COST STRUCTURE FOR TRUCK BUSINESS IN NIGERIA (2)

 

      

In the previous article i wrote about the need to allocate certain percentage of the total cash flow

generated by the truck to “Fuelling” and “Driver’s Salary”, today we will look at the percentage that should go to the truck itself, maintenance , Insurance/Tax/other Fees and Yourself.

The Truck 

The truck is a depreciating asset. By “depreciation” i meant the reduction in the performance of mechanical/electronic parts (engine) and physical parts (body structure) over time, by “asset” it simple means a revenue generating mechanism. It is therefore very important to save for the replacement of the truck the moment it starts working on the road. 

The error most truck owners make is to assume that after removing every other expenses from the revenue generated by the vehicle that the remaining is the profit they can spend at will. Am sorry to say, it is not a profit yet until you have “pay back” the original cost of the vehicle and the other costs incurred in putting the vehicle on the road. 

You need to set aside 20% of the total revenue generated by the truck per month as the savings for the truck itself. Please do not make the mistake of spending out of the fund for other things, it will only prolong the “pay back period” for your truck.

Maintenance 

Truck maintenance is the single most important activity a vehicle needs from time to time. Truck maintenance is not only limited to changing of the engine oil and filters, it includes daily, weekly and monthly routine check of the physical and mechanical parts of the truck ( If you need help for a well documented maintenance schedule you can contact me on that).

15% of the monthly revenue of the truck should be set aside for the maintenance of your truck. 

Insurance/Tax/other Fees

                           

Insuring your truck is very key to “keeping it safe” in this business. Whether it is a Third-Party or Comprehensive Insurance, insuring your vehicle is an annual or monthly exercise you must do to keep your business on a safer track. You need to devote 5% of the revenue of the truck to the payment of Insurance/Tax/other Fees necessary to keep the truck legally and psychologically safe on the road. 

If you are yet to insure your truck, kindly do so. 

Yourself (The Boss)

The Boss is usually the risk and profit taker of any business. At the beginning of any business he/she sacrifices to ensure the stability of the business. As a Boss, you are meant to take the remaining 5% of the monthly revenue flow. 

You might wonder why just 5%? The reason is that your financial entitlement or if you like profit starts to roll in the moment you are able to get the money you invested into the purchase of truck in the first place. What that means is that, if you generate that initial cost of investment in 1 year, then you starts to receive 25% from that moment monthly. However, to really make a big bucks from this business, it now depends on how many trucks you have in your fleet.

I am sure you enjoyed the article. Next time i will be writing on “how much you can charge per km” (depending on the tonnage) in the truck business in Nigeria. Stay turned and cheers!

 

Thank you for your time.