Wednesday, 4 November 2015

Business Management Breakdown | Profit Per Mile

Please, recite after me - “The end of the year is almost here.” Again. One more time. This is your anti-procrastination mantra to get your business in gear before 2016 starts. Analyzing your revenue, cost, and profit per mile for each month of 2015 is a perfect place to start. You will be able to fully analyze what factors made you profitable, and forecast what you need to make each month in 2016 to increase your profit margin. We’re going to get into forecasting in just a second, but let’s go over calculating these numbers first.

Profit Per Mile

Revenue - Cost = Profit. For the majority of trucking businesses, revenue is mainly going to be in the form of income (related to hauling a load) and cost is going to be your variable and fixed expenses. TruckLogics does all the calculating for you, but it’s always good to understand how it works.

Once you have your profit, you will divide it by your miles driven for a set date range. You will use total miles driven, including empty and loaded. Even though you’re not generating revenue when you’re empty, it’s still a factor.

For example: $12,500/10,000 mi = $1.25 profit per mile for January. Breaking the numbers down in a month-to-month analysis will provide you with the most relevant information to prepare for the beginning of the new year. Again, Trucklogics does all this for you based on the income, expenses, and mileage you entered into your account. All you have to do click a button and a is Profit and Loss report is automatically generated.

Profit & Loss Report

TruckLogics has a detailed Profit & Loss report that will show all the information needed to predict future revenue and create an expense budget that will maintain your profitability. The P&L report is going to list your mileage, income, expenses, and revenue (including net revenue). It is also going to break all the numbers down to a per-mile figure to give you your base amount - the amount you will want to exceed to increase profit. You will quickly be able to see which loads were more profitable, which customers contributed the most to your profit percentage, and further analyze the factors that increased your income.



Profit Forecast

The wait-&-see method is not going to keep your trucking business profitable. You have to get smart about forecasting what you need to operate and turn a profit. You already have the information you need to forecast your profit per mile for at least the next 6 months. Six months might be a little overzealous, so let’s scale it back and explain how to create a profit forecast for three months (January, February, and March).

First, you want to calculate your revenue, cost, and profit for each month. Then, divide each number by the miles driven so you have your per-mile figures. If you notice your cost was unusually high for one month, see why. If it will be a recurring expense for 2016, then you need to plan to make the revenue to cover it. If revenue for one month was high, look to pinpoint the reason and see how you can increase it even more. Finally, look at your profit per mile for each month. These figures are going to be your base. You don’t want make below these numbers, but you do want increase these numbers for 2016. Set a goal for the profit you want to make and you will be more likely to reach it.

The easiest way to increase profit is to cut back on costs, but you can also try increasing your rates. If you had a full year of safe miles, positive customer feedback, and passed every inspection, then you have some great negotiating tools to increase your rates and generate more income.

Planning ahead and having set goals of what you need to make to turn a profit is going to keep you in business. TruckLogics can quickly generate all the information for you so you can thoroughly analyze your miles, income, expenses, and revenue. We even break it down to a per-mile figure so you have all the information you need to forecast future earnings.

Test drive TruckLogics today and experience the future of management.

For more information on revenue and cost per mile, check out more from our series:

Business Management Breakdown | Figuring Cost Per Mile

Business Management Breakdown | Revenue Per Mile

Let’s Talk

We are hoping you have some questions, because we would love to hear from you. Contact the TruckLogics Crew at our Rock Hill, SC headquarters, via phone: 704-234-6946 or email: support@trucklogics.com.

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