It can be hard to separate the truck stop rumors or myths from the facts. As an owner-operator, one of your biggest concerns is revenue. Since most owner-operators are paid on a per-mile basis, this tends to dominate discussions about income because it is easy to measure.
Unfortunately, pay-per-mile is often used as the deciding factor of which carrier to lease with. While pay-per-mile is important, it alone is not an indicator of success, nor does it mean a big settlement check is coming your way. Pay-per-mile must always be looked at in perspective with gross revenue. It can include mileage pay, percentage of revenue pay, loading or unloading pay, toll or scale reimbursement, etc.
Original Article in Team Run Smart Blog by Kaitlan Cathey
Here are the common Trucking Myths on revenue that are just not true:
- Myth #1: Your company is in control of your pay-per-mile. Your company does not have very much influence on the rates it charges shippers; the marketplace sets those rates. Even raising rates a few cents can mean your company will lose loads to their competition. Your company has to make sure their gross revenue stays healthy while keeping rates competitive and operating efficiently. Sometimes the best choice is to lower the rate per mile to increase the gross revenue. You need to be able to recognize the things that will contribute to your gross revenue.
- Myth #2: Running more miles means more profit. Often, when drivers feel like they are working hard but still not making money, it’s because their costs are higher than their income. Revenue is only half the equation – costs are the other half. Costs have to be managed as carefully as revenue to be successful.
- Myth #3: Concentrating on increasing revenue will make you successful. Increasing your revenue will also increase your costs. After covering all your costs, only a fraction of every extra dollar you make goes into your pocket. Alternatively, 100% of every dollar saved will go directly into your wallet.
- Myth #4: More revenue per mile is the answer to all your problems. Pay-per-mile doesn’t change much from company to company, but there can be a big difference in miles, reimbursement, and other fees that affect gross revenue.
- Myth #5: You can tell how well you’re doing by the size of your settlement check. The settlement check is only a small part of the big picture. Miles driven, loads hauled, road conditions, mechanical problems, time off, and especially costs, all have to be considered to help determine the degree of your success.
Too often operators focus entirely on revenue per mile and overlook the importance of gross revenue. Some will even change carriers for one-cent-per-mile difference, and unknowingly sacrifice $10,000 in gross revenue. By focusing on just one element of revenue, things can get out of balance.
Pay-per-mile is usually consistent from month to month. Gross revenue, however, is much less consistent. Changes in your gross revenue can have great effect on your monetary status. Variables affecting gross revenue can include weather, national and local economies, average length of haul, your company’s sales and customer base, seasonal factors, changes in personnel, communication, lanes of operation, competition, and regulation such as DOT compliance.
Here are some tips to help manage your gross revenue:
- Determine a reasonable amount of miles you expect to run. This requires careful consideration of factors such as your age, experience, motivation, financial goals, personal and family needs, health, and the condition of your tractor. Once you have established a reasonable number of miles to run each week, month and year, you have goals to work towards.
- Measure your results frequently. Does your performance match your capacity? Does it match your goal? If it doesn’t, find out why and determine what you need to do to correct it.
- Manage your time. You are your own boss and in control of how you use your time. The time you spend driving and delivering loads determines how much you get paid.
- Establish a relationship and improve communication with your fleet manager. Trust is essential to success and is achieved through on-time pickup and delivery as well as good communication.
Conclusion? You can’t believe every myth you hear out there. It’s not just about revenue and pay-per-mile because you have to consider the whole picture.
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