money
- Thread starter samueltp2
- Start date
Yeah, I know what you're saying. If it paid $1 a mile before, and $.90 was the line haul and $.10 was the FSC, now it's still $1 a mile, but $.30 is the FSC and $.70 is the line haul. In some cases, as with a few companies with flat FSC programs, and especially a few brokers, the line between line haul and FSC gets more and more blury, with the contractor getting a smaller piece of the pie, and the percentage of the line haul with the FSC being manipilated so that the contractor gets about the same rate per mile, and the company or broker manages to scarf the difference. I'm not naive to think that the same thing doesn't happen at Panther. I know there are a lot of loads that paid disproportionally more than my meager $.77 a mile plus FSC.
If a load gets written up with the FSC lumped into the rate, as some customers are quoted an overall rate without breaking down the FSC, it's gets a little harder for the broker/company to actually pass along 100% of the FSC, doesn't it? If you're on a flat FSC, it doesn't matter. But if you're on a percentage of the load plus FSC, it matters if they can't break it down for you. Otherwise, they're just giving you a percentage of the load, and a percentage of the FSC. And in that case, they're keeping more than they should, and I'd be doing regular audits of the bills.
If a load gets written up with the FSC lumped into the rate, as some customers are quoted an overall rate without breaking down the FSC, it's gets a little harder for the broker/company to actually pass along 100% of the FSC, doesn't it? If you're on a flat FSC, it doesn't matter. But if you're on a percentage of the load plus FSC, it matters if they can't break it down for you. Otherwise, they're just giving you a percentage of the load, and a percentage of the FSC. And in that case, they're keeping more than they should, and I'd be doing regular audits of the bills.
I told you my head hurt. Sorry.
I'm not disputing or side-stepping anything. You're looking at your fuel cost percentage of revenue, but what, really, is that telling you? Are you losing sleep over it? Is it telling you that you're losing money because the cost of fuel has gone up? You're not. Not if the FSC keeps pace with the cost of fuel. The overall percentage is higher, but the net income is not lower because of it. Back when fuel was a relatively constant cost, and little or no FSC, the percentage of fuel to revenue meant something. It would tell you where you are wasting money, or if you were taking too many low paying loads. The fuel cost percentage is no longer a meaningful indicator as long as the FSC covers the additional fuel costs.
Yes, FSC must be considered, but you're not considering it, at least in a meaningful way. Instead, you're lumping it into the regular revenue, and yes, expenses are a percentage of revenue, but FSC isn't revenue. Or at least you didn't earn it. If anything, it's FSC revenue, and the fuel cost percentage of that revenue is 100%. It shouldn't come as a shock when something that costs 100% of revenue gets lumped into other revenues that it skews the percentages.
The only way that percentages won't be skewed is when fuel costs rise 20% that your total revenue also rises by 20%, and not merely by the amount of the increased FSC. Then, the fuel cost percentage of revenue will remain relatively constant and relatively meaningful.
If the electric bill at a retail store is $500 a month, and it suddenly goes to $2000 a month, that's gonna take a huge hit on the percentage of revenue, I know. But if the electric company gives you a check for $1500 every month to go towards your electric bill, or if you levy $1500 worth of surcharges to your customers to exactly offset the increased cost, what difference does the percentage of revenue make? You can complain that the electric bill is $2000 a month if you want, but it doesn't change the fact that it's only costing you $500 a month.
Or, lets say you charge $4.00 for a gallon of gas that you paid $3.95 a gallon for, so you make a nickel per gallon in profit. Your fuel cost is 98.75% of revenue. But the credit card companies charge 3% for retail fuel purchases, which is $0.12 per gallon. There goes your nickel, and then some, cause now you're paying $3.95 plus $0.12 per gallon, for a total of $4.07 a gallon.
So, for credit card purchases, you charge $4.12 a gallon. It costs you $4.07 a gallon, and you're selling it for $4.12, so your fuel cost is now 98.79% of revenue. Your fuel costs have gone up by .04% of revenue. The credit card company takes $0.12 of each gallon, leaving you with $4.00 in revenue, less the $3.95 you paid for it, which gives you $0.05 in profit. So, really, what difference does 98.79% versus 98.75% make? Nuthin'.
I'm not saying there is anything wrong with looking at the total paid out for fuel as a percentage of total overall revenue. It's interesting, I suppose, but since the FSC covers part (or all) of your fuel costs, to look at a rising fuel cost percentage while dismissing the FSC that pays for it, it's a meaningless figure. All your figures show is that the cost of fuel has gone up in relation to the revenue. Nothing more, nothing less. It certainly doesn't show you're making any less because of it. If fuel goes to $10 a gallon, as long as the FSC keeps pace, I don't care. It'll certainly kill my fuel cost to revenue percentage, but again, I don't care. I care about the bottom line, tho.
Granted, these are simplistic figures and there are accounting and tax considerations that I'm not going into, and as Greg mentioned, some companies are playing with line hauls and FSC which have an effect on revenue, but basically, if the FSC keeps pace with the cost of fuel and pays for it, the percentage of fuel to revenue is pretty much irrelevant.
