There are a variety of metrics that are important for owner-operators to know about before they open their doors for business. Among the many metrics that are crucial for owner-operators to understand, cost per mile might be the most important of them all.
Knowing how to calculate cost per mile can go a long way in providing the insight necessary for helping owner-operators. Keep reading to get more details about the benefits that owner-operators reap by understanding how to calculate cost per mile.
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Why Is it Important to Know Your Cost per Mile?
There are numerous reasons as to why knowing how to calculate cost per mile is a must for owner-operators. One of these reasons is the fact that this information can make you aware of unsustainable spending patterns.
Knowing how to calculate cost per mile can help owner-operators understand if their prices are too high or low. Having a proper understanding of how to calculate cost per mile can help owner-operators reach profitability goals.
What Do You Need to Know to Calculate Cost Per Mile?
When calculating cost per mile, owner-operators need to have a few details about the business handy. Those details include:
Fixed expenses are important to know when calculating cost per mile. This expense ties into the total number of expenses owners incur for having the truck out on the road. An example of a fixed cost is a monthly truck payment because it stays the same regardless of how many miles it’s been driven during the course of a month.
Owner-operators should know their variable costs because those are the expenses associated with mileage. Fuel expenses are an example of variable costs because the amount that’s spent on fuel probably varies from month to month.
Salary and Benefits
Salary is an important figure for knowing cost per mile because drivers who are out on the road may be paid at different rates. The same goes for benefits that any drivers have access to. Incorporating those costs helps to provide an accurate idea of the total costs owner-operators are faced with.
4 Steps to Calculate Cost per Mile
After gathering the data necessary for calculating cost per mile, the next step is performing the equation. The steps for how to calculate cost per mile are:
Step 1: Determine Your Total Number of Miles Driven per Month
The first step determining the exact cost per mile starts with determining how many miles that have been driven in a month. Most owner-operators report around 100,00 miles driven per month. When determining how many miles have been driven within the course of a month, remember to include miles that were compensated.
Step 2: Determine Fixed Cost Expenses
Fixed costs are expenses that don’t change from month to month or year to year. They often include things like insurance costs, permits, and monthly truck payments.
Step 3: Determine Variable Cost Expenses
The next step in figuring out the cost per mile is accurately determining variable cost expenses. Unlike fixed expenses, variable expense costs can change from month to month depending on how many miles have been driven. Variable expenses often include truck maintenance, fuel, and freight-related costs like dispatching services.
Step 4: Calculate Cost per Mile
After getting the proper details necessary for calculating cost per mile, the final step is to use them to find out the cost per mile. That’s done by dividing the variable costs by the total miles driven, then dividing the fixed costs by total miles driven.
After that, add the two totals together. The final answer, which is the sum of the fixed cost per mile and the variable cost per mile, is the total cost per mile for the month.
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The typical cost per mile for trucking is within the range of $1.16 to $3.05 on average.
Owner-operators typically make anywhere from $1.50 to $2.50 per mile.