Recent months have been rough for small carriers and owner-operators. The impacts of high fuel costs, inflation, and more have made it especially challenging to keep operating costs low and maintain the same profit levels.
DAT’s analysis shows that costs today are around $2.01/mile, up from approximately $1.77/mile a year ago. This represents a 14% increase in operating costs, primarily due to fuel prices. Compared to last year, the average fuel cost has gone from $0.52/mile to $0.76/mile today, a 52% increase. Fuel is the highest cost for owner-operators and represents about 38% of total operating costs.
With costs rising and owner-operators facing a down market, optimizing your operations and running your trucking business efficiently is more important than ever.
The benefits of optimizing your operating costs
Planning and strategizing are essential parts of being a carrier. Here are a few key reasons why it’s necessary to optimize your operational costs:
Maximize financial efficiency by understanding day-to-day costs. Refueling, deadhead miles, and even the money you spend on meals can eat into your profits if you’re not careful. Keeping tabs on all the areas where you spend helps you know exactly where you can cut costs and improve your profit margin.
Ensure that you’re actually making a profit. Even if a load looks like it would pay well, carriers need to consider many other factors to determine whether it’s worth taking or not. No trucker wants to find out that they barely made a profit or just broke even on a haul.
Make informed decisions that lead to long-lasting success. The trucking industry is cyclical, and even the worst markets will rebound eventually. Costs will return to normal, and rates will grow. Learning how to outlast downturns like the one we’re experiencing this year will set you up for even greater success once conditions improve.
Solutions for managing your operating costs
Let’s go through some tips for optimizing your operating costs and tools and resources that can help you along the way.
Determine your weekly truck targets. Setting a goal for what you want to achieve for your truck within a 6-day work week is the best place to start. To start, your goals should include:
- Which equipment types you want to haul
- Amount of miles per week
- Desired truck revenue per week
By giving yourself benchmarks to hit, you’ll be able to gauge how effectively you manage your costs. You may also need to adjust your goals and expectations to match the market. For instance, if fuel costs are up, you may want to decrease the miles driven per week, which means you’ll have to haul loads closer to home or find other ways to maximize fuel efficiency.
Understand your monthly fixed costs. Many main operating expenses that carriers need to track will generally stay the same over time. These costs include:
Equipment payments: Many independent carriers or small fleet owners lease, finance, or take out loans for their equipment.
Insurance: It’s essential to ensure you and your equipment are protected while on the road. Auto, cargo, and health insurance are all necessary costs for carriers to keep track of.
DAT offers cargo insurance to carriers through our partner Loadsure so that you can haul loads with peace of mind and save money by paying on a per-load basis instead of a monthly or yearly rate.
Permits: The permits you must get will depend on your equipment type, location, and more.
Understand your monthly variable costs. While your fixed costs are a predictable part of your operating costs, your variable costs are where things get trickier. They can change drastically depending on the market and include factors like:
Fuel costs: Early 2022 saw one of the biggest jumps in fuel costs that the industry has seen in recent years. While prices have eased slightly in the second half of the year, fuel costs are still nearly 50% higher than they were last year around the same time, according to DAT Trendlines.
Because fuel is a significant contributor to carriers’ operating costs (Today, fuel makes up 38% of total costs), a plan for refueling before you haul a load should be a top priority. Each time you set out, you should clearly know how much you’ll need to spend on refueling.
Tolls: Depending on your destination, the frequency and cost of tolls can vary quite a bit. Even if a load pays well, it’s important to factor in the tolls you’ll encounter along the way, as traveling along a route with many expensive tolls can quickly cut your profit margins.
One potential workaround is using the “avoid toll roads” feature many GPS apps have. Of course, some toll roads may be unavoidable, or the detour is too time-consuming and will use up more fuel. In that case, it might signal that you’ll need to find a load that suits your needs better.
Fines: Regulations are important for staying safe, but the penalties you receive for not following trucking regulations represent an unnecessary and easily avoidable cost. Common fines related to moving violations, Hours of Service (HOS) violations, improper loading, and more can cause financial headaches for carriers.
We assist independent carriers with following regulations from the start with DAT Authority. By helping you deal with paperwork, permits, and other legal necessities, carriers can have greater peace of mind when they set out.
Scale fees: While the fees for using scales may seem like a hassle, truck weighing ensures that a truck doesn’t exceed weight limits on certain roads or highways. An overweight truck can cause damage or raise the likelihood of an accident, leading to even higher financial costs.
The DAT One mobile app allows carriers to view the nearest weigh stations and track how much it will cost, making it a regular part of prepping to haul a load.
Taxes: While company drivers will typically have their taxes deducted from their paychecks, independent owner-operators do not and are required to pay taxes each quarter.
Naturally, how much you’ll owe will depend on your earnings. Still, generally, it’s a good rule of thumb for owner-operators to save approximately 25% to 30% of their weekly income to prepare for this particular cost.
Turn your trucking business into a well-oiled machine with DAT.
For owner-operators, cutting operating costs is the name of the game. Once you understand where all your costs are coming from, managing and optimizing those operating costs can become a routine and straightforward process, and long-term success will be within reach.
Check out The DAT Exchange, our new carrier resource hub, to learn more about how to improve your trucking business and grow your rates.