xiggi's point is a good one. Expediter Services will have good guidance for you to follow regarding expenses and profitability, and the more you ask them about it, the more you will likely learn.
Whether you drive a fleet-owner truck or a truck of your own, the process is the same. As WanderingFool pointed out, get good with spreadsheets. This is a skill you can learn if you do not have it now and I strongly urge you to do so.
The spreadsheet used widely in industries of all kinds is Microsoft Excel but there are several others available for free that are more than adequate for a one-truck expedite business. All of them are similar enough to each other that if you learn one, it takes little additional effort to use the others. You can buy books that teach you how to use spreadsheets and there are many free articles online that will do the same. I have not checked but am sure there are online videos that teach spreadsheet basics too.
Again, I strongly urge you to learn how to use a spreadsheet if you do not already know. It is one of the best skills you can develop as an expediter.
In general, you use a spreadsheet to track your expenses and revenue. When it is properly set up and you diligently enter the data, you will be able to determine instantly what your cost per mile is to drive your truck, what your cost per day is to be in the business (whether you drive that day or not), and what your revenue is and average revenue is over a given period of time, on a per-mile basis and per-day basis.
Note that it takes time to keep a spreadsheet. You need to sit down every now and then to enter your data, and the more often you do it, the better. Otherwise the receipts build up and what could be a small job each day becomes a bigger job each week or month that is easily put off.
You will need to track your revenue and expenses over several months to develop a good sense of your true numbers. The longer you track your numbers, the more the short-term variables blend together and the more accurate your picture will be.
Getting back to your question, and by way of example, because we keep a good spreadsheet, Diane and I know exactly how much it costs to drive per mile and how much it costs us to be in business each day (on the road, at home, wherever; the per-day cost averaged over a period of time is the same).
When a load offer comes in, we look at the revenue per mile that load provides (all miles driven, that is, deadhead plus loaded miles), compare that number to our cost per mile to drive the truck and make the load accept/decline decision. With our carrier, load price is negotiable and we often do so if the initial offer is low. We don't always get it, but if the offer is low, we will at least counter with a profitable number.
Profitability is not about taking a load that pays more per mile than what it costs per mile to drive your truck. That can be accomplished with a revenue per mile that is just one penny higher than the cost per mile. Profitability is about taking loads that pay significantly more than than it costs to haul them so you actually have money in your pocket when the delivery is made.
Drivers often ask each other, "Are they keeping you busy?" That is absolutely the wrong question. Instead ask, "Are you making any money?"
When determining the amount of revenue per mile that is acceptable for us on a given day, it is not a formula that is cast in stone. Other factors are considered.
We just agreed to a load yesterday at a pay-per-mile rate that is lower than we normally agree to. But our cost-per-day was very much on our mind when the load was agreed to.
Last week, we delivered a load close to our Florida vacation home. As it seems to happen in expediting, that was the last place we wanted or needed to be because we had just been there for a while and we wanted to be out making money. But we went to the house because we did not get quickly dispatched out, and, as it turned out, we waited for freight here longer than we ever have before. Tick-tock, tick-tock. A day passed by, then two, then three ... tick-tock, tick-tock. While it was costing us nothing to drive the truck (because it was parked), our costs per day continued like clockwork and we grew restless because we were not making money when we wanted to be out making money. Tick-tock, tick-tock.
Then a call came in and we agreed to a 3,300 mile run at a rate lower than we normally agree to. It is still profitable but not by the margin we like. We took the load because the money it will produce keeps us from having a zero week. Nothing kills an average like a zero week, so it was very good news, not only that we would not have a zero week, but that the greater number of miles will put some real money in our pocket; not at the profit margin we like but at a profit just the same.
Had we been busy and not waiting a day or two for load offers, we almost certainly would have declined the load because we normally do better. But when the freight is not moving, you take what you can get.
So, regarding your profitability question, you absolutely must know your per-mile and per-day operating costs, and you consider them together when making a load accept/decline/negotiate decision.
Now, about spreadsheets, it is of VITAL IMPORTANCE that you be brutally honest with yourself when setting up your spreadsheet and tracking your numbers.
Interested in the topic (I once worked as a software instructor teaching people how to use spreadsheets), I have asked several expediters to see their spreadsheets over the years and have learned that just because you keep a spreadsheet, it does not mean that you know the truth about your business. To do that, you have to keep a good spreadsheet. You have to include everything. And you have to be honest with yourself about what your numbers really are.
For example, few of the expediter spreadsheets I have seen include a line for depreciation. Depreciation is an expense, and a big one, but it is not the kind of expense that many expediters are aware of because it is not the kind of expense that they write a check for every now and then.
Depreciation is the declining value of your truck. Diane and I paid $251,000 for our truck, brand-new off the lot in 2006. With 6.5 years and 850,000 miles on it now, it is not worth anywhere near that amount today. The truck declined in value each year, putting downward pressure on our net worth. You can't just buy a truck and not account for this decline in value. You need to put money away each year to replace the truck. This is a business expense that must be included in your spreadsheet if you want a true cost per mile and cost per day figure.
I can understand how many expediters overlook their depreciation expense and end up confused as to why they have worked all these years but have little to show for it. Depreciation is an abstract concept that is not easily understood and accounted for by people who have not been educated about it.
What I don't understand is something that is far more common among expediters who keep spreadsheets. That is the phenomenon of fooling themselves.
This takes many forms. Some might intentionally not count the miles of deadheading home because in their minds, they are not business miles. Others just leave stuff out, like money they spend on hotels because it is, in their minds, "recreation." Other things omitted include paper towels, hand soap, and other such items used in the truck. They are true business expenses but get overlooked because people count them as "groceries" and do not track them, thinking they have to buy groceries at home so it is not a business expense.
My guess is that the people who lie to themselves using their spreadsheets to do so are driven by the desire to believe that they are running a profitable business. Driven by emotion, they look but do not see everything that should be included as a business expense. That produces a lower cost-per-mile and cost-per-day average and the ability to say they are profitable when hauling cheap freight, when in fact, they are not.
The reality is that most expediters do not know their numbers and of those who keep spreadsheets, some think they know their numbers but really do not. These are the reasons why you see so many people pouring their lives into this business only to end up broke at the end.
If you don't want to be one of them, you must be honest with yourself about your numbers and keeping a good spreadsheet is a great way to do that.
The more thorough and honest you are in tracking ALL of your business expenses and revenue, the more accurate your spreadsheet will be and the better decisions you will make when evaluating the profitability of a load.
