Running a commercial rig ain’t cheap. Whether you’re an employee at a logistics firm or an independent owner / operator you’ll need to be hyper-aware of the cost of driving and maintaining your truck. Running a logistics operation can be profitable, but if you’re not on top of your costs,runaway expenses can kill a logistics business profitability nearly overnight. In this articles we’ll cover the typical costs involved with running a commercial truck, including fixed and variable costs. We’ll also share some good advice on how to save costs and ways to keep up on book keeping.
Fixed Cost Considerations
Fixed costs represent recurring expenses sustained by simply keeping your rig in service whether it’s driving or not. Typical logistics companies fixed costs include:
- Truck Payments
- Ongoing rental costs
- Licenses / Permits
By totaling these costs on an annualized basis, owners can parse the totals into monthly or weekly increments to determine the break-even point for maintaining the business. For example, it the total annual fixed costs of operation are $32,500 for a commercial rig, it takes $2708 per month or $625 per week of fixed costs to maintain the operation. Owners can then determine the net benefit of any individual run as well as the potential loss due to maintenance shutdowns or holdouts based on a more lucrative job.
Variable cost will directly fluctuate in accordance with the number of miles driven per truck. That being said, not all variable costs are created equal Many variable costs, like maintenance, will decrease per mile as the total number of driven miles increase. Fuel, on the other hand, will directly coincide with the number of miles driven and the price of fuel on the market. Typical variable costs for the logistics / trucking include:
- Fuel Taxes
- Broker Costs
Let’s take a minute and discuss the “king” of all variable costs – fuel. With all the talk of falling oil prices, fuel costs still reign supreme as the largest expense in commercial trucking, representing a whopping 35% – 40% of the TOTAL costs to operate a commercial truck. This critical cost factor can be a competitive advantage for costing a potential job if you can use more efficient diesel engine or fuels like a bio-fuel mix.
Next on the list of big costs is Maintenance. Typically representing around 7% – 10 % of total costs of operation, maintenance needs to be carefully considered and scheduled every year.
Profits / Salary for Drivers
If you own your rig, you’ll need to pay yourself with any leftover money after expenses. For business owner of logistic companies, driver have to be paid promptly for the work being done. Generally, salaries take up around 20 – 25%% of the expenses one is putting in. For businesses with a large payroll, you’ll need to understand there are multiple levels of experienced driver out there, and each one will have his or her salaries. Seasoned drivers will take more than new ones, but there are benefits in going with the experienced hand. The chances of short-term troubles (i.e. accidents) popping up with an experienced driver can make it worthwhile to foot the bill and pay more.