How do I know if i should do the load

[nightcreacher]

This question has had every truck owner and driver think about for as long as there have been trucks.
As an owner operator,there are many things to look at,but I have a formula that works for me ,and the outcome has not failed me in the last 20 years.I do vary it some, once in awhile,but not by much.
Here is how it works.I take the total miles,dead head to pick up,loaded miles,and where i want to layover when I'm done.I take those total miles and divide them by 5mpg,(I do get much better)leaves room to play with.I then multiply that by the cost of fuel,and then divide that by the percentage I get for an advance.Now here is the variance.When freight rates drop off,I take a lessor advance to send more home.so now i would divide this figure by 40% instead of 45%.This is what the load would have to pay me to do it.
I will give you a typical run:
Truck is in Akron Ohio,pick up is in Pittsburgh Pa,delivery is in Knoxville Tn layover in Atlanta Ga.Miles would look like this;
104 to pick up,507 to delivery, 210 to layover.
total miles would be 821,@ 5mpg thats 164 gallons of fuel,@ 2.21 per gallon thats $362 for fuel,and from Pittsburg to knoxville there will ne about $5.25 for tolls,so cost of running expense is 367 dollars.now divide that by 40%,This run would have to pay at least $910 to do it.The load actually paid $957,that sends right at $575 home for an overnight delivery,that is more than most trucks gross for a 500 mile run.Now by figuring a lower mpg,and a higher total miles,that will leave money in your pocket,and this run,since going to Knoxville ,you most likely wouldn't give up the 200 miles to Atlanta,and that would also put more money in your pocket.
So ladies and gentlemen,the next time you think a load doesn't pay enough,or you think you getting a high paying run,try this out.It really works.

 

[ATeam]

Good idea to start this topic.

Our technique is to maintain a running spreadsheet that tells us the cost per mile to operate the truck in the last twelve months. In that number, all costs are considered; everything from oil changes, to tires, to truck depreciation (replacement cost), to accounting services, to business lodging, to cell phone useage charges, to the shoe polish we use on our steel toed shoes. Fuel costs, being volatile, are not averaged over a 12 month period. Fuel is included in the cost per mile figure, using the price of the fuel that is now in the tank (our last purchase).

Knowing our cost per mile, we mark the number up by a percentage amount that we believe to be both reasonable and competitive. The markup is our profit margin or pre-tax take-home pay if you prefer. Thus, our price to run will fluctuate up and down as fuel and other operating costs fluctuate.

If an offer comes in paying $x.xx per mile for all miles (deadhead + loaded), it is a simple matter to say yes or no. If the load meets our marked up price, we take it. If not, we don't.

Also considered is where the load is going. If it is going to a remote area, we may add miles out to the all-miles figure.

There are many questions to answer with this method; like, (1) do you include your IRA contributions in your cost per mile calculation? (2) on items like tires that have a useful life of more than a year, do you include their full price when purchased in the appropriate 12 month period, or do you spread their cost over their anticipated useful life? (3) with a truck that is expected to outlast the reefer, do you depreciate the reefer differently or just lump everything together in a more generalized truck cost? (4) if a load is going into a toll-intensive area, you you bump the price for that area or spread all tolls over all loads in a 12 month period?

These are just a few of the questions our method raises. Answers will vary widely depending on your circumstances (like how long you plan to run the truck and how often you expect to replace the reefer) and who you talk to.

Simply put, we put a lot of time and effort into knowing our true cost per mile. That number is then marked up to provide a profit. Most loads that pay that price or better are accepted.

To be competitive, we specialize in high-value freight that commands a premium and strive to keep our operating costs close to or lower than the next truck that offers the same services we do.

 

[nightcreacher]

Phil ,I dont need a spread sheet,although I do have one,but my expenses for 2008 were $150000 for 1200000 miles,thats $1.25/mile.no need for spread sheet to give you that answer.its bottom line.Granted, each month that changes,but its pretty much the same every year.My total income for 2008 was $207000.My days away from home were 232,my income last year was a little down,normaly I average $1000 per day .

Phil,my way doesnt matter where it goes,I don't look at where I think FDCC is going to think about my layover but where I want the layover to be,my layover average is around 60%

 

[ATeam]

There is your way, my way, and I am sure a host of other ways practiced by other expediters. I hope a good number of people can feel free to share their ways here without feeling the need to defend them. If they do so share, this could be a tremendously infomative thread.

My post was not intended in any way as a criticism of yours. You shared how you decide on loads. I shared how we decide on loads. I sincerely hope others share too.

 

[davekc]

I don't try to complicate the simple. I know our cost per mile and look where it is going. With the exception of a few places, I can find a load just about anywhere. I just look how close to a major metro area it is and that is it. Like Steve, I don't use spreadsheets or anything like that.

