $100/month as a business expense. That's $100/month that I no longer have as a personal expense and therefore don't have to budget for when figuring how much to pay myself. So, I have an additional business phone expense of $100 but $100 less in salary expense. It's a wash as far as profitability is concerned.

 

your goal is to get paid enough that your cpm does not matter

 

No arguments on a 1st part, cause it's #1 priority, but "cpm" is always matter IMO!

 

I completely agree. I stopped calculating how much I got paid by the mile a long time ago. How much I get paid per day is much more important. None of the people I pay bills to charge me by the mile, so I don't calculate my revenue by the mile, just as I don't calculate my costs by the mile.

 

It is if you're deducting your whole house as your office and not just a portion, or any other household expenses not related to the business. That's what I was getting at, I see you're not though.

Do you also include monthly average for groceries in your calculations? If so you must be good with a budget.

 

I know exactly what you are saying, but I disagree.

Bills are bills, no matter whether they are for the truck or not. My earnings must cover ALL my bills, not just the truck-related ones, so they are included in my costs.

Yes, I do.