One of the most common questions that new owner-operators ask industry veterans is “how much will I make per mile?” Often, they hope for a simple answer, such as $1.50 or $3.00 per mile. The fact is that there is no standard answer.
In this article, we help you determine how much you will make. More importantly, you will determine the price you should charge shippers and freight brokers so that your trucking business is profitable.
Step 1: Do not buy your truck yet!
The biggest mistake that new owner-operators make is buying their equipment before figuring out all the other details of their trucking business. This is a big mistake – often a fatal one. Here is why. The last thing you want is to invest most of your money in equipment you won’t use because the industry/lanes/rates that you thought you would use don’t support your desired salary.
The smart thing is to go through the planning process first. Your only cost is effort.
Step 2: What industry will you support?
Determine what industry you want to support. This decision helps determine what equipment you need to buy. For example, if you plan to move produce, you need a reefer. If you plan to move grains in the Great Plains, you need a hopper truck. Other industries have their own requirements, such as dry vans or flatbeds.
It is best to know the industry that you want to work with before getting into it. Each industry has its own characteristics, such as seasonality, price variation, and so on.
Step 3: Where are you going to be based?
The industry you support will be determined, in part, by where you live. It is crucial to pick an industry that is serviceable by the freight lane you want to use. And it makes sense to pick a freight lane somewhat close to your home. Picking the right industry and freight lane helps you maximize your home time, which is extremely important when you spend your life on the road.
Step 4: What freight lane do you want to work?
Now that you have determined the industry and your home base, determine what lanes you are going to work. If you are a new owner-operator, our colleagues at Learn to Truck recommend that you pick a lane near one of the “hot markets” in transportation.
Learn to Truck recommends markets such as Chicago, Atlanta, Memphis, Texas, and Louisiana. Markets on the west side of the country include Seattle and California.
For example, let’s say you are based in South Dakota. One option is to support the produce industry. In that case, pick a lane that takes you from Chicago (a hot market) to the Pacific Northwest.
Step 5: What do my chosen freight lanes pay per mile?
The next step is to determine what your chosen lanes pay. The easiest way to do this is to go to a free load board and look for loads in that lane. Some load boards provide full details on each load, while other boards provide only the pickup, destination, and contact name for the broker. Follow this process:
- Get quotes on at least 10 loads
- Get the average pay-per-mile (divide the pay by the total number of miles)
- Average the pay-per-mile of the 10 loads
This calculation should get you the average per mile for that lane going in one direction. However, now you need to find a load to pull back to your original point of departure. Repeat the above process for loads going in the opposite direction.
It is not unusual for a load going in one direction to pay a different rate than a load coming back in the opposite direction. We have a spreadsheet that helps you figure this out (download – price per mile).
In this example, we look at the price of a 10 loads from State A to State B. Then, we look at 10 loads from State B back to State A. Here is an example of how this looks:
| Miles | Pay per Load | Pay per Mile |
|---|---|---|
| 1,500 | $3,500 | $2.33 |
| 1,555 | $3,650 | $2.35 |
| 1,467 | $3,700 | $2.52 |
| 1,589 | $3,900 | $2.45 |
| 1,478 | $4,000 | $2.71 |
| 1,543 | $5,100 | $3.31 |
| 1,534 | $3,800 | $2.48 |
| 1,589 | $3,760 | $2.37 |
| 1,601 | $4,100 | $2.56 |
| 1,569 | $4,900 | $3.12 |
| Average | $2.62 |
| Miles | Pay per Load | Pay per Mile |
|---|---|---|
| 1,500 | $4,500 | $3.00 |
| 1,555 | $5,000 | $3.22 |
| 1,467 | $5,100 | $3.48 |
| 1,589 | $6,100 | $3.84 |
| 1,478 | $5,500 | $3,72 |
| 1,543 | $5,300 | $3.43 |
| 1,534 | $5,100 | $3.32 |
| 1,589 | $4,900 | $3.08 |
| 1,601 | $6,000 | $3.75 |
| 1,569 | $5,500 | $3.51 |
| Average | $3.43 |
Step 6: Determine broker vs. shipper rates
The next step is to determine how much shippers are paying the brokers. This knowledge is important if you want to run a profitable business.
A broker’s quote to a shipper includes their expected carrier cost plus a markup. The markup is the broker’s profit. Obviously, when the broker posts a load on a board, they subtract the markup.
The exercise in the prior step gave you an idea of how much a broker would pay you to move a load. However, you need to know how much shippers pay brokers. Why? Eventually, you want to work directly with shippers. You want to quote them a number that is competitive with what brokers are quoting them.
Remember, when you work directly with shippers, you keep all the profit. You don’t share it with a broker.
Broker markups vary. Some charge 15%. Others charge 20% or more. The following table uses the information from the prior example (in Step 5) to estimate the price that the broker is charging the shipper.
We must consider this for loads in both directions. This is how it looks.
| Broker Profit | 20% |
| Broker Mile | Shipper Mile |
|---|---|
| $2.33 | $2.92 |
| $2.35 | $2.93 |
| $2.52 | $3.15 |
| $2.45 | $3.07 |
| $2.71 | $3.38 |
| $3.31 | $4.13 |
| $2.48 | $3.10 |
| $2.37 | $2.96 |
| $2.56 | $3.20 |
| $3.12 | $3.90 |
| $2.62 (Average) | $3.27 (Average) |
| Broker Mile | Shipper Mile |
|---|---|
| $3.00 | $3.75 |
| $3.22 | $4.02 |
| $3.48 | $4.35 |
| $3.84 | $4.80 |
| $3.72 | $4.65 |
| $3.43 | $4.29 |
| $3.32 | $4.16 |
| $3.08 | $3.85 |
| $3.75 | $4.68 |
| $3.51 | $4.38 |
| $3.43 (Average) | $4.29 (Average) |
The column “Broker mile” in this table comes from “Pay per mile” in the first table, where you calculated how much a broker would pay you for a load. The column “Shipper mile” is an estimate of how much the shipper pays the broker. The example assumes that broker marks down a load by 20% when offering it to a carrier.
As mentioned, the best strategy is to work with shippers directly and quote them a cost that is competitive to what brokers charge them. To succeed as an owner-operator, you need to know how to get your own trucking contracts so you can get high-paying freight loads. It’s hard to make a good living as an owner-operator just by using load boards.
Step 7: Are those lanes profitable for you?
Your next step is to determine how many round trips you’ll be able to make in a month. This step, along with the information in the previous two steps, allows you to determine your expected revenues.
To make this calculation, add how much you made taking a load to a destination to how much you made pulling a load back. These two loads equal one round-trip. Multiply the round-trip revenue by the number of round-trips you can make in a month to determine your monthly revenue.
Now that you have your revenue, you can calculate your expected profit by subtracting all your expected expenses.
As an owner-operator, your biggest variable expense is fuel. Fuel can make or break your business. Get the absolute cheapest fuel you can. This requires a fuel purchasing strategy. And remember that, due to how IFTA works, the cheapest pump price is not always the cheapest fuel for the trip.
Other expenses include:
- Equipment costs
- Insurance
- License plates
- Permits
- Parking
- Meals
- Tolls
- Maintenance
- Your salary
Step 8: Is the business worthwhile to you?
Now you have a complete model of your revenues and costs. Examine the numbers and determine if they make it worth your time. If they don’t, consider adjusting the model until it meets your needs. Changes you can make include selecting a different:
- Industry
- Shipping lane
- Home base
Note: This article is part of a series on how to make successful trucking companies.
Is your trucking company up and running?
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