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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

11 Ways to Improve Your Profits

While the economy may be booming with lots of new construction, it is important to keep an eye on your numbers to ensure that you are maximizing your profits. If the influx of new business is stretching your dump truck service company to the limits, now may be the time to look at implementing new processes to improve your efficiency and your profits.

1. Streamline your quoting process

Many people think they can create a quote faster by using a calculator and paper or email instead of using quoting software. However, there are several things they are not taking into account. The manual and email process have more room for error and inconsistent pricing. They usually spend a lot of time searching for the paper proposal or the document in an email.

While some businesses in the construction industry have a software program for creating bids and estimates, few have a system that is integrated with order processing and dispatching.

What happens when the person doing the dispatching is not the same person who created the proposal? Does the dispatcher even know that there is a quote, or will they end up pricing this again when creating and scheduling the order? This makes customers unhappy when the price changes or they have to wait for another quote to be created.

A good order and dispatch software system will streamline this flow so that when a proposal 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 and for it to be immediately available to the dispatcher.

A streamlined, integrated software application reduces the communications between the salesperson and the dispatcher. Searching for quotes and orders takes seconds instead of minutes. In the manual system, when a paper quote can’t be found within 5 or 10 minutes, it normally gets hand written onto another sheet of paper, resulting in duplicate effort.

2. Ensure orders don’t fall through the cracks

Many dump truck service 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.

3. Improve the ticket collection process

Do you have trouble collecting and reconciling all the tickets to a job? Are your drivers and sub-contractors slow to turn in the tickets so that you end up delaying the sending of invoices? If you had a streamlined system that links the tickets to the order and requires the tickets to be entered at the point of generation, you would get the following advantages:

  • Fewer items would be missed on invoicing
  • You would spend less time processing the invoices
  • Fewer calls from clients because the invoices are wrong

When this ticket collection is tied to your dispatching system, it is much easier to know when a job has been completed. Think of how much work is involved for the dispatcher when there are 20 trucks on an order and 40,000 tons are needed to complete the job. How do you keep up with this in real time if you don’t have your ticketing system with actuals integrated with your dispatching system?

If the ticketing system is tied to the dispatching system and the drivers enter the tickets upon loading, the dispatcher will know exactly when the correct amount has been loaded. This prevents your coming up short or ending up with trucks loaded with product you can’t deliver.

If the drivers enter the ticket amount and take a picture of the ticket to load it into the system, you won’t be overrun by paper tickets in your office. When a client calls in requesting proof of a load, you can send them a digital version which was found in seconds by searching for the order.

4. Authorize credit cards of COD customers before delivery

If you get an order from a new customer that you have not done a credit check on, put them in a COD status. If the COD customer is using a credit card, pre-authorizing before delivery reduces the chance of them failing to pay.

5. Have a good preventive maintenance plan

Preventive maintenance can reduce your fleet costs. It is less expensive to replace the $5 part in the shop than it is to tow a broken-down truck to the shop. In addition to having to pay for towing and repair, the truck is out of service and not producing income. A well-maintained truck will have a longer serviceable life.

Do you have a written preventive maintenance plan in place? Can you see at a glance which vehicles have reached the mileage, date, or hours that they are supposed to have a PM done? If not, you may want to consider getting a vehicle maintenance system to help you keep your PM plan on track.

If you get a cloud-based vehicle maintenance system that ties into a telematics platform, the mileage and PM warnings can be generated automatically. This is a great way to make sure all your trucks are maintained properly. While a good vehicle maintenance system will typically cost $2 or $3 per truck, it takes a lot less effort to implement than a manual system. Manual systems are often neglected, and PMs are frequently overdue.

Several of the telematics platforms have a simple preventive maintenance warning system built in. If you are on a budget and want the benefits of a PM program and the benefits of a telematics platform, be sure to choose a system with this capability. My recommendation on a telematics platform is Geotab.

6. Have a good predictive maintenance plan

While preventive maintenance is a good start, it is typically based on manufacturer suggested maintenance frequencies. A dump truck or cement mixer that spends a lot of time in the vicinity of dusty aggregate and rough terrain requires more maintenance than a truck running down the interstate for most of the day.

Because of these differences, you should change preventive maintenance frequency to account for your environment. While this is a good start, there is still some variation between how the trucks are used daily. There is also a difference in how parts wear due to driver behavior differences. Brakes are a good example of this. Some drivers go through brakes faster than others.

So how do you account for these usage and driver differences and build them into your PM plan? In short, you can’t. Instead, there are 2 approaches you can take. First, you can do inspections and take measurements at more frequent intervals than the suggested maintenance interval. Using this measurement, you can tell how much the item has changed or worn during that period and can use that as an estimate for when the maintenance is due.

