Cost-per-mile is probably one of the most important numbers you need to understand when running a trucking company, but it is probably one of the least understood. Knowing how much it costs you to run each mile increases your likelihood of success. You don’t want just an educated guess, you need to know what the exact number is.
We have developed a free tool at Motor Carrier HQ to help you calculate your own cost-per-mile. You can find it on our website by clicking here.
What to Expect From Episode 20
In this episode I’ll show you how I came up with the “exact” cost-per-mile and why it is important. Most importantly, I’ll show you what components go into calculating your cost-per-mile and explain the different types of expenses that make up the cost-per-mile calculation. Learning all this will help you calculate your own cost-per-mile. I’ll also show you how the cost-per-mile that I estimated before I started running is different from my actual cost-per-mile after three months of operations. Here is a little bit about what goes into the actual calculation.
Your cost-per-mile is made up of two different types of expenses: fixed expenses and variable expenses. Each of those types of expenses is made up of actual expenses. Let’s take a closer look at each.
Fixed expenses are expenses you have no matter how much work you do. It’s a bill you have to pay that does not change if you run one mile or 20,000 miles during a month. Here are the fixed costs I talk about:
- Truck payment
- Trailer payment
- IRP fees
Variable costs are costs that you typically don’t pay unless your truck is moving or the cost changes significantly when your truck is moving. Here are the variable costs I talk about:
- Driver pay
- Dispatch fees
- Factoring fees
- Maintenance and repairs
During the podcast I talk about why it is important to know the difference between fixed costs and variable costs and how you can use them to make decisions in your business.