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How to Calculate the Cost of a Dump Truck Company Start-up

Introduction

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.

Start-up Costs

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.  

image of a spreadsheet showing main dump truck costs

Below is a chart with data reported from the ATRI regarding Average Marginal Operating Cost for the Trucking Industry. (Hooper & Murray, 2017)

chart of dump truck operational costs

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.

graph of 2018 fuel costs

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.

chart, spreadsheet, margins, hourly

Getting Contracts

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!

Technology Tools

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:

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.

dump truck dispatcher software displayed on an iPad

Industry Forecast

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!

Conclusion

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.

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Works Cited

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

Streamlining Your Dispatching Process

How do you start your day at the office?  Is it with a cup of coffee in hand, sifting through e-mails, preparing for the day’s business? You ask yourself, which e-mail was it, that had the information for that order you are supposed to dispatch this morning?  You scroll through, opening at least three irrelevant e-mails to your task at-hand.  Finally, you find it and start jotting down notes on a pad of paper, grab a calculator and finalize the quote for your customer.  You start writing the reply e-mail, the same basic information that you have sent over and over.  This sure does seem like a lot of work for one item being checked off your ‘to do’ list.   You ask yourself, how long did this take?  It probably took too longand unfortunately, a similar inefficient process may be repeated for each step of the dispatching process, in between phone calls and other distractions. 

This is just the beginning of the work flow to make your customers happy.  The quoting, planning and dispatching process in a dump truck hauling company can take time and be a drawn-out process.  We all know time equals money.   

A good order and dispatch software system will streamline the work flow, so that when a quote is created for a customer, it can be used to create the order.  Cloud based software allows salespeople in the field to enter a quote for it to be immediately available to the dispatcher. This approach cuts down on the communications between your sales team creating the quote and the dispatcher.   

A good quote and order system will also allow the users to copy and edit quotes and orders.  Searching for quotes and orders takes seconds instead of minutes.  In the manual paper system, when a quote can’t be found, it is usually rewritten. 

Many dump truck companies are still working with paper orders. Are you one of them? If so, how do you ensure that you have all the pieces of paper representing today’s or tomorrow’s orders? Did you remember the order placed last month, or the ones created the day the substitute dispatcher was working?  

Even if you have all the orders in hand, how do you plan the order of the deliveries? If something changes, how difficult is it to juggle the remaining orders? Often, this results in much chaos around the dispatch office. Inability to schedule and dispatch trucks accurately and timely results in drivers working over-time or missed orders and unhappy customers. 

Think of how much smoother dispatching would go if you had software that allowed you to schedule your orders in advance and to assign the trucks to deliveries. Good planning and dispatching software is very visual and lets you see the availability of your trucks at a glance. It will also let you readily see which orders have not yet been scheduled. 

An example of a system that allows you to schedule your orders might look like the below. Note how the trucks shown in the top section change color. Green trucks have availability and red trucks are fully utilized. In the “# of Trucks” column, note the 2 red numbers indicating that not enough trucks have been scheduled.

dispatcher schedule screenshot

What happens if your main dispatcher is sick or quits? The paper-based system will be much harder for the new dispatcher to pick up the pieces. With a good software application, all the data will be available, and the system will enforce a good, repeatable process. You don’t have to worry about all the information being in the old dispatcher’s head. 

So, let’s just imagine your work life with a cloud-based dispatching software.  How much smoother will your day go?  How much time will you save by not being on the phone, sifting through e-mails, or shuffling papers?  How much more will you enjoy your job?  How many more customers can you make happy? 

Dump Truck Dispatcher is cloud-based dispatching software, that offers an integrated system for quoting, planning, ticketing, and dispatching.  It has easy-to-use search and filter features to organize the information you are looking for.  It is a highly visual app that makes managing your schedule easy.  Your daily schedule can be planned for in advance, and can easily be edited with last minute changes.  The best news is, this ‘paper trail’ is paperless so you don't have to search through filing cabinets to find that order or ticket that you need. 

If you are in the dump truck service, concrete, or asphalt industries, and would be interested in a free 30-minute consultation about how our dispatching software can help your business, please reach out to me via ourContact Us page. 

Even if you aren’t interested in the free consultation, please leave a comment below on what other things would help streamline the dispatching process.