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The key to success as an owner-operator is tight control of your earnings. If you don't know how much it costs you in terms of fixed and variable costs to haul a load, you may be losing money instead of making a living. Do you know your operating costs? If not, read on. Cost per mile, or CPM, is a simple tool truck owners use to measure their operating costs. To figure your CPM divide your total costs by the number of miles you run. For example, if you spend $60,000 on trucking-related expenses in 2000, and you run 120,000 miles, your cost per mile is 50 cents (60,000/120,000). Typically, the biggest component of cost per mile is the truck payment. Suppose that you have a truck payment of $1,800 per month ($21,600 for 12 months), and you run 100,000 miles. Your CPM is 21.6 cents. But if you increase your mileage to 120,000, CPM drops to 18 cents per mile. The hardest part of determining your cost per mile is calculating your fixed and variable costs. It's easier if you already have a budget (and you stick to it). If you don't have a budget, start by listing every cost related to your trucking business: monthly truck payment, fuel costs, maintenance expenses, tolls and scale fees, food and related expenses, etc. It's best to track your CPM monthly. For expenses you pay on an annual or semi-annual basis, it is best to calculate the total expense and divide by 12 to get a monthly cost. Enter your information in the chart below to get an automatic calculation of your cost per mile. Your cost per mile is important for several reasons. You can use your CPM to analyze the profit potential of loads. You can use it to create a budget, forecast revenue and set earning goals. Knowing your cost per mile helps your accountant at tax time and can help you get a business loan when you need one. |