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So, there's been a bit of discussion on here about pricing, costs, turnover, profit and the like, but little in the way of guidance so anyone can actually work out if they're making any money.
Let's get a couple of things clear at the start; there's a huge difference between TURNOVER, that's the money you take every week bfore any running expenses like fuel, repairs and the like, and profit. Profit is what you're left with after all the expenses have been taken out. You "might" for instance have a turnover of £800 a week, but the profit is only £200 a week and you've done 60 hours on the road for that. tihs leads to the discussions on here about why sit around for hours at £3.33 an hour?
There's 3 types of costs we need to take into account, "overheads", which is the cost of running the business before you even turn a wheel, fixed costs and variable costs. Fixed costs are things like the cost of buying or leasing the car, insurance, annual test, licence fees, radio rent etc. These charges do not vary and are not mileage dependant. Variable costs are those that are distance dependant, fuel, repairs, tyres and consumables.
How do we find these out? The best way if you're computer literate is to create a spreadsheet, first section list all your overheads, vehicle lease/purchase/depreciation, premises costs, phone costs, advertising, accountancy and legal costs etc. Add these up for the year and you have a figure for overheads. Divide this by 365 or however many days you have to work a year, and you'll get the daily cost of your overheads. You have to pay this before you turn a wheel, regardless of whether you do 10 miles or 200 miles a day. So it can be seen that the more mileage per day you do, the lower the overheads per mile.
Fixed costs is the next section of the spreadsheet. Again, list vehicle insurance, road tax, radio (if you're on a circuit), CRB check fees, LA licence fees and so on. Again add these up and divide by 365 or the number of days you have to work.
Last, variable costs. These vary as to how many miles you do. Fuel costs, you need to know the mpg of your car, but that doesn't matter at the moment. How many miles do you get from tyres? How many times do you have your car maintained or repairs? How much a year do you spend on these? Oil, water, screen wash, car wash, valet, air freshener... Once you know these costs, you can work out how much per mile you need to earn to cover these costs. If it's ant help, base these figures on last years and divide that total on how many miles you done.
It should be obvious that the more miles you do, the more your variable costs as you use more fuel, tyres wear out quicker etc., but the less cost per mile for your overheads and fixed costs.
How do you find out tyre costs? Simply by knowing the price of tyres and how many miles you normally get from a set of tyres.
It should then be possible to try several scenarios from your spreadsheet as you will have the daily cost of the overheads and fixed costs of say £30 a day; this is what you have to earn before you even turn a wheel, just to have the car sitting there. You will know your cost per mile. Typically on a few scenarios I've worked on have been between 40p and 60p per mile, depending on your car and its fuel consumption. On that basis, if you do a 10 hour day, you have to take £3 an hour just to vover your overheads. you should expect to earn at least minimum wage, so that puts your hourly take up to about £11 an hour again before you turn a wheel.
As an example, let's look at an airport run. From my part of the world it's 100 miles to Heathrow, so that's a 200 mile round trip. On a good day, you're looking at about 5 hours work. At a cost of 60p a mile, the fare needs to be at least £120 to cover the cost of the car; then there's wages at around £8 an hour, bringing the total to £160 just to cover that. Oh, I forgot parking at the airport.. Then there's the £30 a day overheads and fixed costs, divide that by 2 based on our assumed 10 hours a day, and that's another £15 to add, bringing the total to £175 for the airport trip. The way to make anything on this sort of basis is to try to do 3 airport trips a day, that way it reduces the cost of the overheads per mile or get a back working if at all possible, but from a lot of areas it never works out. Quite how my local competitors can charge £95 for the airport trip beggars belief. As has been said in other threads, they are paying money just to lose money!
What I'll do if I can find out how, is to download the simple spreadsheet I use so you can use it for your own purposes. The formula is based on that taken from Croner's Road Transort Operations books and information gleaned from the bus industry. This formula works very well for tendering for local authority contracts!
There's also a level that it's not really worth going over or you'll fall into the higher rate tax bracket!
I'm also working on a graph that shows the optimum mileage per year to get your turnover and profit right.
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