Table of contents for Owner/OP 101

  1. Fixed Costs
  2. Variable Cost

Today I am starting a series on the tools you need to be an Owner/Operator. I am planning to go about this by discussing one topic at a time over the next few weeks or months. We will delve a lot into the economic side of running your own business, how to figure the real cost of doing business and see if you are really making any money on the road. We will also go into subjects such as leasing vs. owning, truck specs, and any other subjects that people want to learn about.

First off we need to get some basics down, so I’m going to cover some simple basic terms used in accounting, because if you do not know how much your spending then you can’t know how much your making.

Now everybody settle-down and take your seats, todays topic is the dreaded subject of:

Fixed Costs:
Fixed costs are simply the expenses in your business that do not change on a day to day basis. I like to think of fixed cost as the amount of money that I have to pay for my truck to sit in my driveway and not move freight.
Fixed cost include such things as:

  • Truck payment
  • insurance
  • base permits
  • interest
  • depreciation
  • Federal highway tax

I like to figure my fixed cost on a weekly and a daily basis. Weekly will help you figure how much you should make at the end of the week and we need to know our daily cost to make informed decisions on load selection.

Now, lets dust off those calculators, say you add up all of your fixed cost and figure it out to be $3000 per month. We now know that it cost us about $100 per day for that truck to sit out here on my driveway ($3000/30 days = $100 per day). Now we know that if we run a load that takes 3 days to deliver, it will cost us $300 in fixed cost.

If your fleet manager comes to you with this great paying load that he says pays $2 per mile for 1000 miles but has 4 days on it to before you can deliver then you need to look at whether or not this great load actually pays. This load will cost you $400 in fixed cost before you make a single penny on it. Kind of takes the wind out of that great paying load doesn’t it?

Fixed cost generally don’t change with the number of miles you run, so your per mile cost of fixed cost goes down with number of miles you run. This is something I think a lot of dispatchers just don’t understand. I look at it this way, I have to drive X number of miles each week just to cover my fixed cost, I need to turn a basic level of revenue each day to cover this expense.

I hope I haven’t confused all of you, it will all make more sense as we go along. Next time we’ll cover variable cost.
Be safe;
Don Rogers

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