 

[aileron]

This question has had every truck owner and driver think about for as long as there have been trucks.
As an owner operator,there are many things to look at,but I have a formula that works for me ,and the outcome has not failed me in the last 20 years.I do vary it some, once in awhile,but not by much.
Here is how it works.I take the total miles,dead head to pick up,loaded miles,and where i want to layover when I'm done.I take those total miles and divide them by 5mpg,(I do get much better)leaves room to play with.I then multiply that by the cost of fuel,and then divide that by the percentage I get for an advance.Now here is the variance.When freight rates drop off,I take a lessor advance to send more home.so now i would divide this figure by 40% instead of 45%.This is what the load would have to pay me to do it.
I will give you a typical run:
Truck is in Akron Ohio,pick up is in Pittsburgh Pa,delivery is in Knoxville Tn layover in Atlanta Ga.Miles would look like this;
104 to pick up,507 to delivery, 210 to layover.
total miles would be 821,@ 5mpg thats 164 gallons of fuel,@ 2.21 per gallon thats $362 for fuel,and from Pittsburg to knoxville there will ne about $5.25 for tolls,so cost of running expense is 367 dollars.now divide that by 40%,This run would have to pay at least $910 to do it.The load actually paid $957,that sends right at $575 home for an overnight delivery,that is more than most trucks gross for a 500 mile run.Now by figuring a lower mpg,and a higher total miles,that will leave money in your pocket,and this run,since going to Knoxville ,you most likely wouldn't give up the 200 miles to Atlanta,and that would also put more money in your pocket.
So ladies and gentlemen,the next time you think a load doesn't pay enough,or you think you getting a high paying run,try this out.It really works.

nightcreacher,

I got a question for you. How do you calculate all these things in the 10 minutes you are given to make a decision? I mean, you have the deadhead and loaded miles, but then you need to know what express center is the best to layover after delivery. Most of the time I have never heard of the delivering city, so I would need to look it up, then do the calculations, oops, out of time, you lost the load.

I used to have something similar, but not as complex as you. But right now, I threw all of that away since FedEx made it way easier for us B units. Right now, since all loads pay .85/loaded mile, I only worry of how much deadhead I have and how long the run is and where it is delivering. Still have to perfect my method of seeing which loads are profitable, since it has been kind of trial and error so far.

 

[theoldprof]

Aileron, you mentioned .85 per mile. I suppose you are in a CV. Does anybody care to mention what Panther is paying a CV per mile? It was .77 when I left. I knew what my cost per mile was. I looked at the deadhead, and to where it would take me.

 

[nightcreacher]

With the flat rate .85 per mile,now its about miles,the more the better,so when you deliver in BFE, your going to get paid the .85 back to what ever ex center,so, it wouldn't matter where you go.When I was at Con-Way Now,we got 1.05 all miles,I did every load to Fl. that was offered, the layover was always Atlanta.Lots empty miles at flat rate pay then.
Since there are two of us,while one is on phone,other is looking up city on map,if its some where I dont know,but after thirty years in the trucking business,not many places I haven't been.I once had a co driver that called me Mr.Map,not to brag.

 

[inkasnana]

Phil, your post on your technique is making my head spin! lol Most of the things you mention we do not have to worry about or consider because we drive for an owner, but I still think it would be good information to know and to learn how to calculate. It would probably make tax time easier as well.

My husband does keep a spread sheet of all loads we do with pay per mile, DH, tolls ect. Mainly for our own confirmation that the owner has calculated our pay correctly and it helps with taxes. I also keep copies of all BOL's that I file with each load's information sheet. Every time we stop, we write down where we stopped, the time and the mileage, even if it's just a stop in a rest area.

With our carrier, we do not have the luxury of 10 to 15 min to decide if we want a load or not. They call us, offer the load, and we have to decide yes or no within just a few minutes time while still on the phone with dispatch. We always consider how far away the load picks up from and where it's going. We question dispatch about the likelihood of getting a load out of that area if it is a known low freight area and make our decision based on past experience and answers from dispatch.

Even though we drive a truck that belongs to someone else I believe that good record keeping is vital and keeping track of miles and hours driven as well as receipts, BOL's ect. It's just good business.

I am impressed with your system, and think I need to consider some aspects your technique to come up with a more effective way of tracking our business.

 

[nightcreacher]

Phil, your post on your technique is making my head spin! lol Most of the things you mention we do not have to worry about or consider because we drive for an owner, but I still think it would be good information to know and to learn how to calculate. It would probably make tax time easier as well.

My husband does keep a spread sheet of all loads we do with pay per mile, DH, tolls ect. Mainly for our own confirmation that the owner has calculated our pay correctly and it helps with taxes. I also keep copies of all BOL's that I file with each load's information sheet. Every time we stop, we write down where we stopped, the time and the mileage, even if it's just a stop in a rest area.

