FUEL SURCHARGES REVISITED

[SUPERIOR35]

What is everyone doing about the high cost of fuel ? If surcharge is in place, how are you calculating ?

[GRUMPS The Towman]

I am curious about this myself. I have noticed when picking up wrecks and whatnot from most of the surrounding companies in my area they are now charging a fuel surcharge on their tow bills.

. With the way things are going ( Thanks Biden or should I say President Pelosi?? ) I think I need to seriously consider it too.

So I will ask too. How is it calculated?? I have never done a "fuel surcharge" I would normally just bump my overall rates to cover the surge in fuel prices. It is getting to the point where that isn't feasible without looking like I am trying to gouge my customers.

[Stubborn66]

The simple answer is to raise your pricing.  To not seem like your gouging, wait until the new year.

 

Trucking companies have been using fuel surcharges for years and traditionally it is supposed to be based on the market price of oil and was adjusted once per year in market price ranges.  The bigger trucking companies but their fuel on the futures market so they have found a way to make the fuel surcharge work for them in many cases.....that is a whole different scenario.

 

For small companies like most of us here, IMO.

When I did my operating costings earlier this year, I used $3.50 per gallon in my calculations.  Then, I calculated what I needed my margins to be to cover those costs and give me a reasonable profit.  I also used that margin to calculated how much of a discount I could offer larger repeat customers or clubs if I chose to.  I was happy with where I was at.  In my case, I did not raise the rates or add a fuel surcharge this year.  This year, I did add an overnight premium to my rates.  It has slowed down the overnight and when I do go out I get a premium for that work.

 

No, when I re-run the numbers now, I used $4.00 per gallon. 

That raises the cost of fuel alone by 14%.  

In my operating costings, it raised my cost per mile to run the truck by 4%, in turn it has eaten up 4% of my margin.

 

So, in my scenario I would add a 4% surcharge when the fuel hits above $3.75 per gallon.  From $3.50 - $3.75 would be normal market fluctuation?

 

Personally, I am going to ride out the rest of this year and then do something were I can, likely a fuel surcharge when the fuel is above the $3.75 mark.  I will have to continue to eat the 4% on the rates I have with the couple of clubs I do work for or drop them because they will not pay surcharges. 

I would also highly recommend Quick Books, it is worth the cost of purchase and the time to learn how to use it. 

 

Hope this helps

 

 

[dperone]

We went the same route at stubborn, our mileage rates went up to reflect the rising price of everything, not just fuel.

[Stubborn66]

We still have a couple guys running around here for 35.00 local tows.  I pass by one of those places pretty frequently and the truck is generally sitting there.  It blows my mind, but to each his own.

[GRUMPS The Towman]

Same here. There's One "Company" in particular that is doing the $35 any tow, anywhere in the city and promoting it like it is going out of style. Local radio, Papers, Bill boards and even those advertisement plaques they put on shopping carts in the local grocery stores... Of course they are underinsured, Poorly equipped, un-trained type of guys who feel that big J's on all tugs and one hook thrown in back as a tie-down is sufficient. And that's only if it doesn't run or move well enough to simply drive on the deck and throw it in park for the trip across town... 

Not only can I not even come close to touching that rate, I will turn the phone # off and sell everything before I would even consider working like that Just to save a buck...

My saving grace is My established reputation and dedicated long time customers.. The ones that know the difference in back-door shady deals and quality service.. It does make it difficult to snare any new or off the cuff customers. 

[Stubborn66]

I spent a lot of time figuring out what my real costs were this year and had adjusted my rates earlier in the year so I had a decent profit.  I am just going to keep going for now, the 4% hit isn't going to break the bank.  I really don't see fuel coming back down in the near future so I will likely add the surcharge next year.  I think I will do it as a surcharge where I can when the price of fuel in our area is over $3.75 per gallon, that way it will be a separate line item on the invoice.  I can then take if off, if and when the price comes down.  I just saw fuel at $4.15 on the turnpike tonight

 

I am also going to address the credit card issue next year.  I do charge extra for credit cards on the towing part of the business but I have never added a fee for credit cards in the repair shop, I need to start, the monthly fees are really adding up. 

 

 The cheap guys did not affect my decision, they will come and go, but they cant offer the service I can.  The customers I want will see that too.

 

Stay Safe

[GRUMPS The Towman]

I too have spent a considerable amount of time researching and maintaining my expenses, costs and rates, ( Stubborn's Computer program is a big help 😉 )and always take any type of increase or change In rates very seriously. I try my best to look ahead to make sure I am staying competitive and fair ( at least with the other real and reputable companies in my area.)  I am Not looking to become a Millionaire like some of these fly-by-night clowns who are gonna take over the world, ( Just ask them, They will tell you ) But I do want to run a Legit, healthy business and put food on the table at home. Average fuel costs around here are hovering @ $ 3.75 - $4.00 a gallon. Being a 2 truck show, I have been able to focus a bit on controlling and improving MPG on my rigs via driving habits, Maintenance and cutting down on excess idle time Etc.. which has helped of course. I understand where that can be a huge undertaking for bigger fleets with multiple drivers and different driving / working habits. But for me, It is one area that I can easily make a difference. 

The companies around me That are currently adding the fuel surcharge are doing it as an added line Item. IF I end up jumping on that band wagon, That will be my play as well so I can remove or alter it as needed. 

For the Credit cards, I have always added a 5% "processing fee" on any CC charges over $150.00 My CC service provider charges 3% on every transaction, so it works out ok at the end of the month ( Usually, But now that I have spoke about it, It probably wont anymore. LOL ) Because Most CC payments I receive are at or above that range anyway. The few that slip by ( local lock outs, flats, Jumps ) get absorbed via the extra 2% on the bigger charges and I feel that it shows those small charge customers that I am not Nickel and diming them By charging a $3.25 fee ( 5% ) on their $65 service call..

[yoBdaBenO]

we have not gotten to that point yet. however, we are very close actually pennies to the magic number. At that point we don't add pennies we add quarters.