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Fitting the Pieces Together: A Guide to Office Operations for the Liquid Waste, Portable Toilet & Septic Pumping Industries |
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Cost savings are those moneys that you have budgeted to spend and because of a purchase of change in business practices you do not spend the money. Let’s look at some examples.
We are going to look at the purchase of a new truck and the retirement of the existing truck and the cost savings associated with the purchase.
Fuel costs. You purchase a new truck. Last year you spent $100.00 per week or $5200.00 dollars per year in fuel. Your current truck gets 10 miles per gallon. You have budgeted $6000.00 this year for fuel to allow for inflation and additional business miles. The new truck gets 15 miles per gallon. The new truck will utilize $3000.00 in fuel, giving you a cost savings of $3000.00 per year.
Insurance. The current truck has insurance that costs $2400.00 per year. The new truck insurance because of air breaks and better safety equipment has an insurance cost of $1800.00 per year. This is a $600.00 a year savings in truck insurance.
Maintenance. You have been spending $3000.00 a year on maintenance on the existing truck. The new truck has a projected maintenance cost of $1200.00 per year, a savings of $1800.00 per year.
Lost service time. The existing truck was out of service for 1.25 days a month or 15 days per year. If you complete 6 to 8 jobs a day that translates to 90 to 120 jobs per year. Assume you are able to complete 50% of the jobs and you lose 50%. That is 45 to 60 jobs lost. In addition, you still had to pay the driver for 3 weeks without revenue.
Truck capacity of the existing truck allowed an average of three services before heading to the dump. The new truck can handle four. Assuming it takes about 1 hr to dump and reach next service site, this is a savings of approximately 20 minutes for every three loads or 40 minutes a day. In addition, it could mean one additional job per day.
Remember if you do not retire the existing truck, the cost savings need to be pro-rated on how the business mileage is split between the two trucks and the cost savings calculated accordingly.