Recently, we were at a presentation where we discussed the ins and outs of the ISP negotiation. As part of these, we always go over what life will be like as an ISP and what other changes are on the horizon.
As part of these lively discussions, the subject of "are ISP's profitable" always comes up.
As usual, there are those in the group that want to voice their displeasure and complain about how they are not making any money. Believe me, we hear this at all of our sessions, from coast to coast.
This time it occurred to me to ask the group, "So what do you think it takes to be profitable?"
An otherwise talkative crowd went went silent.
After some curious stares, I then asked, "How do you measure what most effects your profitability?"
The Brave One
There were more blank looks, then a brave soul piped up, "I look at the bottom line on my P&L".
It then occurred to me, as the look of agreement spread among this veteran group of contractors' faces, that the idea of monitoring anything other than service, was a foreign concept, for which there were only occasional encounters.
Sensing some blood in the water, I then blurted out, "NO, NO, NO! By the time you take a glance at your financial results, months have gone by and it is too late to do anything that can positively impact this result!"
More blank stares.
I then offered up this thought, "What is it that you can manage on a day-to-day basis that directly impacts your bottom line?"
But then, the brave soul spoke again and said, "Well, I look at my bottom line".
Now I ask, "What is the most basic measure of productivity and efficiency you know?"
To my complete amazement there were still no answers.
I then explained (to put it mildly) that you need to measure and KNOW your previous day's STOPS PER ON ROAD HOUR!
The puzzled looks were everywhere.
The Big One
This is the most immediate and useful metric you can monitor. It should be as easy as reciting as the previous day's service.
Why you ask?
Your cost to perform a stop is directly impacted by the productivity of your drivers.
The lower your Stops Per On Road Hour, the more it cost you, in labor, to perform stops, on a given day.
The higher your SPORH, the less it cost you per stop.
Since labor cost is your biggest expense, it moves your profitability, up or down, the most.
This is the metric that has the biggest impact on the success or failure of your business.
It won't surprise you to know that when I asked how to calculate this, nobody could tell me.
So let's do it here.
You take the total number of stops performed in a day, and divide it by the number of on-road hours for the day.
So if your team did 1500 stops, and it took 125 on road hours to do this, you would have performed 12 stops per on road hour.
For extra fun, I asked where to find these numbers.
These numbers can be found on your daily, or weekly service worksheets.
This, ladies and gentlemen, is why you "can't make any money".
If you are not tracking SPORH (productivity), and most of you are not, you cannot be effectively running your business.
It is running you.
If you are not watching this, you do not know if you should, or how, to make daily adjustments that maximize your earning potential. You are doing the same thing over everyday, hoping for a different result.
If this is you, and be honest, then you should consider plotting your exit strategy. You're not going to make it in the bigger, bolder ISP world.
Your Stops Per On Road Hour (SPORH) should be as important as, and yes, if not more than, what your service was the previous day.
FXG Has Brain-Washed You
So let's look at this.
You know what your service is everyday, right?
Why? Because it is of paramount importance to your business partner, FXG. They measure it, and then confront you with it, over and over, if you fall short of goal. You are forced to make the necessary adjustments, so that it doesn't happen again the next day.
See how that works?
What if you made as big of a deal about your SPORH (productivity), as you do about your service?
Then you would "make money".
It's that simple.
I've always wondered why folks don't do this. I think, for one, that making this calculation daily, is problematic for most people. It can be done, but you'd have to do it. In case you are wondering, FXG is NOT going to do this for you.
Why? They don't care about your productivity. They care about your service.
And....there are some legal issues.
So it's up to you to do so.
eTruckBiz PRO To The Rescue!
Below is what we do for our PRO Clients, on a daily basis, in our ProMetrics App:
If you don't want to do it yourself, we'll do it for you, every day!
It's right there, ready for you to take action on. How cool is that?
If you don't track anything else, tracking these metrics, and then correcting back to goal, will make you profitable. Whatever it costs you in time (you do it) or money (we do it for you), it is the best investment you can make in your business.
Yes, this is easier said than done, but so is obtaining 99.5% service. You are experts at achieving that. Why? Because it's in your face everyday.
If you are to survive in the future, you must start managing this number and what makes it up.
If not, it's time plot your exit strategy.
There are many other things that can be tracked and improved on, and our PRO package addresses so much more.
But let's start with this simple thing first.
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