Business is business and all businesses run on the same principle gross revenue comes in you deduct all the related expenses and what is left is either profit or it’s a problem you need to tackle ASAP. So if you’re an Owner Operator and it is time for you to get tough here is what I suggest you to do and do fast.
Start by making a list of every business expense you have and I mean everything related to the operation of the truck you are operating, everything! This is where the person who has been keeping good records has a huge advantage over the driver who does their filing in a Wal-Mart bag. Now that you have everything listed organize the list with your largest expense at the top of the page in order to your smallest expense at the bottom of the page. Have a pad of paper handy that you can make a list of things to do and investigate as you dissect each expense item.
Now its reality time, take a hard look at each item on your list starting at the top of the page I am going to guess that fuel and wages are going to be number one and two. Fuel is a variable cost because the more you drive the more you spend on this one and it has two or three controllable components assuming your engine and running gear are set up properly. What speed are you running the truck at and I know we are all sick of this subject but every mile over 60 miles an hour is 1/10th of a gallon in fuel economy gone out the stack and this crunch time remember. Is your idle time cut back to a minimum and I know it is tough this time of year but you need to look at every possible area of savings possible. Have you measured the ROI (Return on Investment) on an APU (Auxiliary Power Unit) put this item on your things to do list. After you have rationalized these two areas ask yourself this question, if you are buying your fuel right from your carrier do you get a reasonable discount off the pump price on the road or in the yard? Some of the fuel optimization programs that are available for a cheap subscription cost might be helpful, maybe you should do some research here, also put this on your “Things to Do” list.
Your truck payment is a fixed cost because it does not change no matter how many miles you drive in a month; think of a fixed cost as something that is usually paid on a calendar basis. Not too much you can do here usually but you should be aware of what your finance cost is over the life of the payment schedule, separate the principle from the interest. Once you do this you can see how important it is to shop for your finance contract the same way you do a truck, every percentage point of interest over a 3-5 year contract means thousands of dollars.
Your maintenance costs are variable and regardless of your experience in this industry or as an owner operator there are benchmarks to go by that are usually fairly accurate. For a new truck put 2 cents per mile in an escrow account because you will spend it eventually on maintenance, 1 year old 3 cents, 2 year old 4, 3 years 5 cents, 4 years 7 cents and 5 years 10 cents per mile. If you are spending more than this now, figure out why and how to bring it back in line ASAP. If you’re off here, make a note to take your favorite mechanic out to lunch and discuss the numbers with them don’t let this slide.
Driver wage! Here’s a toughie, what kind of money are you drawing out of the business to satisfy your lifestyle? To do this one right you need another piece of paper and you need to do the same thing that you just did for the truck expenses, highest to lowest expenses and scrutinize each one of them to ensure they’re necessary and legitimate. You got to know that your truck will only make so much money no matter how lean and smart you are as an operator and living beyond your means personally is a slow death filled with stress, who needs it.
You get the idea of what I’m saying here do this for every expense you have and then get to work on your things to do list; this is a key component of how a business operates if you’re looking after it. Another thing I do is read and no not Tom Nicks novels or comic books, I read self help books I read business books, I read titles and subjects that I think will help me run my business better. I have stayed away from recommending titles but I can’t help it this time, I strongly recommend anything written by Larry Winget. How can I not like a guy who written books titled “Shut Up, Stop Whining and Get a Life?” or “People are Idiots and I can Prove It” how about “It’s Called Work for a Reason” the one I recommend for drivers and Owner Operators who have trouble watching the nickels and dimes is “Your Broke Because You Want To Be”. You can also visit http://www.larrywinget.com/ for some other nuggets of wisdom.
The last word is about the dreaded tax man, yes it is that time of the year again, get it done right and by a firm who knows this industry. Working with a good business advisor and tax specialist can be the single greatest ROI you will ever get in business.
Mr. Ray Haight has enjoyed a successful career in transportation starting as a company driver and Owner Operator logging over one million accident free miles prior to starting his own company. After stepping down from a successful career managing one of Canada’s 50 largest trucking companies, Ray focused on industry involvement including terms as Chairman of each of the following, the Truckload Carriers Association, Professional Truck Drivers Institute, North American Training and Management Institute and the Ministry of Training Colleges and Universities voluntary apprenticeship of Tractor Trailer Commercial Driver, along with many other business interests, he enjoys a successful consulting business, also sitting on various Boards of both industry associations a private motor carriers. He is also Co-Founder of StakUp O/A TCAinGauge an online bench marking service designed to assist trucking companies throughout North America focus on efficiency and profitability within their operations. All posts by Ray Haight