More About Establishment Charges. Their ,Effect in Cases Where the Weekly Mileage is Low.
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HINTS FOR HAULIER&
ITIS HARDLY necessary for one to consider in great detail the case in which a:man owns three lorries, none of which he chives himself except in emergencies or in the unexpected absence Of one of the regular drivers. I must emphasize that the circumstance makes no difference whatever to the operating east of the lorry itself, for we have made a proper allowance for wages there, irrespective of 'whether the driver be the owner or not. Indeed, one of the reasons for this careful insistence of mine on the, necessity for reckoning wages in all circumstances is that, if it be done, as it certainly should, then the mere fact of th owner-driver deciding to ' employ a man for the driving need make no difference, either to his bookkeeping or (and this is far
more important) to. his contract prices. • .
Some slight alteration is, however, involved in the establishment or overhead costs, and we may best see what this amounts.to if we compare. with the case discussed in a ibrevious article, in which we considered. what might be these costs H a man owned three lorries, one of which he regularly : drove himself.
Referring hack, then, to that article, the items named were :—Rent and rates, telephone, insurance, . lighting, heating, maintenance of office; stationery,
-postages and telegrams, travelling expenses, legal _
costs„ income-tax, staff, and advertising. There will only be one of these to be affected by the change, and in saying this Tam not forgetting the nasty things
I wrote last week about light and heat bills being heavy when the Man who had to 'foot them wa.s4not . there-to supervise the use of gas (or 'electricity) and coal. The difference, if any, will be so little as_ to be hardly worth considering.' In any case I am, of course, only Suggesting a, figure, not laying down . something which the haulier must regard as a standard. The figure which will have to be modified will be that under the heading of " Staff." Instead of a senior office boy or junior clerk at 25s. a week, there is now a managing director, who must. receive four or five times that sum. Eor the sake of argument, we will suppose he gets 25 a, week. It is clear, therefore, that fm. . a three-1Kry business, in which the owner does no driving, devoting, instead, all his energies to organizing, getting orders and seeing that they are promptly and properly executed, the establishment costs work out as follow:—
This amount has to be spread over three lorries, as in the former ease, so that each lorry has to stand an overhead expense of £3 7s. id. a week, in addition to its operating cost, which, as I have so frequently pointed out, is made up of running costs and standing. charges.
Turning once more to our regular example of a three-ton lorry, running, an an average, 300 miles per week and costing a. shillinea, mile to run, as well as
26 a, week for keep, the total cost per week in such an establishment as that which we have been discussing will be :—Three hundred times a shilling for the running costs, which equals £15, plus 26 for the stand. ing charges, plus £3 7s. rd. for the establishment costs ; total, 224 7s. id. This, it should be remembered, is to he spread over 300 miles, so that the total cost per mile is 224 .7s Id.. divided by 300, which is 18. 7.38d, Effect of Fleet Growth on Establishment
Charges.
I daresay it will have occurrtd to a good many readers that, if these figures be correct, then all the advantage lies with the man who owns one lorry, to the extent of more than a penny a mile as between the firskand last cases, and that, on a 300-mile week' which means that, on a 150-mile week, the difference would actually be 21d. a mile in his favour.
The comparative figures are The amounts, that matter are, of course, those per lorry ; that is to say, the El 13s., the Z2 2s. id , and the £3 7s. Id. • If the .mileage in each case is 100, this iseequivalent to 3.96d., or nearly 4d. a mile in the first case, 5.05d. in the second, and 8.05d, a mile in the third. (Now, note these figures carefully ; they are very important, and must be taken very seriously.) These heavy charges have nothing to do With the actual running of the lorry ; they are outside that, but they are there all the same. At 200 miles per week they amount to 1.98c1., 2.52d., and 4.03d. respectively ; at 300 miles they are 1.32d., 1.68d. and 2.68d.; and at 400 miles 0.99d., 1.26d., and 2.01d. Even on a big weekly mileage the item of establishment charges is anything but a negligible One, yet it is entirely overlooked by a good many— I might almost, say nine oat. of ten—small hauliers.
Now, although I have compared these various esti; mates of establishment expenses one with another, they are not strictly comparable, for several reasons, but chiefly for one special one, which can be made clear only after consideration of the effect of different weekly mileages. Some of that effect is apparent above, in the difference which it makes to the established charges alone, but a little' emphasis, effected by showing the variation in total costs brought. about by varying mileage, will bring the point home more effectively. In addition,-I will also take into consideration the question of profit. From experience, and as the result of correspondence and 'conversations with • small hauliers, it appears that the majority are content if they can make a clear profit of about 30s. a week on a threeor four-tonner, in addition, of course, to what they, draw as . wages, either, in cases one and two, as driver of one of their own lorries, or, in case three, as managers of their own departments. THE SKoTart.