PROBLEMS OF THE HAULIER AND CARRIER.
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Weekly Mileage and Its Effect on Revenue.
QUITE recently I was chatting to the owner of a one-ton truck about business in general and was doing a little discreet " pumping " as to his business methods. He admitted that his jobs were rather few
and far between. Suspecting that his prices were not popular, I got down to "brass tacks" and began arguing figures with him.
It was soon apparent that he was labouring under a misapprehension, and I found that his chief error was an elementary one. Although he had reckoned depreciation and interest in his own mind—two commonly forgotten items—he had never put anything on paper or calculated his running costs and standing charges separately. He decided, by some means unknown, that it cost him is. 6d. per mile to keep and to run the tanner, and as he charged 2s. 6d. a mile to cover his outlay, few people employed him at so high a price. He gave his average takings as £7 108. and his expenses, at is. 6d. a mile, as 14 10s. The supposed balance of £.3 had to cover profit and establishment expenses. Naturally, things did not seem too rosy, and he could not see how to increase his weekly mileage ; although the business was there, people would not pay the half-crown a mile.
Having an hour or two to spare, I settled down in his office with a note pad and pencil and produced a copy of The Commercial Motor's Operating Cost Tables.
The first point to impress upon him was the difference between running costs, standing charges and operating costs as being the basis of a proper appreciation of haulage finance. His task was to grasp that running costs are those items which depend upon the mileage covered, whereas standing charges have to be paid in any event simply because of the ownership of the vehicle. The term "operating costs," being the total of the two‘classes of expense, presented no difficulty. Having got so far, the next step was to trace out the incidence of mileage on his operating costs and the effect on his policy of calculating charges to customers. As a beginning his operating costs for the tonner were itemized as follows :--Fuel, 1.11d.; lubricants, 0.24d.; tyres, 1.62d.; maintenance, 0.65d.; and depreciation, 0.38d. ; giving a total cost per mile of 4d. The standing charges were made up in the following way :—Licences, 100d.; wages, 720d.; rent and rates, 60d.; insurance, 75d.; interest, 65d.; giving a weekly total of 14 5s. Establishment expenses, after an explana tion of the term, were put down at £1 weekly.
Starting with 60 miles a week, the figure he was then averaging, the actual total cost was found to be 16 Zs., which equalled 2s, id. per mile. At a charge of 2s. 6d. he was, therefore, getting 5d. a mile profit, or £1 5s. a week. Nothing to rejoice about!
My next little sum was worked out on the assumption that he increased the weekly mileage to 100. This showed that it cost £6 18s. 4d. for operating costs and establishment expenses and was equal to 1s. 4.6d. per mile, a reduction of 8.4d. per mile in expense, although the weekly distance was only increased by 40 miles!
Without going farther, he could charge 2s. 21d. per mile and get a profit of about 14. The decrease of 31d. per mile in charges would scarcely be attractive enough, however, to most customers, so I did another calculation on a basis of 150 miles per week.
At this rate the outgoings were £7 15s. My friend Was very struck by the fact that although the mileage was 150 per cent, greater than at first, the total expenses were but 24 per cent, higher than in the first instance. At this stage the cost per mile fell to 12.4d., or a further reduction of 4.2d. per mile, consequent upon the working of 50 more miles. A charge of Is. 6/d. per mile would yield. £4 a week profit at this rate of work. Although the profit had not increased in size, the chance of getting it had vastly improved, for our friend would be asking practically is. per mile less than his former charge; surely a bait for business!
After a few moments' thought and study of the figures, he became enthusiastic over the proposition of reducing his charges, thus enabling him to obtain a greater volume of business. In a few minutes, however, he seemed tO have found an objection and raised the following query :—" The more I run the more life I take out of the vehicle, Sand this means that I shall have greater repair bills and the lorry will have to be replaced at an earlier date." My reply pointed out to him that he had overlooked the fact that his running costs took into account allowances of .65d. and .38d. per mile for maintenance and depreciation respectively ;
thus, so long as he obtained his proper payment for every mile travelled he would be fully compensated for the extra wear and tear.
A further advantage of the policy of increasing working mileage is that, as the old adage hath it, "nothing succeeds like success," and people will take advantage of a service which seems to he popular rather than one which is not so much in the public eye. An analogy, lies in the purchase of the average private motorcar ; one which sells in quantities generally has a high second-hand value, because people see it about on the streets every day, but a car which is somewhat of a rarity is regarded with suspicion on resale.
In the same way, if lorries are running about daily and a good number of local reSidents becomes familiar with their appearance and the advertising scheme adopted on their panels, much of the peculiar innate suspicion will be overcome and customers will be far more satisfied that they are dealing with a worthy concern than if the appearance in the streets of a:lorry bearing a certain name was somewhat of an unusual occurrence. Although novelty is alwaysinteresting, when it comes to a matter of business it often creates suspicion, and this holds good in the case of haulage work as much as anything else, so keep your vehicles
in the public eye. S.T.R.