With our carrier, we do not have the luxury of 10 to 15 min to decide if we want a load or not. They call us, offer the load, and we have to decide yes or no within just a few minutes time while still on the phone with dispatch. We always consider how far away the load picks up from and where it's going. We question dispatch about the likelihood of getting a load out of that area if it is a known low freight area and make our decision based on past experience and answers from dispatch.

Even though we drive a truck that belongs to someone else I believe that good record keeping is vital and keeping track of miles and hours driven as well as receipts, BOL's ect. It's just good business.

I am impressed with your system, and think I need to consider some aspects your technique to come up with a more effective way of tracking our business.

Keep what your doing,someday you will make a good O/O.With the records your keeping,you should know what your truck is making or loosing.But as I stated,once you have been thru a full year,all you have to do is divide the total expenses,by your total miles,now you know what you need to get for the truck to make any money.If your on 60/40,same thing,what your expenss were for the year divided by the miles run,maybe you really dont need that illusive dollar a mile in a straight truck.What I have found over the years 40/60 owner looses

 

[CharlesD]

I think I operate a little differently as an independent, but the same basic principles still apply. I know my cost per mile, so I know how much a load needs to pay me in order to be profitable. When I am bidding, I take into account two things. How much does the driver need to make and how much should the carrier make. If it is a load I'm bidding to do myself, I still consider myself as an owner operator leased onto my own company and I try to bid enough for me to get a good rate as a driver and still make a profit for the company as well. If a certain load would have paid me $1 a mile plus fuel surcharge when I was leased onto another carrier, then as the carrier I don't think it's wrong to try to get $1.25 plus fuel for the same load as an independent. The carrier has to make a profit too and my expenses as a carrier are more than they were as a leased on driver.

As to where the load is going, this may sound odd to some of you, but I try to avoid the main automotive service areas. That's where all the competition is and with the automotive freight being slow right now, I don't want all those people bidding against me when they can't find anything to bid on in NLM. I'd rather go where the larger carriers are less likely to have many vehicles because they're more likely to have to broker loads that they get in those areas and there's not going to be as much competition for those loads when they turn up.

 

[nightcreacher]

Is this really rocket science?If your an owner driving your own truck,all you need to know is what you spent over the year on expenses,and divide by the miles.Now if you run team,that co-driver is part of the expenses,and if your smart,you add drivers pay for yourself.
Keeping track of all the expenses on a spread sheet, weekly or daily,even monthly, so you dont have to do it at the end of the year,is great,but I certainly hope, anyone in the trucking business should already know what it takes to opperate their truck.

 

[aileron]

With the flat rate .85 per mile,now its about miles,the more the better,so when you deliver in BFE, your going to get paid the .85 back to what ever ex center,so, it wouldn't matter where you go.When I was at Con-Way Now,we got 1.05 all miles,I did every load to Fl. that was offered, the layover was always Atlanta.Lots empty miles at flat rate pay then.
Since there are two of us,while one is on phone,other is looking up city on map,if its some where I dont know,but after thirty years in the trucking business,not many places I haven't been.I once had a co driver that called me Mr.Map,not to brag.

Haha, I get you, unfortunately I don't have the luxury of a codriver or 30 years, but you are right, some of the names I don't have to look them up any more...

I think I did not understand the first part of your comment. After I deliver, I don't get paid .85 a mile. It is .15 after the first 50 miles plus fuel surcharge which right now is right at 6.3 cents. If I got it wrong, please correct me.

 

[nightcreacher]

Haha, I get you, unfortunately I don't have the luxury of a codriver or 30 years, but you are right, some of the names I don't have to look them up any more...

I think I did not understand the first part of your comment. After I deliver, I don't get paid .85 a mile. It is .15 after the first 50 miles plus fuel surcharge which right now is right at 6.3 cents. If I got it wrong, please correct me.

no my mistake,forgot you only get .85 loaded,since I dont know van expenss,not sure what I would do.
My express centers are minimul,I dont do all the excenters in the book,thats why my agree to layover is only 60%

 

[ATeam]

You can put as much or little effort as you wish into analyzing your business income and expenses. There are very few expediters out there that drill down to the level of detail Diane and I do. We don't keep track of just deductible expenses. We track every penny.

If I find a nickel in the street, I log it in as income (really). We enter in every penny we spend on food and categorize it as fast-food, dine-in or grocery. Every newspaper we buy from a vending machine, every load of coin-laundry we do is tracked.

Everything is tracked, popcorn purchased at movie theaters, tips given to truck wash workers, a few dollars here and there slipped to the person ahead of us in the Wal-Mart check-out line who is putting items back into his or her cart to make the purchase match the too-little money he or she has.

