Whether you are a first time owner operator just starting up or a seasoned veteran who knows his operation inside out, we’ve all heard the adage- preparation is the key to success. The more you can plan for your operating expenses, the smoother things will go and you and your trucking business will thrive as a result.
You’ll need to itemize all of the costs you are going to incur on the road and at home. These don’t just include truck and driving expenditures, but also registrations, office costs and fees. And there are probably a few things that you didn’t even realize you needed to cover.
Start with itemizing your fixed costs. These are the expenditures that are not going to change and you can budget monthly. Consider payoff opportunities if possible and, when you can, ask about discounts based upon multiple policies.
Also look for opportunities to use auto pay and paperless billing to save on headaches and missed due dates. Make sure you pay certifications and registrations on time because fines and fees can lead to bigger problems including potential loss of your licenses or business. Keep good documentation of all invoices and receipts, as well as mileage and billings.
Fixed costs would include things such as:
If you have payments on a truck, then it’s easy to know what your monthly requirements will be and budget accordingly. However, depending on your operational setup, you pay have payments on trailers as well. Always be aware of when payments are due and how long is left in your payment plan.
If you have an older truck and you are spending a lot of money on repairs, it might be time to consider something newer. If you are spending more on keeping your old rig on the road than a monthly payment would cost, it’s probably time to go truck shopping. Do some research into the payments and figure out what is right for you.
Not only insurance on your rig but there may be insurance requirements on you as a driver or business operator. Depending on your operation you may also be required to pay workman’s compensation insurance. If you operate more than one rig, inquire about multiple vehicle discounts.
This cost will vary depending on the size of your operation. If it’s more than just you, consider group plans for small businesses to cover other drivers and employees. Consult local insurance laws about requirements.
Check with your health insurance provider about state-to-state coverage. Many insurance policies are not valid in foreign countries, so if your route takes you abroad budget for supplemental insurance.
Annual Licenses & Registrations
Every state has vehicle inspections, registrations and testing as well as your driver’s license or any renewal fees.
Depending on local laws, you may need business licenses or certifications. Make sure you keep up on all of your expiration dates. Contact your local government offices for requirements.
Memberships and Affiliations
Include all your membership fees to guilds, clubs, roadside assistance programs and other affiliations.
Do you have an office? Don’t forget the costs of operating there when you aren’t on the road. Calculate utilities, rent, office supplies and other costs. Also be aware of any local business license requirements.
If it is your home office, make sure you keep track of the same information to deduct on your personal taxes. Also be aware of any local regulations regarding operations of business in a residence. This can also include the storage of your rig at your home.
Now it gets a little trickier, especially if you don’t have any reference points from past operations.
Your variable costs are the things you have to budget for, but those numbers could easily change based upon how many miles you accumulate. If you have a company or route history to work from, you have a good idea of how many miles you will rack up in a year. If not, you’ll have to make an estimate.
Your rig is going to need maintenance inside and out. So you’ll need to budget for regular service visits and repairs. Don’t forget tires! It’s often left off the list. Keeping on top of tire maintenance and replacing them regularly can lead to savings in not only truck repair but also help save you from down time and lost income. Depending on the age of your truck, maintenance and repair fees can easily run well over $10,000 annually.
And don’t forget the cost of washing and cleaning supplies if you’re going to keep your truck spotless.
This is the one that can hurt the most. A single fill up of two 150 gallon tanks can run over $1,400. In the current market, fuel prices can also spike very quickly as well as have wide cost variations from state to state. Your fuel costs can easily rise to the tens of thousands of dollars depending on your hauls and mileage.
Food and Drink
Eating on the road adds up quick. Be realistic about how much food can cost and remember often prices on the highway are higher. Also take into account water, coffee and snack allowances to keep in the cab while you are on the road.
Make sure you save all those receipts for any qualifying tax deductions.
There will be times when you may not have the ability to sleep in your rig. Weather or safety concerns may require you to sleep in a hotel. Or maybe for one night you just don’t want to stay in your rig and wouldn’t mind a hot shower. So be honest about how often you may need to stay in a comfortable room.
On the road, look into travel and lodging apps to get the best rates and to help you stay within your budget. Some apps offer rewards programs leading to free hotel nights. Make sure you also take advantage of any loyalty programs for hotel or motel chains.
You may be the boss, but you are probably going to need some help. You may need to hire a bookkeeper or accountant, who do charge fees. But in the end you will end up saving money and avoid some major headaches. Also budget for tax preparation services. You may have other office workers, janitorial staff or truck maintenance employees you need to add to your payroll budget.
Allow for any sort of skills or training courses that you take. These types of safety courses may give you discounts on insurance policies or certification processes. Contact your insurance provider for more information.
Even with someone doing your books you may still need software for your operation. You may also require software for your truck depending on your navigation or onboard computing system.
If you are using software, it is highly advised that you budget for licenses and subscriptions verses downloading pirated versions. As a small business owner it just isn’t worth the risk of fines or computer viruses.
You’ll need to keep in touch on the road so you’ll have a phone/data bill. Roaming plans can vary by state and country depending on the carrier. Always make sure to look for the plan that’s right based on your travel. Comparison shop to find the plan that’s right for you and your operation.
There are some great smartphone apps out there to help you with navigation, scheduling, invoicing and other trucking needs. Many of them are free, but often the pro versions are worth the fee, however they can add up.
Parking & Tolls
Not only might you have costs for parking while at your home base, you might require parking while on the road.
Depending on where you drive in the country, tolls might be something you need to include in your budget. Look into EZ passes and other programs for potential discounts.
Depending on how you are set up as a business, you can a have a number of different taxes. From personal taxes to LLCs to corporations to local business taxes.
Use a professional tax preparer (that you budgeted for earlier) to make sure that you get every possible deduction and your returns are put together properly.
Don’t forget that you need to get paid. Include your own salary in your budget.
Growing your business is important for an operation of any size, even yours. So depending on how you need to market your services, factor in some money for websites, advertisements and promotions. Online directories may charge fees for listings as well.
These services can run from $100 for a simple website to the thousands of dollars based upon your operation’s professional needs. You can also hire someone to run your social media or prepare billboards, commercials or online ads.
If you drive a refrigerated truck or have other specialty deliveries, don’t forget to take this into account. Also consider the cost of maintaining and replacing straps, winches and other gear for flatbed trailers.
A contingency plan
Stuff happens. Tickets, accidents, longer than expected runs, breakdowns. Cost overruns are a fact of life for small businesses. Don’t budget yourself so tight you can’t handle a surprise.
SO NOW WHAT?
Using all this information you can estimate your cost per mile. The goal is to get that number as low as possible to maximize profitability for your operation.
Add all your cost estimates (fixed and variable costs) and divide by the number of miles you think you will cover. That’ll give you your estimated cost per mile.
So for example if you calculated you had $100,000 in total fixed and variable annual expenses and planned on covering 75,000 miles next year:
100,000 operating expenses /75,000 miles = 1.33 cents a mile
If you want to increase profitability you can lower your costs or raise your miles (although some costs will go up accordingly). Once you get on the road, you may find that your numbers were way off, but it gives you the ability to begin to plan. As you get to know your own operation, it will become more concrete and you are on your way to a successful operation.