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You’re a great truck driver. You know how to choose the best routes, are always reliable and deliver on time, every time. But it takes more than being a great trucker to run a profitable trucking business. We don’t want a lack of cash flow to hold you back. That’s why we put together three easy ways to help increase your profit margin, so your business can thrive and grow in the ever-changing world of trucking.
We all know that fuel is a trucking company’s biggest expense. Because the cost of diesel fuel fluctuates throughout the year, it’s important to get the very best mileage per gallon to offset its cost. Let’s assume today’s average diesel fuel is at $3.00 per gallon. Here are some proven ways to reduce your fuel costs:
Utilize fuel cards! There are several companies that offer fuel cards to give you discounts and other benefits at truck stops nationwide. When comparing the different fuel card programs, you want to consider the coverage, savings, and benefits for your small or medium-sized trucking company.
For example, eCapital’s fuel card can save you over $9,000 per year per truck and covers more than 16,000 locations from the top 4 fuel providers in the country.
According to the US Department of Energy, idling a heavy truck consumes about 0.8 gallons of fuel per hour. Typically, a long-haul truck idles about 1,800 hours per year, using about 1,500 gallons of diesel.
Auxiliary Power Units (APUs) are a great alternative. They provide in-cab climate control and a power source for your appliances. Some are diesel powered and burn 0.25 gallons an hour, consuming about 450 gallons a year. The estimated savings at $3.00 per gallon is $3,150 each year.
In addition, idling a truck also increases engine wear which also cuts from your profits.
Drivers now have hands-free access to the best routing as they drive. GPS or routing software can ensure that you drive the fewest miles, saving fuel. Optimum routing can even be done using your Electronic Logging Device’s GPS features.
ELD (Electronic Logging Device) tracks hard accelerations, harsh braking, speeding, excessive idling, and fuel economy all in real time. Truckers can utilize this information to improve driving habits and save fuel to cut costs.
Many fleets are outfitting their rigs with Low-Rolling-Resistance tires (LRR) to save fuel. And tire life is extended by LRR retreading.
According to the US Environmental Protection Agency, LRR tires can reduce both costs and emissions for a long-haul class 8 tractor-trailer by 3% or more.
If you drive 100,000 miles a year and get 6.5 miles per gallon fuel that means you buy 15,385 gallons. A 3% drop in fuel costs means you burn 461 gallons less in a year. At $3.00 per gallon that’s a savings of $1,383.
Also, keeping your tires inflated to manufacturer’s specifications also saves fuel and extends tire life.
When you’re on and off the gas pedal, it becomes difficult to hold a steady speed. Constantly speeding up and slowing down, even in small increments, wastes fuel. Using your cruise control on the open road can hold a much more consistent speed. Fuel consumption is reduced, creating savings for you.
According to an article published by FleetOwner, a report by American Trucking Associations states that a truck cruising at 75 mph burns 27% more fuel than one driving at 65 mph. You can save a lot just by slowing down.
For example, let’s say your truck travels 100,000 miles in a year and at 50% of the time on highways at 75 mph. And at that speed, your truck averages 5 miles per gallon. By dropping your speed to 65 mph you decrease fuel consumption by 27% and your miles per gallon (mpg) goes up to 6.35.
By shifting from 5 mpg to 6.35 mpg over 50,000 miles, you save $3.00 per gallon and $6,377 a year per truck.
Transport Canada commissioned the National Research Council Canada (NRC) to conduct wind tunnel tests to evaluate the aerodynamic performance of various drag-reduction concepts.
The tests were performed on a 30% scale model of modern tractor-trailer combinations. Tests of wind drag created by the gap between tractor and trailer found that for every foot the gap was reduced, drag decreased by 2.6%. That translates to fuel savings of about 213 gallons per tractor per year.
Trailer underbody side skirts that extended over the trailer wheels saved an additional 800 gallons per year. At $3.00 a gallon, these findings add up to annual savings of about $3,039 per tractor-trailer.
Maintenance has evolved from preventive to proactive. Technology such as ECMs (Electronic Control Modules) coupled with a wide range of sensors in vehicles provides alerts to many issues before components fail, saving you towing and downtime.
