Cost-Per-Mile Calculator
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Calculate Your Cost-Per-Mile
Knowing your cost-per-mile is crucial for running a profitable trucking business. It helps you set competitive rates, track expenses, and make informed decisions about your operations.
To help you get started, we’ve compiled a comprehensive list of common trucking expenses and created a user-friendly cost-per-mile calculator. This tool allows you to input your own numbers and get an accurate picture of your operating costs.
Remember, understanding your cost-per-mile is just one piece of the puzzle. At CTC Ground, we’re dedicated to supporting your trucking success.
Maximize Your Trucking Profits With Our Help
Understanding your cost-per-mile is essential for success in the trucking industry. We can help you optimize your operations and boost your bottom line by handling the paperwork and administrative burdens that drain your time and resources.
Why Knowing Your Cost-Per-Mile Is Crucial for Trucking Success
In the trucking industry, understanding your cost-per-mile is like having a financial compass. It guides your business decisions, helps you set competitive rates, and ultimately determines your profitability.
But what exactly is cost-per-mile, and why is it so important? Simply put, it’s the total cost of operating your truck divided by the number of miles driven. This key metric reveals how much it costs you to run your business for every mile on the road.
Why is this number so crucial?
- Profitability: Accurately calculating your cost-per-mile ensures you’re charging enough for your services to cover expenses and make a profit.
- Pricing: Knowing your cost-per-mile helps you set competitive rates that attract customers while ensuring you’re not underselling yourself.
- Efficiency: Tracking your cost-per-mile helps identify areas where you can reduce expenses and improve your overall efficiency.
- Informed decision-making: Whether you’re considering purchasing a new truck, hiring a driver, or taking on a new route, understanding your cost-per-mile empowers you to make informed business decisions.
Calculating Your Cost-Per-Mile:
There are different approaches to calculating your cost-per-mile, each with varying levels of complexity and detail. We’ll explore three methods: good, better, and best, using a real-world example from Road Runner Transport’ first three months of operation, covering 29,417 miles.
The "Good" Method: A Simple Way to Calculate Your Trucking Cost-Per-Mile
Let’s start with the simplest way to calculate your cost-per-mile. This method gives you a general idea of your operating costs and is a great starting point for understanding your business’s financial health.
How it works:
- Gather your financial data: You’ll need your profit and loss (P&L) statement, which summarizes your income and expenses over a specific period. If you don’t have a P&L statement (you really should!), simply add up all your trucking expenses for a given period.
- Calculate total miles: Determine the total number of miles you drove during the same period.
- Divide and conquer: Divide your total expenses by your total miles driven. This gives you your cost-per-mile.
Example:
Let’s say your total expenses for the last quarter were $47,655.54, and you drove 29,417 miles.
Your cost-per-mile would be: $47,655.54 / 29,417 miles = $1.62 per mile
Important Note: While this method provides a quick estimate, it’s not the most accurate. Here’s why:
- Reimbursed expenses: Some expenses, like lumper fees, are reimbursed, meaning they don’t represent a true cost to your business.
- Incomplete accounting: Certain expenses, such as truck payments, might not be fully reflected on your P&L statement.
Despite its limitations, this simple calculation offers a valuable starting point for understanding your cost-per-mile and can help you make more informed decisions about your trucking business.
The "Better" Cost-Per-Mile Method: Level Up Your Trucking Finances
While the “good” method provides a basic understanding of your cost-per-mile, a more detailed approach gives you a clearer picture of your expenses and helps you identify areas for improvement. This “better” method involves breaking down your costs into individual categories.
Here’s how it works:
- Itemize your expenses: Instead of lumping all your expenses together, list each one separately. This includes everything from driver pay and fuel to insurance, truck payments, and maintenance.
- Calculate cost-per-mile for each category: Divide each expense by your total miles driven to determine its cost-per-mile contribution.
Example:
Let’s break down the costs for a hypothetical trucking business, “Road Runner Transport,” over a three-month period:
| Category | Calculation | Cost-per-mile |
|---|---|---|
|
Driver pay
|
$12,618.92/29,417 |
$0.43 |
|
Fuel |
$14,962.54/29,417 |
$0.51 |
|
Truck insurance |
$4,524.85/29,417 |
$0.15 |
|
Worker’s compensation insurance |
$376.23/29,417 |
$0.01 |
|
Truck payment |
$1,345.01/29,417 |
$0.05 |
|
Trailer payment |
$815.01/29,417 |
$0.03 |
|
Dispatch/factoring |
$5,415.51/29,417 |
$0.18 |
|
Maintenance and repairs |
$3,787.40/29,417 |
$0.13 |
|
IRP |
$376.60/29,417 |
$0.01 |
|
Subscriptions |
$371.25/29,417 |
$0.01 |
|
Miscellaneous/Overhead |
$2,107.23/29,417 |
$0.07 |
Key Considerations:
- Time period: These figures represent three-month totals. It’s essential to analyze data over consistent periods for accurate comparisons.
