How Confident Are You About Your Hauling Rate?
There’s good money to be made in trucking. So, why do some carriers continue to struggle financially, even when business is booming and the economy is strong? Their cash flow stagnates, leaving them stuck, unable to pay their bills and unable to expand.
One major reason for negative cash flow is setting incorrect hauling rates. When considering the correct hauling rate to charge, carriers often lose out on money by overlooking some hidden — or even some obvious — expenses.
To calculate your proper hauling rate, you must first know your fixed costs and variable costs. From those numbers, you can calculate the minimum cost per mile. This is the minimum or “base” rate you need to charge so that you don’t lose money.
Things such as vehicle leases or payments and necessary permits make up your fixed costs.
Variable costs, which change month to month, include fuel, truck maintenance and repairs, taxes, salaries, and driver expenses (tolls, food, etc.).
Because variable costs will fluctuate, these expenses should be reviewed regularly and your hauling rate should be adjusted accordingly. For example, if you had to buy new tires for some of your trucks, the hauling rate may need to increase slightly to cover that expense.
To calculate your base rate, first, total your fixed expenses for the month and divide by the number of miles your trucks drove that month. Secondly, do the same thing with your variable costs for the month. Finally, add fixed costs and variable costs together to get your total cost per mile.
If you want to make money:
- Determine any additional business needs you may have (New drivers? New trucks?) and your desired profit margin.
- Do the same calculations with these numbers as you did to calculate your base rate.
- Add your total from step 2 to your base rate. The result: you now have a working range within which you can negotiate your hauling rate.
Not sure how your rate stacks up against other trucking companies? The American Transportation Research Institute (ATRI) is one resource that can help you determine if your cost per mile is competitive. The research firm looks at business costs for carriers so you can use their data as a baseline for comparison.
Beyond fuel and time on the road, there are so many other expenses to look at when figuring out what to charge to move a load. By knowing all of your fixed and variable expenses and how to account for fluctuations, you can calculate a hauling rate that will keep you profitable for many years to come.
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