Just like any other business, your trucking company needs to run at a profit or it will quickly fail. Sounds like stating the obvious doesn’t it, yet it’s surprising how many operators make the critical mistake of hauling loads without properly considering their trucking business profit. This is especially true during times of low freight volume when truck company owners are willing to jump on any load to fill empty capacity. To help your trucking company succeed, eCapital provides a simple calculator to quickly assess cost vs. revenue. Use the Trucker’s Profit & Loss Calculator to judge whether or not to accept a load before you haul.
The general rule of thumb is simple; in order to generate profit, trucks need to keep moving with revenue generating freight, and freight needs to pay for ALL costs associated with the haul plus more. Hauling underpaying freight to cover the backhaul minimizes loss but needs to be the exception to the rule, not the standard mode of operation.
Keep moving with freight
There are over 2 million tractor trailer trucks on the roads and highways of this country, all looking for freight to haul. At times, such as in 2018, finding freight was so easy you could name your rate, but that’s far from the norm. Usually, truck company owners have to search every avenue available to move outbound freight and fill backhaul capacity. Knowing how to find freight is typically the first big test facing startups, challenges companies that just lost a dedicated lane and is essential for carriers to fill the backhaul. For most, the answer is load boards, the online mecca for available freight. But this is a place where you need to know your numbers otherwise you roll the dice.
Load boards are busy marketplaces where you have to act quickly to secure freight or lose it to a competitor. Whether the rate is posted or you have the option to bid, carriers need to know their break-even point in order to make a profitable decision. That leads us to the next problem.
Know that the haul will be profitable
Every experienced operator understands that you must know your cost-per-mile to be successful. It is the golden rule of trucking! Without knowing your costs, it is impossible to make profitable decisions. But how do you know what loads to take given this knowledge?
Example: A load is posted online from Los Angeles to Detroit for $4,218.
That’s a big bite of revenue…do you take it? If you hesitate, it’ll disappear off the load board and end up on someone else’s rig. If you take it, it may lose you more money that it’s worth.
How many loaded miles is that? How many deadhead miles? How does that translate to rate per mile? That’s a lot of questions to be answered in a short period of time before the opportunity disappears off the load board. To make a profitable decision, you need to use the Trucker’s Profit & Loss Calculator to make fast and accurate calculations before you act.
The calculator is fast and simple to use, allowing you to assess the opportunity quickly. That’s incredibly important when hunting for loads online.
How to become even more profitable
Hauling loads that make money rather than costing you is definitely a good starting point, but it’s not the only way to ensure profitability. There are a series of best practices for easy ways that trucking companies can increase profit margins, however, the most important step is to lower your company’s running cost-per-mile and fixed costs. This involves far greater effort and commitment to achieve, but the results are definitely worth the investment. It’s a 3-dimensional puzzle to figure out.
The type and age of the equipment you run, the technologies you engage, the fuel saving strategy you follow are all part of a Rubik’s cube effect. Each change you make impacts other areas of the business. To solve the puzzle, you need to create a series of “what if” scenarios.
What if I upgrade to late model equipment and add tire pressure monitoring; what effect will it have on fuel, tire and maintenance costs? What if I use a fuel card program to save 12 cents a gallon, how much will I save in a month? To calculate these changes and gauge the overall cost effect, companies need a Trucking Business’ Profit Margins calculator.
Profit is good, but what about cash flow?
Profit is good, but it can’t be realized without proper cash flow. More than 80% of small business failures are due to cash flow problems. Trucking companies are particularly challenged by lack of funds as customers are typically slow to pay and banks are reluctant to support the industry. To solve this particular issue, a growing number of trucking companies are depending on freight factoring to solve the cash flow dilemma.