am planning to start a general haulage and express parcels
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service with 30cwt vans but I am a bit lost when it comes to pricing. Could you give me any idea of what I should charge or the way to go about working out haulage rates?
A It is difficult in the space available to give a fully detailed answer to your question but before entering haulage it is essential that you are sure you have chosen the right vehicles for the job and also that you will be operating at an economic rate that does not prejudice your own business future or threaten established operators through unreasonable rate-cutting--perhaps inadvertently.
The first essential is to establish your costs of operation and having done this with some accuracy you can then add a margin for profit and calculate a scale of charges on a weight. capacity or mileage basis—whichever you prefer or whichever best suits your market.
To establish your costs you must consider two aspects: the standing costs and the running costs.
The standing costs are those which apply before the vehicle ever turns a wheel, namely vehicle licences: insurance: driver's basic wages, National Insurance contributions (the employer's share) and SET: garage or yard rent and rates; and interest on the capital tied up in the vehicles or the interest charges incurred if the vehicles are bought by hire purchase methods.
In addition to these standing costs, establishment costs need to be assessed. These include items which cannot be attributed to any particular vehicle if more than one is operated, such as office costs (le rent and rates, staff wages, heating and lighting, stationery, postage, telephone, etc): workshop costs (rent and rates, wages, heat and light. etc): and the costs of running service vans and staff cars: in fact any other expenses at all incurred in connection with the business.
The next item to consider is depreciation (the amount of money to be put on one side to replace the vehicle when it has completed its useful life) and this may be calculated on a time basis—anything from about two to 10 years depending on the class and quality of the vehicle — or on a mileage basis. If it is decided to use a time basis the item should be included in the standing costs. The method of calculating depreciation on this basis is to take the original cost of the vehicle, deduct the value of the tyres fitted, also deduct from it the expected price of resale when you have finished with it and divide the remainder between the number of years of its expected life. This will give an annual depreciation cost. For calculating depreciation on a mileage basis the same procedure is used but the total is divided by the anticipated mileage and shown as a running cost per mile.
Running costs now have to be considered and these are the costs which are incurred solely in running the vehicle such as fuel, lubricants, tyres, maintenance costs and, as mentioned above, depreciation.
To give a practical example of this system of costing we can take the costs shown in the 1971 edition of CM'S Tables of Operating Costs for a 11-ton carrying capacity dieselengined vehicle.
The standing costs are shown on a weekly basis as follows: Depreciation in the Tables is shown as a running cost which is calculated in pence per mile for a vehicle doing 400 miles per week as follows: The standing costs, divided into 400 miles per week, plus the running costs shown will give a total operating cost per mile for the vehicle of 12.74 pence. The weekly standing cost plus the running cost multiplied by 400 will give a total operating cost of £50.96 per week.
In the Tables, establishment costs, which were mentioned above, are calculated as a 20 per cent charge on top of the total operating cost and profit is also calculated at 20 per cent on top of the total operating cost so that minimum charges can be arrived at.
These are given in the tables as 17.83p per mile or £71.34 per week.
In view of the fact that you are new to the industry and will not therefore have any existing costs against which you can measure your operation you should make a special effort to budget for your anticipated mileage or load carryings for a period ahead and monitor your progress during this period so that you can quickly see if costs are rising to a figure which is near or even more than your revenue. To wait until you have been operating for, say. a year before you check your costs against your revenue is too long a period. A budget should be set and costs controlled within that budget.
The Tables of Operating Costs cover all sizes of vehicles from 5cwt capacity threewheelers to 22-ton artics. plus special examples of 5-ton vans and 8-, 15and 21-ton tippers: 21-ton vans and drawbar trailer outfits. Copies are available from the cashier's department IPC Business Press (Sales and Distribution) Ltd, 40 Bowling Green Lane, London EC1 price 60p including postage.