Growing a trucking company from one truck is a challenge, even under the best of circumstances. In this episode I hope to give you some ideas and things to think about if you want to go from 1 truck to 5, or even more. It’s a process that needs to be well planned out; hopefully, this episode will get your “wheels turning”.
What To Expect From Episode 57
The most common mistakes I see from owner operators are growing too fast and getting out of their truck too quickly. In this episode I talk about what I think is the most financially sound method to grow your fleet. A big part of it is timing how and when the owner should stop driving.
In my opinion, a small trucking company owner should still drive to an extent until there are at least 5 trucks in a fleet. Craig and I talk about some examples of what that should look like. Here are a couple of tables I use to explain what we talk about.
This table shows how the fixed costs per mile of a trucking company decrease as the number of miles per month increase. On average, my truck runs about 11,000 miles a month and is on the road about 20 days a month. Under that scenario, the fixed cost per mile is $0.41.
If an owner operator with 3 trucks takes one of his trucks on one 3-day trip, driving 600 miles per day while his driver is taking a break, the fixed cost per mile for the month drops to about $0.35 per mile, almost a $0.06 per mile savings. If the owner operator takes that truck out on two 3-day trips, driving 600 miles per day during the month, putting the fixed costs around $0.31 per mile, a savings of a little over $0.10 per mile.
Effect on Net Income
Let’s take a look at how this affects the net income.
During a normal month I will spend about 20 days on the road and run around 11,000 miles. My average all in rate-per-mile for my first year was about $1.85 (that includes deadhead miles) so total revenue for a typical month was $20,350. When you factor in the variable and fixed expenses, I am left with a net income of about $2,643.
Take a look at how net income (your profit) changes by just adding 3 more days or 1,800 miles onto the month. Net income increases by $1,170, that is $390 of additional profits per day. If you run an extra 6 days for the month with 3,600 more miles, your net income almost doubles, just for doing an additional 6 days of work. That is the beauty of having all your fix costs already covered, the remaining days of the month become incredibly profitable.
If the owner of a small trucking company can continue to drive the trucks while the main drivers are taking time off, the trucks become more efficient and profitability significantly improves. That will result in the most healthy growth and help the owner maintain the standard of living they’ve had without harming the company.