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What does it Cost to Run Your Trucking Company
- May 30, 2018
- Chad Boblett
I love trucking, but let's be honest: I am in this business to make money.
The only thing I like better than making money is keeping it. There are two factors that are in my control and that could destroy my business as an owner-operator: my health, and my ability to cover my expenses. (I am very health-conscious — but I'll save that story for another time.)
This blog post is about the real costs of running a trucking business as an owner-operator, based on my personal experience over seven years. Your costs won't be the same as mine, but it's important to keep track of every dollar you spend. I'm not in the business of giving financial advice, so if you want to apply some of these ideas to your own business, please talk to an accountant or another trusted advisor.
There are two kinds of costs that you need to control in trucking: fixed costs and variable costs.
Fixed Costs Are Predictable. Some Can Be Pre-Paid. Fixed costs are periodic expenses that remain more or less unchanged from month to month. The upside about fixed cost is that you can predict this number as much as a year in advance. Fixed cost is sometimes called "overhead," and I don't like it hanging over my head. So my goal is to pay off as much of that fixed cost as I can, as early as I can, at the beginning of the year. The downside of fixed cost is that you have to pay this expense whether you work or not.
Examples of fixed costs include lease payments and insurance payments on your equipment, annual license and registration fees, software, computers, cell phones, internet service, truck parking near my home, and whatever else you need to run your business. I track every expense, no matter how small. If you maintain an office, or you have employees who are on salary, employee compensation, rent, and utilities would also be counted as fixed costs.
Variable Costs Change With Activity Level, but You Can Economize.A variable cost is a cost that changes in relation to the level of activity in your business. If I don't drive my truck, almost all my variable costs disappears. Variable costs include fuel, maintenance, washouts, scale fees, and parking on the road. This is the easiest place to cut cost. For example, you can drive 55 MPH, reduce out-of-route miles, use an APU at night, or install aerodynamic gear on your trailer to help save fuel, which is one of your biggest variable costs.
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