Are you considering getting into the trucking industry? Or perhaps you are already running a small fleet, but you are wondering whether your business is really profitable or not. Trucking involves a lot of expenditures from office rental, truck maintenance as well as tools, to your travel expenses, such as food, hotel accommodation, and fuel. The list can go on and on. Simply put, these items may eat up all the money that should be going into your pocket.
Do not get discouraged, though, because if you know how to streamline the costs, you should be able to have higher revenue. But in order to do that, you must have a better understanding first of the different expenses that your trucking business entails and how to reduce them.
Below, we have highlighted all the possible expenses that you will come across as you operate:
These are expenses that are easy to project as the amounts remain the same every month. They usually come with due dates too.
1. Office Rental
Although you can also do your transactions from home, having an office is still necessary to establish the credibility of your business. But, of course, this comes with a price. Depending on the location of your office, you may end up paying anywhere from $500 to $1000 every month. It could even be more than that.
Since office rental is something that you will have to pay on a monthly basis at a fixed rate, you should be careful when choosing one. If you think that your current office is costing you too much, then consider looking for another place; one that is cheaper.
Now here comes one of the biggest expenses that you will have to deal with: insurance. As an owner-operator, you need to get plans that will cover collision, bobtail, and cargo. A safe estimate for these would be from $5000 to $10,000, and that is only for one truck.
You can also avail of workman’s comp, which is quite useful in case you hurt yourself while working. This may cost around $180 every month. Aside from this, you need to consider getting health insurance as well.
Looking at the figures, insurance could really take a huge chunk of your earnings. What you can do is be smart enough when choosing the insurance company that you will go with.
3. Truck Payments
You are lucky if you have already paid your truck/s in full. Otherwise, you would need to factor in the monthly payments for each one of them to your business expenses. But what if you realized that the installment is just too high? A good option would be to refinance, so you can prolong the number of years that you will have to pay for the truck, and, of course, to reduce the interest rate as well. All of these would lower your monthly truck payments.
4. Permits and Licenses
Needless to say, you won’t be able to operate if you don’t have the necessary permits and licenses, and these also come with a certain price, depending on which state you are in.
As the term suggests, these are the expenses that have varying amounts. Factors that can dictate the costs include the amount of time that you are on the road and your destination.
When it comes to variable costs, fuel is probably the biggest that you will have, especially if you are hauling from state to state (long haul). It may run to $70,000 or even more. It all depends on the places that you go to. You can figure out a more accurate cost if you multiply your truck’s average cost per mile by the number of miles that you expect to travel.
2. Truck Maintenance
Even if your truck has already been paid in full, you still have to spend some money on its maintenance. You also have to invest in tires from time to time. In fact, this item is the second biggest cost that you need to handle as you run your business.
In order for you to get more business, you need to find as many loads as you can. However, this alone can be challenging. This is the time when you need the help of brokers. And again, this would cost you money. It is going to be worth it, though, as long as they can find a decent amount of load for your company.
If you go for a long haul, you will have to take care of your accommodation as well. If your truck has a cab, then you can utilize that to save money.
You will realize that the cost of food and drink is just behind that of the fuel and truck maintenance, so you really have to be careful. Work on a budget for your meals. However, those that you can buy from the truck stops could also be overpriced, so it is advisable that you bring your own meals instead. You can keep them fresh in a cooler.
The Importance of Reducing the Costs
Obviously, reducing your business costs will give you more money for you to take home. You can also use the extra funds to save up for possible expansion in the future.
Aside from the strategies that we have mentioned above, there are other things that you can do to minimize your spending. But whatever you do, see to it that the overall quality of the service that you are providing to your customers won’t be compromised.
Furthermore, for the expenses that we have highlighted, whether it is fixed or variable, it is extremely important that you keep the receipts for every single one of them, and record them in your books. This will significantly benefit you once you file your taxes.
Take note that most of the trucking expenses can be claimed as write-offs as long as you have supporting documents. This will improve your income tax return come the time.