But like most of the things in trucking business first sight is not always something that provides the best information you need to have in order to manage your company costs. Every trucking company owner should have few things in mind when dealing with fixed costs:
- Cost Structure – it is very important to have in mind what is the structure of your variable cost. Now days companies that offer you products and services are very creative when it comes to making variable cost a fixed one. For example your business goes up and you decide that you need another license for your software for the extra staff you hire. If they require a 3 year contract in place with every month payments – you just generated a new variable but indeed fixed cost. Watch for these proposals.
- Variable Cost Acceleration – a lot of companies feel excited when the business starts to accelerate, there is a lot of new opportunities, new possibilities to hire new drivers, sign new contracts or to find a dozen of great loads. But be carefully not to accelerate your variable costs faster than your business is accelerating and creating new revenue. Calculate the amount of variable cost in your trucking company and compare it to the revenue growth. Each 1% or revenue growth increase less than 1% the amount of your variable cost to stay positive and profitable in trucking business.
- Variable Cost Deceleration – having a possibility to quickly reduce the cost when the business goes down or slows down is crucial part of managing a trucking business. Have in mind if your business slows down for any of possible reasons (3 drivers quit, truck accident, contract with your client expired, dispatcher quits) how fast can you decelerate (quit or stop) variable cost. Not just how fast but also at what cost. For example If you use GPS service for your trucks and you need to cancel 3 subscriptions – how fast can you do it and how much you need to pay to do it.
Variable Cost Examples
There is at least five times more variable costs that can be mentioned compared to the fixed ones meaning that there is a special approach required to this segment. Simply once you start operating your trucking company and the money starts coming there is a lot of different ways how to spend it.
