The TruckLogics crew is back with the next installment of the Business Management Breakdown series. We’re going to build on last week’s blog about figuring your cost per mile by discussing revenue and profit per mile. All these numbers combined are going to give you a clear view of your company’s financial position. Let’s dive right in, shall we?
Revenue vs. Profit
Before we get really into it, it’s important to have a grasp on the difference between revenue vs. profit.
- Revenue is the income received from business activities.
- Profit is the net income of the business. This is your revenue minus expenses.
Now that the main terms are defined, we can get into the good stuff.
What Revenue Per Mile Tells You
Revenue per mile is going to tell you how much income your company is generating. Your revenue per mile is also going to tie into how you identify profitable loads. You will need to know your revenue per mile and your cost per mile to determine your profit per mile, which we get into in the next section. For our purposes, we are going to figure this number on a monthly basis. The formula for getting this number is to divide your monthly revenue by the miles driven. Here is an example of how to figure your revenue per mile for the month of June:
Revenue Per Mile = Monthly Revenue / Miles Driven
Monthly Revenue Miles Driven Revenue Per Mile
$16,500 11,000 $1.50
What Profit Per Mile Tells You
Profit per mile is going to tell you when you need to adjust your rates to keep your business profitable because it is calculated from your revenue and cost per mile.
- We went over cost per mile and broke down variable and fixed expenses in the previous Figuring Cost Per Mile blog.
For example, if you calculated your profit per mile for the month of April and you ended up operating at a loss due to emergency maintenance on your truck, then you will know you need to charge more in May to make up for that loss. Let’s do some visual calculations for a better perspective.
Profit Per Mile = Revenue Per Mile – Cost Per Mile
Revenue Per Mile = $1.50 Cost Per Mile = $1.076
$1.50 – $1.076 = $0.42
Profit Per Mile = $0.42
Once you have determined your profit per mile over several months, you will clearly see when you need to raise your rates and better negotiate with shippers and brokers. If you are contracted, your profit per mile will assist you in negotiating your rates as well. Rates are always negotiable. It’s just how you spin it.
A profit margin measures how much profit your business is keeping out of every dollar.
When you have your revenue per mile and your profit per mile you can figure your profit margin percentage for a month. To get you monthly profit margin, you would divide your profit per mile by your revenue per mile.
Profit Margin = Profit Per Mile / Revenue Per Mile
$0.42 / $1.50 = .28 = 28% profit margin for the month of June
Bringing the Information Full Circle
One of the main reasons businesses fail in the trucking industry is due to poor financial tracking. You already have all this information, it’s just tracking it can be a hassle if you’re on the road all the time. Knowing and understanding your cost, revenue, and profit per mile is crucial for a successful business.
TruckLogics can keep track of all this information for you, and you can create reports for different date ranges to see your financial position. You don’t have to deal with going through paper receipts and invoices that have been building up for who knows how long. TruckLogics will keep all that information organized and at your fingertips.
When you know what it takes to become profitable, there’s no limit to your success. Give TruckLogics a try with our 15-day free trial
. And be sure to contact the TruckLogics crew to set up a personal demo or ask any questions you may have. You’re not in this alone, we’re always here to assist you. Give us a call at 704-234-6946 or send us an email: [email protected]