You probably have an estimate already of how much an Owner Operator gets paid with steady jobs throughout the year, but how much do owner operators make after expenses is what really matters. You want to know how much you can you really expect to take home after you pay everything off, and this estimation could be a little more difficult to calculate if you don’t know what expenses you should consider.
As in every business, you should not only consider to increase your sales in order to increase your profit, or in this case to get more highest paid jobs, but also you need to consider that reducing your expenses increases the take-home-cash earnings, and this is different on every owner operator. If you know how to calculate the operational cost, you can find out that some high paid jobs get you less profit than some regular paid ones.
In this article, we are going to cover the most common terms that you need to consider that will help you understand how much do owner operators make after expenses and how it is calculated, whether you are new owner operator or want to become one soon. This information will give you the tools that will help you calculate your Break-Even miles point, which will let you know how many miles per month you need to run in order to start making a profit in your trucking business because how much you take home will depend on this.
Break Even Miles Point
The Break-Even Point is where you trucking business realizes no net income or losses. Anything below this point means you are losing money and your business starts the slippery slope down to failure. This calculation should be performed regularly due to the price changing of your expenses. By doing so you will have your profit-margin range more accurate know how much do owner operators make after expenses.
Now, in the following example we are going to show you how we calculated the number of miles necessary for this owner operator to cover his expenses:
In this example, we have information based on one month period.
-This owner operator has a total fixed cost of $2,484 per month that he knows it has to be paid even if he has loads or not.
-And we see that he gets jobs with an average of $1.5 per mile rate. From this $1.5 he spends $0.56 on fuel and $0.44 on the other variable expenses. Leaving him with a total of $0.5 per mile of profit.
-That means that in order for him to pay the fixed cost he has to divide $2,484 of the total fixed cost by $0.5 that he earns free per mile, leaving him with 4,968 miles that he has to work just break even.
|Truck monthly payments||$ 1,565.00|
|Truck permits / registration (AVG)||$ 333.00|
|Insurance (AVG)||$ 416.00|
|Accounting or legal services (AVG)||$ 100.00|
|Cellphone contracts or CB radio (AVG)||$ 70.00|
|AVG mileage rate||$ 1.50|
|Variable cost per mile|
|Fuel (37% of mileage rate)||$ 0.56|
|Operation (28% of mileage rate)||$ 0.44|
|Profit per mile||$ 0.50|
|Break-Even Miles Point||4,968|
|(Fixed Cost / Profit per mile)|
Operational costs are those routine expenses of running your trucking business, and they are vital to calculate how much do owner operators make after expenses. As an Owner Operator, you should break all of your expenses into two categories; Fixed and Variable. Fixed costs are the ones that usually stay constant month after month, and they need to be paid continuously even if you get loads or not. Variable costs, on the other hand, are the ones that vary depending on the kind of load and the HOS you drive.
Do the exercise adding up all your fixed costs and divide the total cost into the days of the month you normally work or expect to work to find out what the daily expense of running your business is. You will now have exactly how much waiting for a job is costing you.
Examples of variable cost:
You can also do the exercise with the variable cost to get the vehicle operating cost per mile, but in this case, you can do it for an actual job you have. This is what it’s called the Round-Trip report. Summarize all the expenses that trip causes you and the total income you received, and calculate how much was the profit. Don’t forget to include everything, and also very important to consider the empty return loads, if it is the case, because you don’t get paid for this miles, but you have considered it an expense, a very expensive one by the way. And also if you get paid per diem. Many truck drivers do not like to include this point but it is essential on knowing the truth about how much do owner operators make after expenses.
This is exactly how much do owner operators make after expenses are calculated by taking the gross income and subtracting the total expenses of your trucking business. In this case, we are not considering taxes yet, because deductions may vary.
Net income varies greatly depending on the season, that is why we recommend you to measure how much you make in a year, that will give you a baseline for improvement. And if you have all your expenses organized you can come up with ideas on how to reduce expenses in order to improve your net income. Remember that this is your business, and as the owner, you should know where every dollar went.
This following example is just an estimated percentage of the common expenses to get you an idea of how much do owner operators make after expenses, and what could be the profit per mile if you have consistent runs throughout the year. Always consider having a margin of safety.
|Driver’s wages & Benefits||23%|
|Repair and maintenance||10%|
|Permits and license||1%|
Consider the following suggestion to continue improving your net income in your trucking business now that you have more information you can run with realistic expectations your profitable owner operator business. Continue educating yourself and be aware of new ideas that experience truckers are doing. Here are some that could come in handy:
We hope this information was helpful for you in getting a better understanding of how much do owner operators make after expenses. Remember that it will always depend on how skilled you become on running your owner operator business.