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Using Fixed Costs, Variable Costs, and Contribution Margin to Make Better Freight Decisions

Many owner-operators see a high rate per mile and immediately jump on it without thinking about costs. Knowing your costs is one of the most important parts of running a successful trucking business. For owner-operators, the goal is not just to know your cost per mile. The goal is to use your numbers to know if you are operating as efficiently as possible, and staying profitable. 

Blue semi truck driving on the highway

To do that, focus on three numbers:


  1. Fixed cost per day

  2. Variable cost per mile

  3. Contribution margin per mile


Fixed Cost Per Day


Fixed costs are the expenses that continue whether your truck is moving or parked. These are the costs of time. 


Examples include:

  • Truck and equipment payments

  • Insurance

  • Phone bill 

  • Accounting and bookkeeping

  • Other recurring business expenses


To calculate fixed cost per day:


Total Fixed Costs Per Week / 7 Days = Fixed Cost Per Day


Example:


$750 / 7 days = $108 fixed cost per day


This means your business has about $108 in fixed costs every day, even if the truck is not moving.


Variable Cost Per Mile


Variable costs are the expenses that change based on how many miles you drive. These are the costs of moving the truck.


Examples include:

  • Fuel

  • Maintenance and repairs

  • Tires

  • Tolls

  • DEF


To calculate variable cost per mile:


Total Variable Costs Per Week / Miles Driven = Variable Cost Per Mile


Example:


$1,360 / 2,000 miles = $0.68 variable cost per mile


This means it costs about $0.68 per mile to move the truck.


Contribution Margin Per Mile


Contribution margin is revenue minus variable costs. On a per-mile basis, it shows how much money is left from each mile after paying the cost to move the truck.

The formula is:


Revenue Per Mile - Variable Cost Per Mile = Contribution Margin 


Example:


Revenue Per Mile: $2.25Variable Cost Per Mile: $0.68


$2.25 - $0.68 = $1.57 contribution margin


This means every mile creates about $1.57 of contribution margin that can go toward covering fixed costs and creating profit.


Why This Matters


Contribution margin helps you look beyond the rate per mile. A load may look good because the rate is high, but you still need to know how much is left after covering the cost to move the truck.


For example, if a load is 1,000 total miles and pays $2.25 per mile:


1,000 miles x $1.57 contribution margin = $1,570 contribution margin


If that load takes 3 days to complete, you also need to account for your fixed costs:


3 days x $108 fixed cost per day = $324 fixed cost


Then subtract your fixed costs from your contribution margin:


$1,570 - $324 = $1,246 remaining


This load covers the cost to move the truck, covers the fixed costs for the days used, and leaves money remaining. Once you cover all of your fixed costs for the week, 100% of your contribution margin is profit. 


How to Use These Numbers


When deciding whether to accept a load, ask yourself three questions:

  1. How many total miles will this load require?

  2. How many days will this load take?

  3. How much contribution margin will be left after variable costs?


Do not look only at loaded miles. Include deadhead, repositioning, and out-of-route miles. Every mile creates cost.


Do not look only at the rate per mile either. Time matters too. If a load ties up your truck for too many days, your fixed costs continue during that time.


Final Takeaway


Rate per mile is important, but it does not tell the whole story. Owner-operators should understand their fixed cost per day, variable cost per mile, and contribution margin per mile. Together, these numbers help you answer the most important question:


Is this load actually making me money?

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