How to Calculate the Cost of a Dump Truck Company Start-up
Will investing your life’s savings into owning and operating a dump truck service company pay off? Owning a dump truck company can be challenging. The operating costs can be high and fluctuate with the price of fuel. Dump trucks average 5 to 6 miles per gallon, so any slight increase in the price of fuel can cut into your profit margins. The good news is the dump truck service industry is a $19 billion industry and is expected to grow 1.8% annually over the next five years. As of 2018 there are 27,562 dump truck companies in the United States that employ close to 100,000 people. There is money to be made operating a dump truck company. This article will provide you with basic start-up costs associated with starting a dump truck company.
Below is a spreadsheet representing basic Start-up Costs for a Dump Truck Company with one owner/operator who is the primary driver. The truck cost is based on getting a used truck in decent shape. A used truck is a good way to get started. Once you have enough experience and cash flow, you can get that new truck.
This projected year-one gross income is $200,000. The Driver Wage is estimated to be $44,000 annually based on data from the U.S. Bureau of Labor Statistic for dump truck drivers. (U.S. Bureau of Labor Statistics, 2017) The shortage of drivers in the past few years from an aging workforce population has resulted in significant salary increases to improve retention of employees. It is also worth noting that state regulatory fees vary from state-to-state.
Below is a chart with data reported from the ATRI regarding Average Marginal Operating Cost for the Trucking Industry. (Hooper & Murray, 2017)
More on Fuel Costs
Fuel costs are the number one expense aside from paying yourself and your employees. Below is a line graph showing the cost of diesel fuel in the U.S. for 2018 according to U.S. Energy Information Administration. (Administration, 2018) The anticipated average diesel price for all of 2018 is $3.12 per gallon and is expected to drop slightly in 2019 to $3.01 per gallon.
Going from One Truck to More
As you can see, starting a dump truck company is no small investment. It is important to research key factors that affect your profitability. Managing a multi-million-dollar operation is not for everyone but can be lucrative if you have the right tools in place.
Typically, a dump truck will travel less than 150 miles per day, which indicates most of your business contracts will come from your local and regional municipalities. Is your city adding commercial construction projects like apartment complexes and parks? Is your state legislature approving budgets for large infrastructure changes like a new bridges and roads? If so, as a business owner you need to meet the demands of growth in your area. It may be a smart decision to expand your fleet to include more trucks.
According to the ATRI, American Transportation Research Initiative’s report, 2017 Operational Costs of Trucking Survey, the largest segment of respondents, 26% of all trucking companies, own and operate 26-100 trucks (power units) with a median annual gross income of $17,797,000. (Hooper & Murray, 2017) Taking the leap from one truck to 10 or even 26 may seem like a huge undertaking but a business plan that outlines your financial goals and market reach may significantly improve your chances for success. The US Small Business Administration can provide resources for new business owners. Their website provides tips on how to write a business plan with a free template.
Cost per Hour Analysis
A cost per hour (CPH) analysis may help you understand the simple functions and needs of your business. Again, we will be looking at this from a one truck perspective to keep the concept simple. An owner must figure out how much it costs him or her to operate his or her truck per hour to know what to charge clients per hour of service. Below is a graph with Average Marginal Costs per Hour from 2016 data. (Hooper & Murray, 2017) This data shows the total cost to operate one truck per hour equals $63.66. There will be geographical and economical factors that may affect the totals for your business, but this at least will you a benchmark figures to work with. Again, this is a cost analysis, so your profit margin must be added to this figure for your business to be viable. You also must take other management expenses into account like office supplies, accounting software, dispatching software and business taxes. Average dump truck hourly service rates (again this will vary by region) are between $70-$120 per hour.
Do your research! Most people who are interested in starting a dump truck service company have previous experience in the field with a list of companies they have worked for. Operators that are experienced and reliable can be hard to come by, so selling oneself as a good operator increases the likelihood that contracts get signed.
Many of the larger companies have mastered marketing and at peak times have more jobs than they can deliver. Talk with these large companies and see if you can help them as a sub-contractor. It won’t pay as much as the direct job, but every little bit helps when you are getting started.
Some resources for contracts include the Department of Transportation for your state, local government officials, and local business owners who need hauling services. Pass out business cards to potential customers at networking events, join a Dump Truck Association, and find resources online such as forums for advice on how to find work. Get out there!
In a highly competitive market, using technology tools like telematics and dispatching software, can give you the competitive edge over more antiquated business models. Not only do these tools make your life easier and your operations more efficient, they will also improve your bottom line. If you are an owner operator with a single truck, your needs may be more modest than when you have numerous trucks. In the case of an owner operator, you will need:
- Accounting system - like QuickBooks online
- Electronic Logging if required by law – note that there are many exemptions that apply to dump truck companies. See https://www.gpo.gov/fdsys/pkg/FR-2015-12-16/pdf/2015-31336.pdf for more detail.
A small company can get away with keeping some records on paper. However, as the company grows, technology can help streamline your business and give you real time insight into what is happening with your fleet.
Some integrated, cloud-based website applications, like Dump Truck Dispatcher, include quoting, ordering, ticketing, scheduling and vehicle maintenance functionality all in one app. GPS tracking of your vehicles can provide you with invaluable data on fuel efficiency, driver behavior, and truck optimization. The bottom line is the bottom line. The overall gain your business will have from utilizing technology and ‘real-time’ data, will improve your company’s profitability. Shown below is a picture of a driver using a tablet to access his truck schedule using Dump Truck Dispatcher.
Due to the economic growth in our country, cities and states are in demand for commercial goods and products to be transported from one location to the next. The dump truck industry is heavily reliant on residential and commercial construction and vice versa. Improvements in infrastructure are a positive indicator for the dump truck industry. The market size of the dump truck industry is anticipated to reach $20.64 billion by 2025 due largely to a proposed $1 Trillion worth of infrastructure projects proposed by the Trump Administration. The future looks bright!
This article was intended to provide a clear and easy to understand overview of How to Calculate Operating Costs for a Dump Truck Company Start-up. If there was anything that I missed or you thought I should have included, please let me know by clicking on Contact Us. Also, if you have any questions about Dump Truck Dispatcher feel free to contact us for a free demo and 60-minute consultation on the appropriate technology to streamline your business.
Get a free spreadsheet to help you calculate your start-up costs
Administration, E. I. (2018, November 26). Gasoline and Diesel Fuel Update. Retrieved from http://www.eia.gov
Hooper, A., & Murray, D. (2017). An Analysis of the Operational Costs of Trucking: 2017 Update. Arlington, VA: American Transportation Research Institute.
U.S. Bureau of Labor Statistics. (2017). Retrieved from http://bls.gov