Friday, July 9, 2010
WHAT, you do not know what a break-even point is?
Listen guys and gals, two points to make here: first, if you own a truck or are leased you are running a business, so what if it is on wheels. Second, if you don't know how to run your business and can't even answer a simple question like, "what is your break-even point," you will fail at your business. I bet those guys that you keep complaining about for depressed rates know what their break-even point is.
Why am I complaining? Because, since I got benched due to my need for insulin, I have been trying my hand at finding loads for you clowns. Now I know why brokers hate drivers as much as drivers hate brokers.
Let's start with some basic economics 101. Total earned dollars, minus cost. equals profit.
What I mean is, if a 1000 mile run pays you $1000 dollars, and your cost for those two days is $800.00, then you made $100.00 per day for two days. That's obviously $1.00 a mile or $55 dollars an hour gross pay. Your net pay is 20 cents per mile, or $11.00 an hour. You get to work 11 hours a day, so you get to make 121.00 dollars a day to put in your pocket and spend any way you want. Your break-even point on this load is 80 cents a mile.
Since I don't want to make this a book right now, I am going to focus on your break-even point.
What are your costs?
* Truck Payment
* Miscellaneous, like tolls
* Taxes and permits
These costs are further broken down into two categories: fixed cost and non-fixed cost.
In the fixed cost category you will have your truck payment, insurance, maintenance and any other expense that does not change no matter what.
In the non-fixed cost goes everything else except showers, food and drink, and non-breakdown hotels. These items come out of your profit, and to some degree, are returned to you through your per Diem at the end of the year with the taxman.
Break-down cost are difficult to determine since none of us have a crystal ball, but they must be planned for, The same goes for tires. Take your best educated guess.
Now, take all of your projected costs, averaged out over the year, and add them together.
Next determine how many days in one year you will definitely not be working, and don't forget your 34 hour restarts.
Take that number and subtract it from 365. The result is the number of days you will be available for work.
Divide the total amount of your projected costs for the year by the number of days you expect to work, and you have the minimum dollars per day that you need to break-even. To calculate your daily cost to a cost per miles, divide it by 605 miles (the average miles you can drive per day at 55 m.p.h. legally), and you get your break-even point. Any dollar amount over this is your profit.
Let's say you have determined that your real costs are about $1.10 per mile. If your broker offers you a load at $1.40 a mile, you now know that you will make a profit of $0.30 per mile, or $16.50 an hour. That is a good wage when compared to other businesses or an hourly wage employee.
But let me show you something you may not have considered. If you refuse that load and wait another day for a better paying load, you just lost $665.55, and for what, another 0.10 cents a mile or $ 66.50 a day? That extra day waiting lost you a real $599.00. Do you think you can make that up during the year? Maybe, if you give up one of your home time days. You see, your costs continue even if you don't work.
I know some of you will say that sitting idle doesn't use as much fuel as running. That, is true, but your fixed costs remain the same no matter what, and that is what your real costs are when you refuse a load.
The bottom line is to know what your break-even cost is so you can make smart business decisions and not lose your butt by sitting on it when you could be working.
O.O.I.D.A. has some great tools and links to help you figure these things out, find them here: http://www.ooida.com/
If you know someone thinking about driving truck for a living, tell him or her about my book. It covers the basics very well and even helps them to evaluate themselves to determine if they would like driving truck for a living. You can check it out here, Be A Truck Driver.
Leslie R Auger has driven Big Rigs of all kinds for the past 16 years.
Posted by Leslie R Auger at 8:29 PM