Driver's Breakeven Analysis

[Scott T. Nixon]

Just for anyone's info, I've come up with a breakeven analysis. I realize there are a lot of different versions out there but I think mine is flexible enough to allow for more accuracy and reality. Two of the biggest calculations in the breakeven are multipliers for time off (no one realistically wants to work 365 days per year), and deadhead and out of route mileage (which can add up to more than 25k miles per year for some drivers). Please have a look at it. And of course plug in your own numbers:

(Final Version 5.0)
If you have Excel and want to plug in your own numbers, e-mail me at [e-mail] and I will be happy to send you the file. It looks better on Excel:

Breakeven Analysis
R = (FC / Total Paid Miles) + VC, where

R = breakeven rate per mile
FC = fixed costs
VC = variable costs per mile

Example: Miles Driven (monthly) = 12,000 (10,000 paid, plus 20% deadhead and out of route)

Monthly Fixed Costs

Salary 6000
Truck Payment 1500
Insurance 900
Phone 75
Load Board 70
Reg. & License 200
Laptop 25
Family Health/Dental 600

Total 9370

Per Mile Variable Costs
Fuel 0.38 (6.5 mpg/2.50 price per gallon)
Repair 0.10
Tires 0.04 (2 steers @ 600 + 16 drives/trailers @ 400 = (7600/12 mos.)/12,000*.67, since we are getting 180k miles per year out of the tires, not just the 120k that we will be driving; our tires should be able to roll over to part of the next year!
Misc 0.03 (Tolls, faxes, copies, ATMs, scales, showers, office supplies, etc. = 300

Total 0.54

(FC / Total Paid Miles) + VC = Breakeven Rate Per Mile, or
((9,370 *1.2)/10,000)+(.54*1.2) = $1.78

$1.78 (Rate you should be charging to break even @ $60k per year salary, assuming fuel at $2.50 per gallon and 10k paid miles per month, with approx 20% deadhead and out of route miles)

*************************************
*Since we have assumed taking two months off per year (that is, working 10 out of every 12, or 5 out of every 6 days), we must use a multiplier, 1.2, to reflect the fact that we still have fixed costs to pay during those two months we are not working (12/10 = 1.2)

*Income is based on working 10 months of the year. You probably want to figure time off for yourself, so it's not reasonable to assume 12 full months @ $5,000 per month; better to assume 10 months @ $6,000 per month; a salary less than this ($60k per year), and you could probably do almost as much as a company driver; why take on the liability and financial risks of an owner operator if you're not expecting to make more money than a company driver? As for two months off, it comes down to 12/10 total on-duty time, or 6/5, which is working five days out of every six, close to the industry standard

*The variable cost per mile ($.54) is multiplied by 1.2 to account for the deadhead and out of route miles (20%), since, though we are not paid for them, still cost us money to operate

*This is not -- I repeat, this is NOT -- a new truck. It's a dependable and reliable enough truck to make on-time deliveries, a 2006 Volvo, but it has 400k miles on it and I have to breathe the previous owner's dog's hair. I can't imagine what a new truck payment would do to the monthly fixed costs here.

*Registration is $2,400 and is paid one time at the beginning of the year, but since it has to be renewed every year it is best to divide that cost by 12 months, or $200 a month

*Laptop is $900 and is depreciated over 36 months, or $25 per month

*Insurance includes primary liability, bobtail, and cargo

There are four other blank areas where you can add any fixed costs that you might have specific to your business, and Excel will add them up for you in the Total column

*I have used a monthly Miles Driven because most of your variable costs will be calculated on a monthly basis, thus making it easier to estimate a total

*Total paid miles is 10,000; don't forget to allow for out of route and deadhead miles between loads (20% in this example)

*Tires are calculated @ $600 per steer tire, $400 all others, lasting 180k miles total, of which 120k miles is .67 times their expected life. Now, these are top of the line Michelins priced here; you could probably downgrade a notch to Bridgestones, and maybe even Yokohama retreads on the trailer if you wanted and save $1000 or $2,000, but just remember that if those Yokohama retreads don't make it to 180k miles, then you have to use a higher multiplier. (120k/180k = .67, thus the .67 multiplier.) If those Yokohamas only make it to, say, 120k miles, you'll need to use a multiplier of 1.

Formula is calculated thus: We are looking for the rate here (R), so the breakeven is the total paid miles driven, or 10,000 miles; take that number and divide into fixed costs times the time off multiplier of 1.2, then add variable cents per mile multiplied by 1.2 to account for unpaid deadhead and out of route to get the rate that should be charged to break even.

[Frederick Schaffner]

Scott,

Excellently laid out. You have done a great job with this post, and I'm certain many will benefit from it. Would you consider spending a little time on air with me and my brother about this issue? I believe many of our brother and sister truckers could truely benefit from a conversation about this very important factor of operations.

~SilverSurfer~