#142. Cost Per Mile

A breakdown, a tow, a rental truck, another breakdown, getting ignored by a broker and rushing to make appointments, all in a week's work for one of our drivers and the team that supports him. I have said this before, nothing is easy in trucking and the best company owners are people who can solve problems. We had a lot of problems we had to solve throughout that trip. I start off this episode talking about a truck we had breakdown and the excitement that ensued. It all ended as well as can be expected, the load got delivered, only a day late, and our driver made it home in time for Thanksgiving. 

What To Expect From Episode 142

Your CPM (cost per mile) is one of the most important things you should know and understand well about your trucking company. This is the second time we have dedicated an entire episode to this subject. The first time was over 4 years ago and a lot has changed so we're overdue to dive into it again. We cover a lot in this episode and it is definitely a must listen. The excel spreadsheet with our CPM data is below. It is best to look at it while you are listening to or watching the episode. 

Here are some of the things I feel like you need to consider when it comes to your cost per mile, we discuss each in detail.

• How often you should figure out your cost per mile
• Is it better to calculate your CPM based off one month of data or the average of 6 months worth of data
• When should you re-evaluate your CPM

My Process For Calculating Haulin Asset's CPM

I dive into the mechanics of how I do it. Here is an overview:

1. I pull a Profit and Loss Statement for the most recent month and one for the previous 6 months and export them into Excel.
2. I delete the revenue info. I like a clean workspace without unnecessary data and the revenue info is not needed.
3. I categorize all my expenses as either fixed or variable and group them together. 
   1. Fixed costs-costs that are based on time rather than the quantity miles driven. (I give some examples in the podcast.) 
   2. Variable costs-costs that change as the number of miles driven changes. (I give some examples in the podcast.) 
4. To simplify things, I lump the smaller less significant fixed costs into one group I call G & A (General and Administrative). I do the same thing for smaller variable costs and put them in a group called miscellaneous. 
5. I like a hybrid CPM calculation where some of the expenses are based off the most current month and some of them I use a 6 month average. I explain this better in the podcast. 
6. I take the mileage from the most recent month and divide each expense by the mileage to get the CPM. Using a spreadsheet makes this step pretty easy. 

How Do I Use This Info

In the podcast I cover a bunch of different ways I use the CPM to help me make better business decisions. With that being said, just because I know my CPM doesn't mean I won't take a load that I essentially lose money on. I use some examples of recent loads to explain this better. 

If you haven't actually started your company yet and you want to estimate your cost per mile, Motor Carrier HQ has a great online CPM tool. You can use it to get an idea of what you think it will cost you to operate and that will help you know if you can be profitable based on the rate per mile you think you can get from loads you will be hauling. You can access the calculator by clicking on here. 

To close out, Craig and I talk about how using my CPM as a comparison to yours could be a great tool to give you better insight into your operations.