Going independent
- Thread starter Vtro
- Start date
danthewolf00
Veteran Expediter
CPM is a measurement of current and future variable and fixed expenses as a ratio of miles driven. Past expenses which will not be repeated are no longer a variable in that ratio.
The TCOPM, or Total Cost of Ownership Per Mile, would include every penny spent on the vehicle, including the purchase price, but you wouldn't want to figure in past expenses into a current CPM.
The TCOPM, or Total Cost of Ownership Per Mile, would include every penny spent on the vehicle, including the purchase price, but you wouldn't want to figure in past expenses into a current CPM.
Oh ok, I didn't know that.
I see. I haven't heard of TCOPM before, how does that figure into your business strategy? Just estimate the life span of your van and sock some $ away every check accordingly?
Mike, they're talking accounting versus strategy.
For these old geezers what they say is fine.
For us young bucks, you need to set aside what would be a payment so you have the money to replace your van.
For these old geezers what they say is fine.
For us young bucks, you need to set aside what would be a payment so you have the money to replace your van.
That's because it's largely irrelevant. It's a score card or a batting average of things past.
It doesn't, really. It can be useful over time across multiple vehicles to compare the cost of ownership per mile of the different vehicles. Or you can use it to see where money went in the past for certain things which you may be able to alter in the future to cut costs (such as, say, a lot of dealer repair costs that can be changed to user-supplied parts and a less expensive mechanic).
You should be doing that as a way to be saving up for the down payment, or total payment, on the next truck. You would include that in the standard CPM, same as a bank payment, though. It's got nothing to do with estimating the life of the vehicle.
That's what I was getting at comparing van A and van B. Maybe I wasn't explaining myself very well. So you're saying even if you buy the van outright you should include what a monthly payment would be into your CPM?
There are no hard and fast rules to the CPM. It's a metric to show you what it costs to run the vehicle down the road, so you can determine if you are profitable or not, and determine which loads are more or less profitable, as all miles both before and after a load incurs a cost.
If you get a loan for your van, you really want to include that cost in your CPM, because it's a fixed expense that must be paid.
If it's a 6 year note and you plan on getting rid of the van in 6 years in exchange for a new one, you're gonna need a down payment in addition to the trade-in value, so you need to plan for that expense somehow. You can factor in those additional funds for down payment in your CPM if you like, or you can set it aside out of your salary, whatever works for you.
If the van is paid for, either up front or very early on, the cost of that van no longer is a part of your CPM. It's still a good idea to set aside a virtual van payment so save up for the next one, and that can be set aside out of your own earnings, and can be part of the CPM or not.
As I said before, the difference in the CPM and the rate is your salary. It lets you know exactly what you're getting out of a load after expenses. Some owner/operators go ahead and include their own salary into their CPM, and that figure becomes the minimum they can run for without taking a salary hit.
Regardless of what all you put in your CPM, you need to know what it all is and why it's included. It's the only way to know whether or not a load, and your business, is profitable.
Speaking of that, ive gathered most carriers want vehicles within 5 or 10 years old. Is that only to sign on? Meaning, if your van is still running fine and you don't need a new one after 5 years, do they want you to buy a new one?
Ok, that's what I was thinking. Sometimes I overthink the simple. Better than underthinking though!
Generally, yes.
Only if you have a really lot of breakdowns while under load and you become more trouble than you're worth, or if the vehicle is so old, beat up and rusty that it attracts attention from the carrier and they believe it reflects badly on them. FedEx is the most to take that position, but there are certainly others.
Go here and read the article, then at the bottom of the page download and play with the spreadsheet. It should all become much clearer after that.
That is a good analogy. The only expense that you will have if you buy the van outright is your maintenance and also a vehicle replacement fund. If you plan on getting another van for cash in 10 or so years, you would have to save a little bit of money every month in order to do that. But you have an advantage over the guy who actually has a van payment, because if you have a slow month, you are not financially obligated to add money to your vehicle replacement fund. The guy who has a van payment can't skip out on a payment because it would ruin his credit and possibly get his equipment repossessed. If you buy your van cash, you might not have any money left over for operating expenses. If you buy your van on payments, you will pay less money up front, but you will pay more money over the long run. The only positive to buying your van on payments is to save some of your capital for operating expenses. I would at least have enough money in a separate account just to be able to make the van payment for at least a year. A separate account where the van payment is automatically deducted each month. Then you don't have to worry about having a bad month, or taking time off, the money for payments are already set aside for the first year. Do your research and always have a plan and a back up plan.
Has there ever been a good time to get into this business? It takes at least six months before you realize you're going broke driving a van. The honeymoon phase always takes over in the beginning. You're so fascinated with seeing the country and getting paid to do it. Then you realize that there is little to nothing left after you pay all of your expenses. I think new guys are going to jump in no matter what they read on here or what we tell them. There is never a good time to come into this business. You either sink or swim. That is how all this works. I hope things get better, but right now it is what is.
Absolutely correct.
Not that I don't value what you guys have to say. I do. Ive learned A LOT about this business thanks to this site. But ive always been a "learn things the hard way" kind of guy. That's the best way to learn, imo.
That's a mistake. The learning curve in this business takes a brutal turn through your wallet.
I was just saying that im going to give this a go regardless of the warnings not to.
Getting by with just liability coverage depends on the value of the van and how much risk you are willing to accept without having comprehensive insurance to cover vehicle damage.
Go for it! No guts, no glory. Or as my late friend Scott Harvey would say: "Short tank, short crank and no charisma."