One of the many juxtapositions in life is that to earn more money you need to have experience, but it’s hard to get experience if you can’t make money. Being an owner operator in the trucking industry is no exception. Your rate per mile will be higher once you prove that you are a dependable driver, as well as after you get all of your initial start-up costs out of the way.
What might seem like a simple question is actually loaded down with several factors. Generally speaking, you can start out with an average of $0.29 cents a mile when you first start driving and work up to around $0.45 after a few years of experience under your belt. These averages will also vary depending on what kind of freight you haul as well as where you are located. Finding where you will fall in this mix starts by writing down all of your fixed and variable expenses so that you can begin to determine how profitable you can make your trucking business.
Calculating Your Expenses
Starting with your fixed expenses, or the ones that typically don’t fluctuate each month is where you get the baseline for your budget. Some of your fixed expenses include the following.
- Truck/Trailer Payments: There is going to be a wide range of prices available when purchasing your units, but if you are first starting out it is vital that you pick quality equipment, but not so excessive that you have to work just to make the payments each month.
- Insurance: For trucking insurance you will need to carry the proper limits for Liability and Cargo insurance for your authority, and unlike company drivers, you will also need to factor in your personal health insurance expenses as well.
- Permits/Licensing Fees: If you are first starting your authority you will have quite a bit of expense in this category. Once you are an established business, maintaining will not cost as much each year. Finding a good permit agent would be a smart investment as they will know what kind of special permits you will need depending on where you will be traveling. Fines and tickets can add up quickly if you travel through an area without the proper permits and paperwork.
- Phone: If you are setting up loads with shippers, and consistently talking to brokers you are going to want to have a phone that you can rely on. Finding the right network that you can get both quality and the best price will take some research, but it is possible. You don’t want to miss a load because of poor cell service.
- Bookkeeping/Accounting Fees: This is another expense that will probably be larger when you first start out and figure out how things work in the business. There are some parts of this you may take over after you gain some experience and learn the ins and outs of being an owner operator.
The next set of expenses that you need to calculate is your variable expenses. These will fluctuate each month.
- Fuel: Filling up the tank in your tractor is what keeps your business going. While you can’t control the price of fuel there are a few steps you can take to make it stretch more per mile. You can sign up for rewards points with stations you frequently stop at. You can also watch your speed, and not idle your tractor at night.
- Maintenance: Keeping your tractor up-to-date on maintenance may take more upfront, but can improve the quality and durability of your equipment. Learning how to do oil changes, fuel filter swap outs and other small jobs yourself is one way to save in this category.
- Taxes: Many drivers that are first starting out forget to account for taxes because they are used to employers taking them out of their paychecks. A good rule-of-thumb is to go ahead and set back 25-30% of your weekly income for taxes and try to pay quarterly so that you don’t end up with a large bill to the IRS at the end of the year. Alternatively, you can pay yourself as an employee of your business with a payroll service that will deduct taxes as you go.
- Wages: As you are figuring out where you fall in the profit part of your business you can determine where is best to set your own wages. This may change each month depending on what and how often you’re hauling.
- Food & Housing: You should be able to sleep in your truck on most occasions, but if you are going to be out on the road for a long stretch of time you may want to factor in some hotel expenses to give you a break. Food and laundry expenses will also fall into this category. This section is where you have the most control when it comes to stretching your dollar the farthest. Proper planning can save you hundreds each month.
How What You Haul Impacts Your Mileage Rate
After you have figured out your fixed and variable costs, you can factor in where you could make more depending on what kind of products you haul. There will be some industries that have fixed rates that don’t give you a lot of leeway for negotiating.
If you are hauling items that are perishable this can also put some constraints on profits as you will need to get them loaded and then delivered as quickly as possible. This may force you into using more fuel and lessening your room for profits.
Factoring in if it is better to pay a broker and have them negotiate a higher-paying rate or you dealing directly with the shipper can also affect your rate per mile. Brokers may get a higher rate, but you then have to turn around and pay them for their services which could end up taking away what you thought you had gained.
Where Your Headquarters is Based
If you live in the midwest you can haul all across the country and find it pretty easy to not only find a variety of work but typically find it easier to get home, with multiple routes and loads going from one side of the country to the other. If you live on one end of the country this can affect your deadhead mileage as well as what companies might be offering loads as there are fewer options to choose from.
You will also need to determine how often you want to be out on the road. The more frequently your tires are rolling the more opportunities you have to make money. When the tractor is sitting still, it’s not costing as much, but it’s also not bringing any money in. Finding a balance between being home and being on the road will help you have the best quality of life in the trucking industry.
Whether you’re starting your own business and looking to calculate costs or a seasoned Owner Operator refining your office work through automation, Truckbase can assist you in reducing your workload, enabling you to spend more time where it matters most. Check out our services today.