Most people don't find that level of detail worth the time or effort. While we do, there are successful expediters that don't use spreadsheets. Just look above for examples.

Not to defend my use of a spreadsheet but to explain why I do it, I offer this.

Spreadsheets and diligence that some may say are not worth the time and effort provide the ability to run what-if scenarios and put your money to its best use.

Examples:

- Diane's diligence, in the form of deep research, enabled us to buy a new truck and avoid paying FET tax on the reefer, generator and truck body.

- Before we settled on a depreciation schedule for the truck, we ran several alternatives through our spreadsheet to determine how each option would affect our cost per mile and ability to competitively price our services.

- When someone comments in the Open Forum that one brand of fuel provides better mileage than others, I can go into our spreadsheet and determine what the average mpg is by brand over a given time period.

- Spreadsheets help you know not only your cost per mile but also your cost to sit. That information helps you make better-informed load accept/decline decisions.

- If you track the info, spreadsheets give you the ability to quickly pull up all your liftgate loads or reefer loads or loads that required both a liftgate and reefer. Is it worth it to equip your truck with these devices? Checking the loads against dry-box loads and other considerations will give you the answer. What about the HAZMAT credential that costs extra to obtain and maintain? How much exactly does it cost and is it worth the price? Again, a spreadsheet can provide your answer.

- When you are in the Memphis area, what zip code has provided the most loads out? Would it be better to go there or instead hang out in a truck stop in West Memphis to wait for freight? The answer is debatable. The spreadsheet will provide the zip code.

Finally, note that I enjoy spreadsheets. Given the choice between watching an NFL football game and developing a spreadsheet, I would probably watch the game but would find equal pleasure in both. In my computer consulting days, one of my gigs was developing spreadsheet applications for a municipal bond consulting company. While those skills have degraded because of lack of use, I still know my way around Microsoft Excel and have fun working with it.

Just as there are successful expediters that do not use spreadsheets, there are others that do. Over the years, some expediters have been kind enough to share their spreadsheets with me. Some day I hope to use their ideas and mine to develop a prototype sheet that can be posted on EO for interested people to try online, download for free and use in a way that makes sense to them.

The challenge is the time it would take and the fact that expediters vary widely in what they do with spreadsheets. When it comes to spreadsheets, one size does not fit all.

 

[nightcreacher]

Phil,I have an enevelope that I use to put all receipts from each load in.Each load has it's own special envelope,and that envelope in itself is a spread sheat.It has on the front,the states that will be traveled,start and stop miles,a place for gallons and cost ,fuel taxes,and permits.Also on front is place for fuel additives,and tolls.
On the back of the envolope starts out with dead head;miles and pay,load;miles and pay,a place for all accessorial charges,and fuel surcharge.It also has the total of what the load will pay,what the advance was,charges for atm machines,and finally a place to put in the expenses for that load.So you might say I have a spreadsheet for every load I do.I also keep a black book on everyload,but not as in depth as you.I do know by looking into my black book,what loads I've taken from that area,and If I want to be laid over there again.And what exactly the loads paid,and if the place was difficult to find or get into.
Oh, and Phil,I pay my sister to take care of my business paperwork,down load the loads to the computer,pay my bills,and she's much cheaper than an accontant,although at the end of the year,my profit loss statement is taken to my accountant,and he does my taxes for me.

 

[ATeam]

Having shared how and why I use a spreadsheet, I'd rather not get into a debate about the value of spreadsheet use. Readers who are spreadsheet inclined can choose to use them. Readers who are spreadsheet adverse can choose to not use them. Those who are in between can use them a little bit, hire someone else to do them for you or whatever.

You may recall some posts a while back where someone talked about doing one's entire business bookeeping and tax work by using the long-lived Dome books sold at office supply stores. For that, you need only the book a pencil and a calculator if you wish to use such a high-tech item. I praised that method when it was shared. Personally, I am fond of spreadsheets.

I am not out to make anyone right or wrong. I am simply sharing my methods and encourage others to share theirs. The original topic, started by Steve, is of vital importance: "How do I know if I should do the load." I hope more people share their way here.

I should add that if you read my blog, you will see me complaining about the unpleasant task of doing our bookeeping and income tax (preparing info for our accountant). Yet above, I talk about the joy of using spreadsheets. The two are not in conflict.

I HATE doing the data entry part. It is a mind-numbing, boring task. As if that was not bad enough, we make it worse by tracking hundreds of transactions that many other people would say are not worth the bother. I also hate gathering and processing data that I otherwise would not but for governemnt requirements and tax laws that force me to.

The fun begins after the data is entered and the spreadsheet use begins. So, to have the spreadsheet fun, I choose to pay the data-entry price.