Lesson 1 of 4

Your vehicle is a business

Treating your vehicle as a small business makes the numbers easier to see. A business needs to know what it costs to run. This lesson shows you the two kinds of cost every vehicle has.

Why the price of the load is not the full story

A customer offers you a job and says what they will pay. It is easy to look at that number and ask, "Is it more than the diesel?" That is the wrong question. The diesel is only one part of what the job costs you. If you only cover the diesel, the rest of the business is paid for out of your own pocket.

To price work properly, you first need a clear picture of every cost. The easiest way to sort them is into two groups.

Fixed costs

Fixed costs are the costs you carry whether the vehicle moves or not. Test each cost like this: picture the vehicle staying in the yard for a whole month. If a bill for that cost still arrives, it is a fixed cost.

  • The monthly instalment on the vehicle, if you are still paying it off
  • Insurance
  • A tracker subscription, if you have one
  • Licences, permits and the admin of running a business, shared out over the months of the year
  • A wage for you, the owner

Do not leave out your own wage. If your wage is missing from the costs, the prices you set will be too low.

Some costs arrive once a year, such as a licence renewal. Divide the yearly amount by 12 and treat it as a monthly fixed cost. That way it is never a shock.

Running costs

Running costs only happen when you drive, and they grow with every kilometre.

  • Fuel
  • Tyres, which wear out as you drive
  • Services, oil and repairs

Tolls and parking are also costs of driving. Check your own records for the real amounts, because they change from route to route.

Fixed costs and running costs Two boxes side by side. The left box lists fixed costs that you pay even when the vehicle is parked: instalment, insurance, tracker, licences and admin, and owner's wage. The right box lists running costs that grow with the kilometres driven: fuel, tyres, and service and repairs. Fixed costs Paid even if the vehicle is parked Instalment Insurance Tracker Licences and admin Owner's wage Running costs Grow with every kilometre Fuel Tyres Service and repairs
Sort every cost into one of two boxes. If the bill still arrives while the vehicle stays in the yard, it is a fixed cost.

Do not forget the day the vehicle must be replaced

Your vehicle gets older every month. One day it will need to be replaced, and that money has to come from somewhere. Good operators think about this early and set something aside, instead of hoping it will work out. The full course shows you how to treat this cost.

Empty kilometres are still kilometres

If you deliver a load and drive back with nothing, the way home still burns fuel and wears tyres. Those kilometres cost money even though nobody pays you for them. Keep this in mind for Lesson 3.

Example

Example numbers only. A bakkie owner-driver adds up the fixed costs for one month:

  • Instalment: R5,500
  • Insurance: R1,700
  • Tracker: R250
  • Licences and admin, shared by month: R350
  • Owner's wage: R4,200

Total fixed costs = 5,500 + 1,700 + 250 + 350 + 4,200 = R12,000 a month. That is R12,000 to cover before a single kilometre is driven and before any diesel is bought.

Key points
  • Fixed costs are paid even when the vehicle is parked. Running costs grow with every kilometre.
  • Include your own wage as a fixed cost.
  • Yearly costs are divided by 12 and treated as monthly costs.
  • Kilometres driven empty still cost money.