The first of the year is a good time to look at your income and expenses from the previous year. You can see what you actually spent and how much you made. When done right, that information can help you plan for the year ahead. But that’s not the only thing you should do right now. As an owner-operator, you’re a business person. That means you need to be aware of what’s on the horizon for the industry.
Costs will go up in 2021. Here’s what you need to do now to get ready for it.
Calculate Your Cost of Hauling
As an owner-operator, knowing the numbers of your business is as important, if not more, than the miles you drive. Not calculating the real cost of hauling means you may lose money in the long run. Worse, it means you might not charge enough to cover your own costs and pay yourself right now. You didn’t get into this business to go broke, so it’s time to crunch some numbers.
Figure out your price per mile. This needs to include fuel, fuel taxes, tolls, what you pay yourself, the cost of your truck, maintenance and service, supplies, your ELD, everything. Add up how much you pay in expenses in a month or year and divide that number by how many miles you drive during the same time period. That’s your cost per mile.
Consider this your baseline what you must earn to pay the bills today. Now it’s time to deal with future increases in costs. Some of this you can game out and some you will know if you’re keeping up with the trends and business happenings in the trucking industry.
Increase Your Rates Before Costs Increase
This is the perfect time of year to increase your rates. Shippers expect it, and it’s the business-savvy thing to do. You should be looking at your numbers as you prepare for tax time — with the tax accountant you’ve hired. Of course, this isn’t something you should only do once a year, but starting now is better than never doing it at all.
You can see cost increases on the horizon. Now it’s time to factor those cost increases into your cost per mile. Again, think about the increase in a given time period like a month or year and divide that by the miles you drive in the same time period. This will help you figure out what kind of rate increase you need to consider.
When you take on a new job or negotiate a new contract, go ahead and raise your rates. When you do, you won’t have to adjust on the fly. You can bank that new income so that when costs do increase, you won’t feel the hit as a loss until you’ve had a chance to adjust your rates. Increasing your rates after the fact means you still lose money or you overcorrect so much you stop being competitive and lose out on jobs.
One way to deal with cost increases headed your way is to make sure you’re not overpaying for any part of your business — including your ELD. Clutch ELD costs as little as $5 per month after a one-time $25 setup fee – with no long term commitment required. Control the costs you can so you can keep your rates competitive even as other costs increase. Sign up for Clutch ELD today.