- Profit and Loss Statement: Most expenses come from your P&L statement.
- However, some require adjustments:
- * Truck and trailer payments: Only the interest portion appears on the P&L. Use the actual payment amounts for a more accurate cost calculation.
- * IRP (International Registration Plan): If you didn’t make a payment during the analyzed period, estimate based on your annual IRP costs.
- Categorization: Group similar expenses together (e.g., “Subscriptions” includes cell phone, pre-pass, and QuickBooks).
- Startup costs: Exclude startup costs from your calculations unless you’re paying off a loan related to those costs.
By analyzing your costs in greater detail, you gain valuable insights into your trucking operation’s financial performance and can make more informed decisions to improve efficiency and profitability.
The "Best" Cost-Per-Mile Method: Mastering Your Trucking Costs
To truly optimize your trucking business and make data-driven decisions, you need to go beyond simple cost calculations. The “best” method involves understanding the difference between fixed and variable costs and how they impact your overall profitability.
Fixed vs. Variable Costs:
- Fixed Costs: These expenses remain relatively constant regardless of how much you drive. Examples include truck payments, insurance premiums, permits, and some administrative costs.
- Variable Costs: These expenses fluctuate based on your mileage. Fuel consumption, driver pay, maintenance, and tolls are prime examples.
Why is this distinction important?
By separating fixed and variable costs, you can:
- Identify cost drivers: Pinpoint which expenses have the greatest impact on your bottom line.
- Optimize spending: Develop strategies to reduce both fixed and variable costs.
- Make informed pricing decisions: Set rates that accurately reflect your costs and ensure profitability.
- Analyze profitability on different routes: Understand how different routes and loads affect your overall costs.
How to Calculate:
- Categorize your expenses: Review your expenses and categorize them as either fixed or variable.
- Calculate total fixed costs: Add up all your fixed expenses.
- Calculate total variable costs: Add up all your variable expenses.
- Analyze: Compare your fixed and variable costs to identify areas for improvement.
Example:
Let’s analyze the costs for “Road Runner Transport”:
Fixed Costs
- Truck insurance
- Worker’s compensation
- Truck payment
- Trailer payment
- IRP
- Subscriptions
- Misc/overhead (Bank fees, compliance, ELD, and parking)
Variable Costs
- Driver pay
- Fuel
- Dispatching/factoring
- Maintenance and repairs
- Misc/overhead (Permits, scale fees, tolls, taxes, and washouts)
In this example, Road Runner Transport’s total variable costs were $1.33 per mile, and their fixed costs were $0.31 per mile.
Beyond the Calculation: How Cost-Per-Mile Impacts Your Trucking Business
Now that you understand how to calculate your cost-per-mile, let’s explore why it’s such a game-changer for trucking businesses. Here are three key areas where this knowledge gives you a competitive edge:
1. Smart Load Selection:
Knowing your cost-per-mile helps you make informed decisions about which loads to accept. When a broker offers you a rate, you can quickly assess if it covers your expenses and provides a reasonable profit margin.
For example, if your cost-per-mile is $1.64, you’ll want to avoid loads with rates significantly below that. Aim for rates that allow you to earn a healthy profit and grow your business.
Understanding your fixed and variable costs adds another layer of insight. If you’re heading to an area with low-paying outbound loads, ensure the inbound load at least covers your variable costs to avoid losses.
2. Accurate Profit Projections:
Even before you hit the road, cost-per-mile calculations help you estimate your potential profitability. By comparing your estimated costs to prevailing market rates, you can assess the financial viability of your trucking venture.
This is particularly useful for new owner-operators or those considering expanding their operations. Use our cost-per-mile calculator and the data provided to get a realistic picture of your potential earnings.
3. Proactive Expense Management:
Tracking your cost-per-mile over time allows you to identify potential issues before they become major problems. For instance, if your maintenance costs suddenly spike, it could indicate a need for repairs or even a new truck.
Similarly, monitoring your fuel costs per mile helps you ensure you’re getting the best possible rates and discounts. If your fuel expenses are significantly higher than average, it might be time to re-evaluate your fueling strategy.
Cost-Per-Mile: A Mindset Shift
While cost-per-mile calculations may seem complex at first, mastering this metric is crucial for long-term success in the trucking industry. It’s more than just a number; it’s a mindset shift that empowers you to make data-driven decisions and optimize your business for profitability.
Recommendations:
- Calculate your cost-per-mile regularly – every three months initially, then every six months after the first year.
- Use the insights gained to make informed decisions about load selection, pricing, and expense management.
By understanding and utilizing your cost-per-mile, you’ll be well on your way to building a thriving and profitable trucking business.
