How To Make More Per Mile Starting Today!! - Part 2

In the last post, Part I of HTMMPMST!!, the topic was fixed costs and the old saying “If your wheels aren’t turning, then you aren’t earning”.  In Part 1 the examples and concept demonstrated how disciplined, steady driving can spread the fixed costs over more miles and leave you with more of the per mile pay in your pocket at the end of the day.

Part 2 will cover the areas of knowing your break even point as measured by miles.  This is critical information to know as it indicates the minimum number of miles you need to run to keep your head above water.  All miles after that, are your "in the money" miles.

The break even point involves two components of cost:  Fixed Costs (as defined in Part I) and Variable Costs.

We will need to look at these three areas to get to our break even point.

1. Fixed Costs (covered in Part I)
2. Variable Costs (calculated below into per mile costs)
3. The Two Part Formula

Variable costs are those costs that accumulate when you are on the road and include fuel, meals, motels, maintenance and any other costs you incur.

Let’s look at converting variable costs into a per mile rate

Fuel:  Let’s say your fuel costs $3.30 per gallon.  Let’s also say that you average 15 miles to the gallon.  To calculate your cost of fuel per mile, you divide $3.30 by 15 mpg = $0.22 per mile.

• Fuel Costs / Miles Per Gallon = Fuel Costs Per Mile

  Let’s say you spend $18 per day on meals (includes cooler which is smart to do), and you run 600 miles per day.  To calculate your cost of meals per mile, you divide $18 by 600 miles = $0.03 per mile.
Meals:

• Daily Meal Costs / Daily Miles Traveled = Meal Costs Per Mile

Motels:  Let’s assume a room costs you $50 a night and you need motels 3 nights a week ($150).  You get the same 600 miles per day 5 days a week (3,000 miles per week).  You take the $150 divided by the 3,000 miles = $0.05 per mile (note: we calculate weekly instead of daily because all trips do not require a motel stay and drivers won't be staying in a hotel each night).

• Weekly Motel Costs / Weekly Miles Traveled = Motel Costs Per Mile

Maintenance:  Ok – this is a slippery slope because there are so many different trucks and so many different ways drivers take care of their trucks.  Some put 10% away – actually into an account (some companies will let you add this to your escrow beyond their requirements so you have access to it for repairs).
Post a message in the comments and if there is enough interest, we'll do a post just on scheduling for maintenance costs, but for now we will include $0.05

• Several ways to calculate - we will handle maintenance separately

So far, between fuel ($0.22), meals ($0.03), motels ($0.05) and maintenance ($0.05) you have spent $0.35 per mile.  Now, since you get paid for loaded miles only, and assuming you head straight back, that means that your Variable Costs per loaded mile are $0.70 per mile ($0.35 x 2).

(note:  It is critical to understand the expense estimates in these calculations are rounded up and while actual costs obviously vary from driver to driver, these expenses are on the higher side these actual expenses among drivers)

The Two Part Calculation – Part 1, Margin

Now that we know what our variable costs per mile are expected to be, we also know what is left over to pay for our fixed costs and our living costs.

Gross Pay Per Mile – Variable Costs = Margin

$1.20          -       $0.70         = $0.50

If we get paid $1.20 per loaded mile gross, and it costs us $0.70 per loaded mile to run (our variable costs), then we have $0.50 per loaded mile left over to pay our bills (fixed costs) and that is called our Margin ($0.50 per loaded mile or $0.25 for all miles).

Two Part Calculation – Part 2, Break Even Miles

Assume your fixed business expenses include

Truck payments and insurance $1,000 per month

In order to find how many miles we need to run to cover our payments, we take our fixed costs divided by our per mile Margin.

Fixed Costs / Margin = Break Even Miles
    $1000    /    $0.25 = 4,000 miles

$1,000 divided by $0.25 = 4,000 total miles a month to break even

That comes out to 1,000 total miles each week as a break even point.

Beyond Break-Even (in other words – “payin the bills”)

Now let’s look at how much we have left over if we run like it’s a job.

If we decide to run 600 miles per day and run 5 days a week, that is 3,000 total miles (which equals 1,500 loaded miles per week).

At 3,000 total miles a week, that is 12,000 total miles a month.

Total Miles - Break Even Miles = Extra Miles

   12,000    -        4,000            =     8,000

Now to calculate how much we have left over:

Extra Loaded Miles x Loaded Margin = Profit

8,000 x $0.25 = $2,000  a month left over for other bills (Profit)

That’s left over for the house, cars, credit cards… etc.

Let’s look at these numbers in total.

12,000 total miles per month (6,000 loaded)

$1.20 per loaded mile pay

$7,200 per month gross

$86,400 per year gross

Remember that we held back $0.05 per mile for maintenance ($0.10 per loaded mile) and if you run 6,000 loaded miles per month, that equals $600 per month for maintenance or $7,200 per year.

This math is based on working 48 weeks (4 weeks per month, 12 months per year) so we have some wriggle room in the numbers.

This is an important process to know and apply to your business as a truck driver.  Just knowing this will help you manage your business to at least the break even point, but hopefully beyond that on a consistent basis.

SUMMARY:

Calculate Variable Costs (to a per mile amount)

Calculate Margin (gross pay per mile minus total variable costs per mile)

Calculate Break Even Miles (fixed costs from Part 1 divided by Margin)

Calculate Profit (Margin multiplied by all miles in excess of Break Even Miles)

Here is a profit spreadsheet provided by OOIDA.com used for small companies with heavy duty trucks (you must have Microsoft Excel).  While there are many differences between that and RV transport, there are enough similarities to be helpful.  Just fill in the amounts that apply to you and zero out any that don't apply to you.

Good luck and keep rolling!