You became an owner-operator to make more money so naturally revenue is an important focus of your business. Most owner-operators are paid on a per-mile basis and while pay-per-mile is important there is a lot more to consider when evaluating and understanding your revenue.
Pay-per-mile is just one component of your gross revenue and is usually consistent from year to year. Gross revenue is the total amount of money paid to you by your carrier and can include mileage pay, percentage of revenue pay, unloading pay, stop in transit pay and fuel surcharge pay. Gross revenue is less consistent. Many variables can affect gross revenue such as the weather, the local or national economy, freight cycles, competition, regulations and average length of hauls.
While you may not have control over many of these factors, there are some ways you can help manage your gross revenue.
- Set Expectations. Determine a reasonable amount of miles you expect to run based on your experience, health, personal and family needs, the condition of your truck and financial goals.
- Measure Results. Review accurate profit and loss statements on a regular basis, so you know if your actual performance is meeting your goals and expectations.
- Manage Your Time. Understand how to best spend your time driving and delivering loads as well as planning your time off effectively to achieve maximum revenue.
- Customer Service. Be an effective communicator with both your carrier and customer and be on time with your pick-ups and deliveries. Practice good customer service skills to get the miles you need to be profitable.
In addition, don't fall into the trap of believing many of the misconceptions about revenue. They can cause you to lose your business focus and make less effective decisions for your business. The following are some of the more common myths about revenue.
- Concentrate only on increasing revenue. You cannot ignore costs because they won't take care of themselves. After your break-even point, only a fraction of every extra dollar of revenue goes in your pocket but 100% of every dollar of cost saved contributes to your profit.
- More revenue per mile is the answer to your problems. More important is gross revenue and net income, taking into account every component that
- Run hard and get a lot of miles. Revenue is only half of the equation. Costs have to be managed as carefully as revenue in order to be successful.
- Large settlement checks mean you are doing well. Your settlement check is only one part of the picture. Costs, miles driven, time off and mechanical problems all have to be considered to determine your level of success.
- Your carrier can control your pay per mile. Your carrier has limited control over the rates they charge shippers because the marketplace sets the rates. If your carrier raises its rates, it may lose loads to competition which means you'll have fewer miles to run. Carriers must keep their rates competitive to ensure they are operating efficiently and their gross revenue remains high.