Perform regularly scheduled maintenance on your trucks to reduce costly breakdowns.
According to the ATA, we are failing to retain our drivers 87% of the time. A recent article in FreightWaves Magazine stated the average cost of turnover is at $11,500 per driver.
A survey of recruiters by Driver iQ reported the number one reason drivers quit is total compensation. The number four reason is the unpredictability of paycheck each week. Thousands of trucking companies turn to invoice factoring to improve their cash flow so they can retain their drivers.
Now that you are saving on costs, let’s look at a few simple tips to increase revenue.
Knowing your CPM is essential to increasing your revenue. Here’s how you can calculate your CPM:
Fixed Costs + Variable Costs / Total Miles
Fixed costs are monthly expenses that your trucking company must pay each and every month whether you are hauling or not. These include insurance, property leases, permits, salary, and other services.
Variable costs are the monthly expense that your trucking company incurs to operate your trucks. For example, fuel, maintenance, repairs, tolls, meals, lodging and other expenses incurred on the road are all variable costs. Calculate this cost monthly to get up-to-date information on your company’s variable spending habits.
Now for the formula in action:
The information above is provided as a simple example. Use the formula above to estimate your cost per mile to determine the best per-mile rate to charge your shippers.
Utilize load boards and brokers to find loads. As you do, you’ll build relationships with new customers. eCapital offers an exclusive broker network to our clients to help them find high-paying loads nationwide.
Exceed your customer’s expectations to build trust. Pick up and deliver loads on time and without any freight claims. Your customers will be encouraged to give you more loads. They’ll keep you as busy as you want to be.
Load boards and brokers are great resources when you have empty trucks, but they can be expensive. To further increase your revenue, create a list of direct shippers and work with them personally.
Increase cash flow by charging more. Use the cost per mile calculator to see how much it costs to run your truck.
Also, don’t be afraid to negotiate. If you know your cost per mile and understand the market, you can justifiably quote a certain rate.
Use the following sales and marketing tips to make shippers aware of your company and the services it offers.
Cash flow is a common headache in the trucking industry. Create a consistent cash flow with these tips:
If you only need a small amount of cash, you might want to consider using a credit card. We only recommend it as a quick short-term solution, because this option does create debt and can incur very high-interest rates anywhere from 12-29%. If you decide to go this route, you must have a plan to pay off the balance each month.
Taking out a loan can get you the cash you need to keep your trucks running until invoices are paid. It’s a great option if you can qualify.
A lot of the trucking companies we work with, especially newer ones cannot qualify for a loan. You’ll need to gather a ton of documents, collateral, and a very good credit score. Most truckers need cash now and cannot wait 60-90 days for the loan to fund.
And remember, a loan is a debt that must be repaid. If you’re short on cash to operate, it can be difficult to pay back the loan, so proceed only if you have a solid business plan in place.
Invoice Factoring is an affordable, quick, and easy cash flow solution. There are many benefits, including:
If you are lucky enough to have a rich uncle, then this is the way to go. When you’re in a pinch, borrowing from a family member could be a great way to combat the dips in cash flow. But treat it as a business agreement and negotiate a fair repayment plan, because you do have to face your uncle again at the next family gathering.
Putting the above tips into practice consistently over time can have a dramatic effect on your bottom line. It can be the difference between barely getting by and thriving. Always remember you are in the driver’s seat and it’s up to you how much money you want to make.
eCapital understands the cash flow demands you face and gets you the immediate funds you need for your transportation business. No matter if you have 1 truck or 100, we can get you quick cash you need to:
It’s simple, fast, and free to get started. Why not get a free, no-obligation quote?
Contact eCapital today to see how we can help!
Call 760.456.3786 or fill out the form.
All California loans made or arranged pursuant to a California Finance Lenders Law License, CA Finance Lenders License – 60DBO46224 and all account serviced by Capital Partners Services Corp. Copyright © 2019 eCapital. All Rights Reserved. eCapital is registered Trademark. Registration Number: 5,098,285
All California loans made or arranged pursuant to a California Finance Lenders Law License, CA Finance Lenders License – 60DBO46224 Copyright © 2020 eCapital. All Rights Reserved. eCapital is registered Trademark. Registration Number: 5,098,285