FOR: TRUCKERS WHO THINK ABOUT THE FUTURE

This brochure is meant for (starting) individual owner-operators who need to know the actual costs of the transport services they (intend to) provide to clients. It shows you:

• How to get to know all actual costs of your truck.
• How to group different cost items to get a complete overview.
• How to consider capital costs as a reservation for the future replacement of your truck.
• How to estimate km driven, invoiced and paid for by clients.
• How to calculate a cost price per kilometre that allows you to run your business on a sound basis.

To get a complete overview of your actual costs they are arranged in a structured way. Before you can estimate your costs you must first find out some essential data on the operation of your truck. If you do not know these data ask other drivers or NIIAT.

Use market prices to estimate costs. Under circumstances of heavy inflation, use expected prices for your truck and spare parts. If you use historical prices you will underestimate your present costs!

The costs of some items can be determined precisely using shelf prices (filters, fuel). To fix a price for items that you buy only seldom (for which no shelf prices exist) is more difficult. The price of a truck is negotiated and known only when its bought. The next table shows the advantages and drawbacks of different methods.

Best estimating method is using present prices. Otherwise, use either adjusted historical prices and expected prices. The use of historical prices shall be avoided.

In calculating the cost price/kilometre, make a distinction between variable and fixed costs. In the following tables, the variable and fixed truck cost components are explained. The added leaflet provides (1) a calculation example, and (2) the same (empty) form to make your own calculations. Because variable and fixed costs add up to total truck cost a continuing numeration is used. All costs are estimated on a yearly basis.

Variable costs are related to actually operating your truck. They include cost items for labour, fuel, tyres, filters and other ‘consumables’. Whenever you run your truck you have these costs.

You are confronted with fixed truck costs less frequently or sometimes unexpectedly: cost items that are either less directly related to one transport job (cost of licences, insurance, payment of interest on loan) or come unexpectedly (break down repairs). The table shows fixed cost items in detail and how to estimate them. You will have (some of) these costs even if you do not run your truck frequently.

For each truck variable and fixed costs are added up to total truck operating costs. They may well differ from one truck to another even within the same company. They depend on the age of the truck, it's mileage, maintenance condition etc.

Total variable and fixed costs per truck per year are divided by the number of kilometres driven, to get the cost price per km. But which annual kilometrage to use, and how to estimate this?. The cost price is based on the number of annual kilometrage paid for by clients. Starting from the number of calendar days per year (365) and average No. of kilometres/trip, deductions are made for weekends & holidays, for ‘down-time’ because of maintenance, repairs and idleness, for empty return trips and for non-payment of invoices. The method is explained with an example in the attached leaflet.

Finally, your profit margin is added to arrive at the tariff you charge to clients.

The profit margin is the difference between the cost price and the tariff. The realised profit can be used to:

• extend the company;
• maintain a (temporary) reserve;
• be withdrawn for other purposes.

Any budgetary calculation has it's uncertainties. When costs develop differently from what you estimated you have to adjust your cost price calculation as soon as possible and your tariff accordingly. Of course tariffs are strongly affected by market forces. Working (continuously) at a tariff below your cost price means that in the long run you are loosing money.

A leaflet with an example of a calculation as described in this brochure and an empty form to estimate your own costs, cost price and tariff is available/please find attached to this brochure.