The Key Profitability Metric for Logistics Contractors

Money in > money out.

When it comes to running a profitable business, this equation is key. But for many logistics contractors, figuring out exact costs can be a hassle.

As a business owner, you’re expected to go up to bat for your company and negotiate a profitable contract. That’s why knowing your Cost Per Mile (or Cost Per Stop) is so critical. 

Knowing where every dollar is allocated helps you to identify areas where spending is too much, or too little. Not only that, but knowing your costs gives you better leverage in negotiation. When you’re negotiating off of “gut feel” it’s not nearly as powerful as knowing your true operating costs, and being able to show the math behind your offer. 

In the final mile business, decisions have to be made every day that impact your bottom line. Should you run an extra truck today? Should you take on a loan to purchase equipment? Knowing your cost allocations makes these decisions simpler– and more profitable.

In short, understanding the costs of your business will help you make sound decisions on how to run your business.

How to Calculate Cost Per Mile

In its simplest form, cost per mile can be calculated using an excel spreadsheet, but in our experience, the formulas get a little messy. That’s why we’ve created an easy to use software solution to help contractors understand their cost per mile. The best part? It’s completely free for LRG members.

This digital calculator includes a simple set up process that walks you through all of the typical costs a logistics contractor would have for operations. It runs the numbers for you to produce a report with key metrics including:

  • Cost per mile and cost per stop
  • Cost per unit on the road
  • Percent of costs that are fixed and variable
  • Estimated net and gross margin
  • Estimated annual revenue

For current members, just log into your LRG account and click “Cost Calculator” on the left hand navigation to get started.

When it comes to running a profitable business, this equation is key. But for many logistics contractors, figuring out exact costs can be a hassle.

Not a member? LRG is an association for logistics contractors to learn and grow together. The cost per mile calculator is just one of many resources we’ve created to help our members run more profitable logistics businesses. You can learn more about membership here.

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Logistical Resource Group is not endorsed, sponsored, approved or otherwise affiliated with FedEx, Amazon or any other companies.