But, if you think I should care, I'm absolutely open to hearing why. There's an awful lot I don't know, and I've never claimed to be anything other than an idiot. And on this subject I may very well be, too.
CharlesD
Expert Expediter
To use the shelled one's analogy, a dollar is still a dollar no matter how it's broken down, and that's what I take into account when I bid for loads. I don't care what you call the money, it's still money and it still spends the same. A rose by any other name...
Right now is a difficult time in this industry, but that doesn't mean one can't succeed. It really depends on how business savvy you are and how much you want to be home. I get home a lot, but I live in a good freight area. There was a time when there was "easy money" in expediting, but those days are behind us and it's only the smart ones who will survive.
My advice for someone getting in would be to come in with a boatload of money saved up. You'll need it. Be miserly with your fuel. Do everything you can to save a dollar here and a dollar there. Some of us are doing ok, but it's not easy. If you have a good thing going and you're home a lot, why change?
Right now is a difficult time in this industry, but that doesn't mean one can't succeed. It really depends on how business savvy you are and how much you want to be home. I get home a lot, but I live in a good freight area. There was a time when there was "easy money" in expediting, but those days are behind us and it's only the smart ones who will survive.
My advice for someone getting in would be to come in with a boatload of money saved up. You'll need it. Be miserly with your fuel. Do everything you can to save a dollar here and a dollar there. Some of us are doing ok, but it's not easy. If you have a good thing going and you're home a lot, why change?
money in and money out.
or gross receipts less expenses.
call it what you want, FSC or income, you have a say ( limited ) on its impact towards your bottom line.
I track my average cost of fuel after applying the FSC so I can determine if my 60/40
split is better than a 40/60.
But bottom line the FSC is income and its lumped into your gross earnings.
Think of a salesman who is on salary + commission + car allowance. The commission is other income. as is the car allowance.
Maybe to compensate expenses, reward effort or create an incentive to produce.
Whatever the reason, bottom line it is incremental income over a standard rate to make the job more viable.
If I were making $800.00/wk net and home every night, I'd probably be content and stay
put and would recommend everyone in that position to be very careful in wanting to leave that money for ANY other job.
And yet, there are those coming into expediting today and tomorrow that will make that
and more. There will be those that will fail, just as there where in the Roberts days, maybe not at the same rate of failure but there is more competition in todays market.
All new business start ups have pitfalls. Be prepared and be wary.
or gross receipts less expenses.
call it what you want, FSC or income, you have a say ( limited ) on its impact towards your bottom line.
I track my average cost of fuel after applying the FSC so I can determine if my 60/40
split is better than a 40/60.
But bottom line the FSC is income and its lumped into your gross earnings.
Think of a salesman who is on salary + commission + car allowance. The commission is other income. as is the car allowance.
Maybe to compensate expenses, reward effort or create an incentive to produce.
Whatever the reason, bottom line it is incremental income over a standard rate to make the job more viable.
If I were making $800.00/wk net and home every night, I'd probably be content and stay
put and would recommend everyone in that position to be very careful in wanting to leave that money for ANY other job.
And yet, there are those coming into expediting today and tomorrow that will make that
and more. There will be those that will fail, just as there where in the Roberts days, maybe not at the same rate of failure but there is more competition in todays market.
All new business start ups have pitfalls. Be prepared and be wary.
Last edited:
moose
Veteran Expediter
I told you my head hurt. Sorry.
I'm not disputing or side-stepping anything. You're looking at your fuel cost percentage of revenue, but what, really, is that telling you? Are you losing sleep over it? Is it telling you that you're losing money because the cost of fuel has gone up? You're not. Not if the FSC keeps pace with the cost of fuel.
Why are you trying to make it so complicated. If you have a Snickers bar, and give away a third of it how much do you have left. My delima is as simple as that.
Why it is a dilemma when you only paid for two-thirds of the Snickers bar in the first place? Somebody else paid for the other third.
But that's not even what's happening. Snickers bars used to cost fifty cents, now they cost seventy five cents. You've got one dollar in your pocket, and it used to be that when you bought a Snickers bar you had fifty cents left in your pocket. So, that Snickers bar was 50% of your revenue. Life was good back then.
Now it's time to buy a Snickers bar, but the cost of peanut butter nougat satisfaction has gone up. They are now seventy five cents, twenty five cents higher than before! But, someone else gives you a quarter to add to your dollar to help offset the higher cost of a Snickers. You buy the seventy five cent Snickers bar with your $1.25, which makes the seventy five cent Snickers bar be 60% of your $1.25. Sixty percent! OMG! In order to keep my cost percent at 50% they should have given me fifty cents, not twenty five! What am I gonna do?
Yet in your pocket, you still have your fifty cents, just like always.
Life is good again.
But that's not even what's happening. Snickers bars used to cost fifty cents, now they cost seventy five cents. You've got one dollar in your pocket, and it used to be that when you bought a Snickers bar you had fifty cents left in your pocket. So, that Snickers bar was 50% of your revenue. Life was good back then.
