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What Does it Take to Be Competitive and Grow Your Bottom Line?

Updated: Oct 9, 2021

There are three interlocking forces that one must understand to be competitive and grow their bottom line and business. These forces are the cost-per-mile, market strategy, and the rate per mile.

In general, your cost-per-mile is your total costs divided by total miles driven. This includes your fixed costs and variable costs. Your fixed costs are those costs that you will have to pay regardless if you moved your truck or not. These include things such as yearly insurance costs, payments on equipment, and so forth. Your variable costs are those cost that are incurred when you move the truck or accept a load. These include things such as fuel costs, factoring costs, and so forth. These two added together reflect your break-even-point, or said differently the rate at which if you accepted would cover all of your fixed and variable costs. However, we are not in business to only break-even. We are in business to make a profit. That profit can be increased by understanding and having a market strategy.

Understanding the market and having a strategy to exploit that market lies the key to maximizing profits once you have a firm understanding of your cost-per-mile. Knowing ahead of time, where the market is hot (i.e., more loads than trucks, higher rates-per-mile) and positioning your truck to be in those markets to capture that higher revenue leads to higher profits over-time. There is seasonality in the market trends and other forces at play. But understanding this and then devising and executing your strategy will lead you to increased profits.

The rate-per-mile is the gross pay of the load divided for the miles driven. The highest rates-per-mile are typically in the hot markets, but when you understand your cost per mile, you may be able to thrive and profit in areas of the market where the rates are not the highest. This can be a very attractive option to build a presence in a specific region, lane, or with brokers, shippers as the go to carrier in that market.

Understanding and executing against these three forces can determine which carries go out of business, barely get by or thrive. You can not merely fly by the seat of your pants, you must be the strategist and the numbers guy in order to succeed.

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