Instead of just controlling costs, owner-operators should be focusing on “waste control.” The things you need to run a trucking business, such as fuel and equipment, often get used inefficiently. The resulting waste hits where it hurts the most—in the pocketbook. Remember, every dollar saved goes directly into your pocket.
The following are typical areas where owner-operators can control their costs.
Truck Specs: An aerodynamic truck yields greater load capacity, more comfort, less noise and higher profit than a “show truck”. According to Cummins, Inc., an aerodynamic truck requires 22% less horsepower to maintain 65 mph.
Speed: Experts agree that every mile per hour driven over 60 mph reduces fuel economy by one-tenth of a mile per gallon. The impact of that one-tenth of a mile per gallon over a year's worth of fuel and miles can be significant.
Fuel: Of all the variable costs for an owner-operator, fuel is the biggest expense, but also the most controllable. For good fuel economy, besides speed, which I mentioned above, the following are some things you can control to reduce wasted fuel: limit idle time, check tire pressure regularly and perform regular maintenance.
Road Expenses: By equipping your truck with a refrigerator and microwave, you can eat healthier and save yourself up to $3,000 - $4,000 a year in food costs, while still benefiting from the per diem deduction the IRS allows you to write off.
Communications: Your cell phone is important, but be careful which “plan” you chose. Certain plans, such as prepaid cell phones and phone cards, can wind up being very expensive. A plan that allows for extended use on weekends and nights can be a huge money-saver.
Discretionary Spending: Before every purchase, ask yourself if you are buying something you absolutely need or better yet, whether it will it help your business? If not, keep the money in your pocket. Even if the item is tax deductible, the tax savings are typically only 15% - 30% of the total purchase. For a $500 purchase, you might save $75 - $150 in taxes but you may have also wasted $350 - $425 of your own money.
In the next blog we'll go into more detail in understanding how you are taxed as an owner-operator.