Updated: Nov 1, 2021
Fuel is expensive right now. This causes owner-operators to change how they manage truck load choices. There are two main factors we will cover that helps Independent Contractors (ICs) understand load choices and common misconceptions we hear that come up based on these high fuel prices.
“Cheap” Backhaul freight
Our first variable comes from a simple factor: load weight. With the current high price of fuel, some people have the attitude that they won’t haul heavy loads. This is a basic misconception that can be squashed with some easy math! The technology of trucks today along with good driving habits means that load weight shouldn’t have much impact. Let’s take a look at a few examples that are extreme, but still, showcase how little load weight should matter in your decisions on choosing loads to save on fuel costs!
“Cheap” Backhaul Freight
How many times have you heard an owner-operator say, “That freight is too cheap for me to haul”? In this market, we are starting to hear “that freight won’t even cover my fuel”. From a business standpoint, there are times when it’s understandable for an owner-operator to think this way. However, we often find that the rationale for owner-operators turning down freight can come from them misunderstanding the true cost of operating their business on a daily basis. Consistent fuel hikes over the last 8 months have made this attitude grow.
If an owner-operator believes the freight they are offered is “too cheap”, many times they will opt to deadhead or skip a day on the road altogether rather than take the load. Deadheading can be disastrous with the high price of fuel. It’s almost always better to haul a “cheap” load so that the fuel surcharge on the load will cover that variable expense of most of your fuel. One thing we hear successful owner-operators telling us right now is that they find the lightest load possible in the backhaul lane just to cover their fuel instead of deadheading.
When running a backhaul lane, we often hear them say they won’t run for anything less than a predetermined amount of money per mile. We don’t believe this is the correct way to look at freight rates. Rather than choosing loads based on revenue per mile, drivers need to look at revenue per day on a round trip or weekly basis. Fuel is a major part of this equation, and the fuel surcharge should be adequate to make up for the high prices right now. This is because whether or not a driver is hauling freight, fixed costs don’t stop. Sitting around waiting for a higher-paying backhaul also increases the likelihood of increased idle time, which is a complete sunk cost in trucking!
In order to have a better understanding of what a driver needs their revenue per day to be, they need to truly know what a day off will cost them. For our clients, the average fixed cost is around $120 - $130 per day. Once they know their fixed costs per day, as well as their break-even point to cover variable expenses, rather than saying “I won’t run for anything less than $1.75 per mile”, they should be saying “I know my breakeven point is $.75 per mile, plus $125 per day, so this is what I need to cover.”
Let’s look at an example of the things a driver needs to consider when deciding whether or not to wait an extra day to get a better-paying load. In this example, we will look at a common designated route between Ohio and New Jersey. The route from Ohio to New Jersey is considered a headhaul. A headhaul shipment is from a high volume area in a dedicated lane that usually pays well. The route back from New Jersey to Ohio is considered a backhaul. A backhaul shipment is the opposite of a headhaul. When a driver is in a backhaul, they want to look for a load that will get them out of there quickly and back into a headhaul lane.
Think of it this way; the headhaul is subsidizing the backhaul. When leaving a backhaul market, a driver can’t afford to be super picky or they’ll force a layover on themselves that will cost them more money in the end. 9 out of 10 times, picking a load to cover fuel costs and fixed costs will be more profitable than waiting. When hauling headhaul and backhaul loads it’s important to always remember to manage the average of the backhaul/headhaul revenue instead of each load individually. Just remember, the fuel surcharge is there to keep the cost of fuel at a base level, use it to your advantage to get yourself back into the strong freight markets as quickly and safely as possible!