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Once you purchase a semi-truck, you are no longer a semi-truck driver but a business owner. I know you like chrome wheels and wood grain, but your truck is a business, and you must treat it that way. Now that we have that out of the way, let's talk about costs and why you must keep costs in check to stay profitable. One of the most significant expenses you'll face is operating your semi-truck. But why should you calculate the cost to operate your truck? I will explain why you should take this very seriously in this article.
1. Profitability: Knowing the cost to operate your semi truck allows you to determine if your business is making a profit or incurring losses. By understanding the expenses involved, you can set fair pricing for your services and make informed decisions to improve profitability. Too many people throw a price out there when you call them to ask for a quote for a load. I first wonder what they use to calculate how much it costs to operate their truck or if they even know. You can use a simple tool like Calculator.net to calculate fuel costs. This will let you know precisely how much hauling that load will cost. The typical price to operate a truck in 2023 is between $2.50 and $3.83 per mile, depending on the car, trailer, insurance, other expenses, etc. I will go over how to calculate this in a future article.
2. Budgeting: Calculating the cost to operate your semi truck helps you create a budget for your business. By knowing the expenses associated with fuel, maintenance, insurance, permits, taxes, and other operating costs, you can allocate funds accordingly and avoid financial surprises. When you understand how much it costs to operate your truck(s), you will know how much you can haul a load for and how much profit you will make off a load. When you provide knowledgeable pricing, you will secure more freight and contracts because brokers and shippers will know you know how to run a business.
3. Cost control: Monitoring the cost to operate your semi truck allows you to identify areas where expenses are higher than expected, such as having issues with DPF or the constant problem of losing air pressure. By analyzing these costs, you can implement strategies to reduce them, such as optimizing fuel efficiency, performing regular maintenance, or negotiating better insurance rates. This helps you retain more of your revenue and improve overall business efficiency. Knowing the fuel cost at different locations can also help you save money. Many truckstop locator apps are out here; I would pick one and play with it until you find one that works.
4. Pricing and competitiveness: Understanding your operating costs enables you to set competitive prices while ensuring profitability. You can avoid underpricing your services by accurately assessing your expenses and preventing undervaluing your business. The goal is to keep the wheels rolling, not to get the highest price for one load. Nine times out of 10, if you get a bag for a high price, that will be your last time getting that high price from that broker or shipper. It is not called cheap freight; it is called knowing how to run a business. You learn how much you can charge for a load by calculating how much it costs to operate your truck.
5. Long-term planning: Calculating the cost to operate your semi truck helps with long-term planning and decision-making. It allows you to evaluate the feasibility of expanding your fleet, upgrading equipment, or investing in new technology. It enables you to make informed choices that align with your financial goals and ensures your business remains sustainable and profitable in the long run. The goal is to set a price you want to make per month or quarter, and you work towards that. That means making long-term decisions and knowing how much it costs to operate your truck.
6. Fuel Consumption: Calculating your operating costs can also help you identify areas where you can save money. For example, if your fuel costs are high, you can look for ways to improve your fuel efficiency, such as reducing your speed or maintaining your tires. Similarly, if you find that your maintenance costs are high, you can look for ways to prevent breakdowns and extend the life of your vehicle. Also, remember that the faster you drive, the more fuel you burn and the more wear and tear that will happen to your truck. Major trucking companies don't only use speed governors for accidents; they mainly use this to keep fuel and maintenance costs down. They also cap fuel on the fuel cards to 50 to 60 gallons; anything over that has to be approved.
7. Expansion: If you're looking to expand your trucking business, it's important to start by evaluating the expenses associated with operating your current vehicle. By taking a closer look at your budget, you can identify areas where you can cut costs and stack savings. This way, you'll be able to invest in additional vehicles, hire drivers, and explore new, profitable niches that can help your business grow and thrive.
Consider acquiring trailers to expand your versatility and increase your potential for securing lucrative contracts. By having a range of options for transporting different types of goods, you'll be able to meet the needs of a wider range of clients and take on more profitable projects. With these tips in mind, you'll be on your way to building a successful and thriving trucking business.
Conclusion: You must calculate the cost of operating your semi truck to achieve profitability in your business. This process will yield invaluable insights that can guide your long-term planning and enable you to make informed decisions that align with your financial objectives, bolster business sustainability, and optimize profitability. By understanding your profitability, you will be better equipped to identify cost-saving opportunities and make informed decisions that can impact the success of your business. Invest the necessary time and effort into crunching the numbers - your bottom line will thank you.