The second approach is to use technology. You can install a telematics device into the truck. This device can send engine diagnostics back to the server which then processes the data. After the data is processed, maintenance can review the alerts and run reports to see which trucks need to be looked at.

In addition to the warnings sent by the system, you may also view patterns in the data from multiple indicators that suggests a problem is coming even though an individual indicator may not have reached a limit. Over time, these systems will get smarter and offer even better indications of upcoming issues based on multiple variables.

The above 2 approaches to predictive maintenance should be used in combination. The 2 approaches tend to focus on different metrics and components. The inspection approach is typically used for components that are not available to the on-board diagnostics. Values such as temperatures, pressures, and other sensor values available to telematics are easier to analyze, track, and view.

7. Maintain tire pressure in the proper range

Do you have drivers who believe that they can thump a tire and tell if it is set to the correct pressure? They are wasting their time and won’t be much more accurate than banging on the oil pan to tell if the oil level is good.

Proper tire inflation is important as it impacts profit in several ways. Following are several benefits of properly inflated tires. The costs below assume the truck is running 1 shift per day, 5 days per week.

Reduces fuel cost

Every 10% reduction in pressure results in approximately 1% reduction in fuel. That means that a truck travelling with tires 10 psi low on average is wasting $200/year in fuel alone. According to an FMCSA study, only 44% of truck tires were within 5 psi of their target pressure. 7% were off by more than 20 psi.

Reduces tire wear and uneven tire wear

Underinflated tires increase tire wear related costs approximately 12% which on average works out to $200/year for a typical dump truck operation.

Reduces tire blowouts

In the FMCSA 2006 study, there was on average, 1 blowout per 18 tires in a year. Add the cost of a service call and the lost production to determine this cost for you.

Reduces accidents

Under inflated tires can change the handling and increase the braking distance, increasing the chance of an accident.

Reduces legal costs

Tire blowouts and accidents resulting from tire issues can get very expensive when they result in legal battles.

Now that you have seen the direct and indirect expenses associated with improperly inflated tires, you can decide what approach to use to address the issue.  

Following are 3 possible approaches to maximize proper tire inflation

1. Require drivers to use a pressure gauge to measure the tire pressures as part of their DVIR

One downside to this approach is the time required to measure the pressure of each tire. On a triaxle dump truck with 10 tires, it will take between 10 and 15 minutes for the driver to measure the pressure. At 5 inspections a week for 52 weeks, this cost works out to $780/year if drivers are paid $15/hour.

Another negative to this approach is that not all drivers will consistently do these checks.

2. Get a tire pressure monitoring system (TPMS) that displays in the cab

These systems cost $700 to $1,000 one time for a triaxle dump truck. While this system only takes a minute for the driver to verify that the pressures are correct, the driver still must take action to fill the tires or to report it to maintenance to correct.

3. Get a tire pressure monitoring system that reports via a telematics system

These systems cost approximately $1,000 one time for a triaxle dump truck. There may also be an added cost to pass this information through telematics system. For example, if you use a Valor system with Geotab, the added cost will be around $60/year for a truck.

In this last approach, the telematics system can send emails and give reports of tire pressures. Since these checks can be automated, they reduce the time and money people spend managing the tire pressure process. While the first-year costs may be the same or slightly higher than the other 2 options, it has the greatest long-term savings. This approach also results in the most consistent tire pressures.

For more information regarding TPMS, visit our article on evaluating Tire Pressure Monitoring Systems.

8. Monitor and correct driver behavior

In some of the above, we talked about how improved truck maintenance can reduce the chance of accident. However, the major component that needs to be addressed is the human element. Certain drivers exhibit behaviors that are more likely to result in an accident. The top 3 of these are:

  • Speeding
  • Distraction
  • Impairment from fatigue, alcohol, or illness

Other behaviors may result in excessive wear on vehicle components or wasting of fuel. We have all seen some driver that likes to eat lunch in the cab while enjoying the air conditioning for an hour or more. Then there are those that accelerate quickly and others that like to ride the brakes or not use turn signals.

There are systems that can monitor for these behaviors and warn the driver when they are exhibiting them. These systems also generate reports for management to use as a scorecard for the drivers to ensure that they are improving. If they are not improving, it is because they are not following the warnings and should have corrective action initiated against them by their managers.

Several of the popular telematics products include this functionality, so you don’t have to get a separate system from the one you are using for GPS and engine diagnostics. It is more affordable to find one system that covers the range of needs mentioned in this article.