Now it's time to buy a Snickers bar, but the cost of peanut butter nougat satisfaction has gone up. They are now seventy five cents, twenty five cents higher than before! But, someone else gives you a quarter to add to your dollar to help offset the higher cost of a Snickers. You buy the seventy five cent Snickers bar with your $1.25, which makes the seventy five cent Snickers bar be 60% of your $1.25. Sixty percent! OMG! In order to keep my cost percent at 50% they should have given me fifty cents, not twenty five! What am I gonna do?
Yet in your pocket, you still have your fifty cents, just like always.
Life is good again.
moose
Veteran Expediter
Why it is a dilemma when you only paid for two-thirds of the Snickers bar in the first place? Somebody else paid for the other third.
But that's not even what's happening. Snickers bars used to cost fifty cents, now they cost seventy five cents. You've got one dollar in your pocket, and it used to be that when you bought a Snickers bar you had fifty cents left in your pocket. So, that Snickers bar was 50% of your revenue. Life was good back then.
Now it's time to buy a Snickers bar, but the cost of peanut butter nougat satisfaction has gone up. They are now seventy five cents, twenty five cents higher than before! But, someone else gives you a quarter to add to your dollar to help offset the higher cost of a Snickers. You buy the seventy five cent Snickers bar with your $1.25, which makes the seventy five cent Snickers bar be 60% of your $1.25. Sixty percent! OMG! In order to keep my cost percent at 50% they should have given me fifty cents, not twenty five! What am I gonna do?
Yet in your pocket, you still have your fifty cents, just like always.
Life is good again.
"Maama always had a way to explain things, so i understand..."
Forrest gump.
jaminjim
Veteran Expediter
If you had a profit of 20 cents per mile last year, and ran the same amount of miles this year and had 20 cents profit this year, then who cares what percentage the fuel was. On the other hand running at the same profit per mile will not pay for a new truck, because of the price increases.
hondaking38
Veteran Expediter
you would be down about 25% in profit, food across the board has already risen 25% let alone other commodities
CharlesD
Expert Expediter
I've often wondered about how many things I need to include as expenses when figuring out how profitable my business is. That's why I don't include my cell phone bill in those calculations. Sure, I'll take whatever deduction I can get for it, but if it's something that I would still be spending money on if I wasn't in this business, then I don't figure it in. I know a lot of people would disagree with me there, but that's just the way I do it. I would still be eating food if I wasn't doing this, so I don't consider food a business expense. I had a cell phone prior to expediting, so I don't count that either. It's just me. Really, if you're making more than you're spending and you're happy with the way things are going, then you're successful. If you're miserable, it doesn't matter how much money you're making.
chefdennis
Veteran Expediter
What CharlesD Said!! Especially:
That folks is the buttom line! While i am new to this business, i am not new to being a business owner. We all want and need differnt things for our endeavors, be they business or personal. I have made over $800 a week hated every minute doing it, If this expediting business simply makes a profit for me, that is all I ask for.
The "income" or "wages" that each of us need are totally different and we each might figure out what we want and need differently also. I am in the same way of thinking as CharlesD, I still have to pay for food, cell phone, laundary, entertainment, and numberous other things that I will spend mopney on as an expeditor that I would as a regular joe.
If my cpm figured as I feel I need to figure it is $.42, and I am offered a load paying $.96 including FSC, anyway i look at it I am $.54 ahead........works for me, Hell even if i was $.10 ahead, I am making money, and that works also........
That folks is the buttom line! While i am new to this business, i am not new to being a business owner. We all want and need differnt things for our endeavors, be they business or personal. I have made over $800 a week hated every minute doing it, If this expediting business simply makes a profit for me, that is all I ask for.
The "income" or "wages" that each of us need are totally different and we each might figure out what we want and need differently also. I am in the same way of thinking as CharlesD, I still have to pay for food, cell phone, laundary, entertainment, and numberous other things that I will spend mopney on as an expeditor that I would as a regular joe.
If my cpm figured as I feel I need to figure it is $.42, and I am offered a load paying $.96 including FSC, anyway i look at it I am $.54 ahead........works for me, Hell even if i was $.10 ahead, I am making money, and that works also........
Some people include strictly business related expenses in their CPM, some figure in all expenses incurred. Either way is right, neither is wrong. Main thing is that you understand what the number is and what it represents, or rather, what you want it to represent. You could use the CPM to mean what it costs you to move the truck, or it could be used to mean essentially a net profit number whereby the CPM includes all of your personal expenses, as well.
I pay myself $.32 a mile, for example, and I could simply add that number to my CPM and not even mess with the CPM of food, laundry, cell phone, and other expenses that I'd be paying anyway. Then, on every load I could quickly determine how much money after my pay and all expenses the load will net my bottom line after I'd been paid.
Or, I could leave my pay and personal expenses out of it and keep it simple with truck and business-related expenses only.
Either way works.
I pay myself $.32 a mile, for example, and I could simply add that number to my CPM and not even mess with the CPM of food, laundry, cell phone, and other expenses that I'd be paying anyway. Then, on every load I could quickly determine how much money after my pay and all expenses the load will net my bottom line after I'd been paid.
Or, I could leave my pay and personal expenses out of it and keep it simple with truck and business-related expenses only.
Either way works.