Knowing the Cost Per Mile Equals Accurate and Competitive Pricing

The world of the self-employed courier is very competitive. When you’re searching for self-employed courier jobs you have to compete with major contractors as well as other independent operators. All want the same job – and they’ll all go the extra mile to reduce their price and get the load.

One of the factors you should be aware of when bidding for a job, is having an accurate assessment of your operation’s cost per mile. This is critical to your business. A clear and accurate cost per mile figure will enable you to quote a price that is realistic and competitive. It will also assist you in identifying those areas of your operation where greater efficiency could cut the cost per mile and increase revenues.

What Makes Up Your Cost Per Mile Figure?

Basically, we can divide costs involved in running your haulage business into two categories: fixed costs and variable costs.

Fixed costs are the expenses you have even before your vehicle has moved from its parking spot. These are expenses that you have to pay, regardless of how many (or how few) jobs you get. They can include truck purchase payments, insurance, vehicle registration fees, rental of premises, property taxes and so on.

One fixed cost that we recommend including are your wages. It’s all too easy to say that you’ll live off your profits, but you really need to factor in how much you want to earn from your business. If you don’t do this, you may be able to pick up plenty of jobs, but your profit margin could be too low to give you a reasonable wage.

Fixed payments can have a crucial effect on the final CPM total because every day your vehicle stands idle – the fixed costs keep accumulating. You may find it more economically sensible to quote a lower price for a job rather than see your fixed costs escalating and eating into your profit margin. It’s a delicate balance, but one that is vital to your overall competitiveness and profit margin.

Variable costs are just that, costs that fluctuate dependant of any number of factors. They include fuel, maintenance and repair, fines (it happens to all of us) and more. As this is the category over which you have the most control, let’s take a look at some of the more crucial elements that can affect your variable costs.

Fuel – You’ve Got to Burn It to Make Money

This may not be a fixed cost, but it’s definitely a constant one! Your aim should be getting the most miles per gallon. This can be achieved in a number of ways:

• A well maintained and regularly serviced vehicle. A well maintained engine uses less fuel and will breakdown less. Good tyres with the correct air pressure save fuel.
• Good driving skills that conserve rather than “drink” petrol or diesel. These include proper acceleration and braking and overall speed.
• The length of your runs and driving speeds. A constant speed maintained over a longer distance requires less fuel than a series of shorter journeys.
• Start/stop jobs or jobs where you leave the engine running while you deliver or load goods, consume lots of fuel.

Remember that fuel efficiency can be a make or break factor in your profitability. The greater your average MPG, the lower your overall costs.

Servicing & Repairs

Make sure to regularly service your vehicle and get any mechanical faults fixed as soon as possible. A well serviced engine and vehicle with all of its components operating at optimum efficiency can save you a lot of money. Not just on fuel bills, but on repairs and replacements later on down the road as your vehicle gets older.

A badly or irregularly serviced vehicle will be prone to breakdowns – and that costs you money! Not just for repairs but also lost jobs and a lost reputation.

As a self-employed courier, jobs might on the surface appear more profitable if you succumb to the temptation to cut the corners on maintenance to save money. Remember - a pound spent today, can save hundreds in the future.

Tyres

If your tyres are worn or inflated to the wrong pressure, not only are they dangerous, they are also increasing your fuel costs. Check them at least once a week for correct air pressure and regularly for damage and wear. If they need replacing – do it now rather than waiting until they burst. It’s not only your profit on the line – it’s also your life and that of others.

Long Haul Costs

This may not your biggest outlay, but the amount can build up over time. If you have a long trip you may have to stay over and eat out. We’re not saying you should sleep in the back of the van and bring a week’s worth of sandwiches – but don’t go overboard.

Return Loads – Not an Expense, Just a Bigger Profit

Let’s say you’ve won a contract for a courier job. You make your delivery and then head back home with an empty van. That’s a waste of space and a loss of potential profit. The cost of your journey, there and back, has already been covered by the contract, so, why not look for a load that you can pick up at your destination – it’s 100% profit!

To summarise: do the math and do it properly. Take the time to work out your real cost per mile. Make a chart or a spreadsheet with all your costs and your expected mileage and use it to check that you haven’t forgotten anything when you make your final calculation. Then add on a percentage for “unforeseen overheads” and you’re ready to go.

Happy and profitable driving!