9.Improve truck utilization

Improving truck utilization starts with tracking any time a truck is out of service during the work day. This can be as simple as creating an Excel spreadsheet with 3 columns:

  • Date
  • Truck number
  • Reason

Periodically, you will analyze the data and generate a list of causes sorted by highest number to least. The easiest way to start is to look at those reasons near the top of the list that can be easily prevented and put a process in place to fix them. For example, if the truck was out of service because preventive maintenance was done on it, an easy fix would be to make sure all preventive maintenance is done outside the work day.

Following are some typical items that may be on your list:

  • Breakdown repair – break this into part and cause
  • Trucks without drivers
  • Rain
  • No work

For some of these causes, a way to reduce them may not be obvious and may require some out of the box thinking. Don’t limit your thinking to “this is the way the industry has always done it” and don’t accept that there is nothing that can be done to improve the situation.

There are other less obvious ways that utilization can be impacted. In this other category of utilization detractors, the truck is technically in use, but it is not being as productively as it could be. These items won’t be in the list you created above. A few items that fall into this category are:

  • Improve scheduling process so that trucks aren’t waiting between dispatches
  • Improve scheduling of trucks at start and end of route so that they aren’t backed up
  • Route optimization

All the things in this list can be improved and automatically tracked with good dispatching and vehicle maintenance software tied to a telematics platform.

10. Reduce dispatcher burnout

Dispatching is a difficult job. Having to replace a dispatcher is an expensive proposition when you factor in the job search, the training time, and the inefficiencies caused by beginner mistakes.

There is a lot of communications and chaos in the typical dispatch room. The dispatcher has to coordinate with salespeople, customers, and drivers and keep everything flowing smoothly. He will typically be working across a couple computers, have a phone in one hand, and a radio in the other. There is often somebody on hold on the phone as well. There might even be a person or 2 in the office trying to talk with him.

It is no wonder that dispatchers burn out so quickly and move on to another job. Then the process of training a new person starts. It takes a while for this new dispatcher to come up to speed. During this ramp up time others are often taken from their job to help.

If you could remove some of the many communications and reduce the stress level of the dispatchers, you would go a long way toward retaining them. Software to improve the situation could:

  • Provide a means for the salesperson to enter a quote directly into the system and for it to be immediately available to the dispatcher.
  • Make it easy to enter an order from a quote
  • Make it easy to add, edit, and copy orders
  • Provide a means to schedule orders in advance
  • Provide a schedule that makes it easy to rearrange the trucks working an order
  • Allow the drivers to enter the tickets from their cab so they don’t have to call it in
  • Provide a map view that shows where all your trucks are so when you need to change priorities the dispatcher doesn’t need to call around for availability
  • Provide a means to message or dispatch multiple drivers at once

As you can see in the above list, most of the functionality specified cuts down on the communications being done by the dispatcher. Instead, they can use the software to get their answers, so they aren’t trying to juggle the phones and radios as often. Leveraging technology allows multiple communications to be sent at once and for the incoming messages to be queued up until the dispatcher has the time to check the messages.

A system that does this might even make your dispatcher love their job again.

11. Implement telematics

Telematics offers many benefits. In several of the above tips, I detailed how it can be useful in regard to maintenance, safety, and fleet efficiency. Not mentioned above was the use of telematics for GPS services. This allows you to see where trucks are, so you can efficiently dispatch them or to see who might not be where they are expected to be.

Many telematics platforms also provide a means for dispatching and messaging a driver. This functionality generally requires you to have an added device such as a Garmin, tablet, or phone to send and receive the dispatches and messages. Using a device in this way cuts down on much of the traffic coming in via radios and telephones. It also means the dispatcher doesn’t have to have everything in their brain as they can always look it up on the system.

One downside to the dispatching functionality in these telematics systems is that it is not tied to the plan or schedule and still requires a dispatcher to control every delivery or stop. We are working on connecting our software to some telematics systems and would love to hear of some of your needs so that we can be sure to build it to meet your needs. If you would be willing to share your advice, please reach out to me via our Contact Us page.

Overview

You may have noticed that many of the above options implement technology to improve your profits. If you choose the correct technology solution, you may be able to accomplish several of the above at the same time. For example, if you choose the correct telematics system, you may be able to use it to improve your maintenance operations, driver behavior, and dispatching. Using a software system that can tie to the telematics platform adds even more benefits.

If you are in the dump truck hauling, concrete, or asphalt industries, and would be interested in a free 30-minute consultation about which technologies might be most appropriate for you please reach out to me via our Contact Us page.

If you think I should have included something else in this article, please comment below so others can benefit.