Money

Determining The True Cost Of Running A Bus

Tom Holden
Posted on July 7, 2018
Thoroughly outlining all of your costs for operating a motorcoach will help you avoid painful financial rope burns and welts. (LCT image)
Thoroughly outlining all of your costs for operating a motorcoach will help you avoid painful financial rope burns and welts. (LCT image)

Owning and operating a bus can be the most profitable or costly endeavor for your company. It can take you into the next decade, or put you out of business.

I don’t want to scare you…well actually, I do. I want you to think about everything you will read in this article before you decide to jump into this vehicle segment. You live and learn, but only if you can afford to lose first.

Understand Your Market Before Buying A Motorcoach

You have listened to many educational seminars and webinars on buying your first bus. New or used is always the question. No one can answer that but you. You need to understand your market and have a real knowledge of your finances. So many companies don’t even know their numbers until tax time. That’s too late.

A great operator understands their profits and losses on a monthly basis. They have a close connection with the bean counters: Your company accountant or CPA. You should meet with your CPA every few months and do a recap of your P&Ls. So many companies are losing money in one department and don’t even know it. Maybe they have a large cash flow, but when that cash flow stops, they don’t have as much as they thought.

Make Sure You Can Afford A Bus

So many people only think “can I afford the payment?” You need to gross at least $200,000 per year for a used motorcoach and higher for a new one. Do you have enough business coming in now for that bus? Have you been farming that amount out to the local bus company?

If not, you’re NOT ready to buy that bus. If you already have buses and are thinking about new business, something like contract shuttle work, the same thought process must take place.

The attached side boxes are an example of fixed cost and variable cost; you must understand both. The question is not, “Can I afford the monthly payment?” It’s “What is my yard cost?” This is the fixed cost — the cost of a bus before you even start the engine.

How Often Will Your Motorcoach Be Moving Groups?

Usage is another important number. How many days in a month and year will that bus move? In the motorcoach industry, there needs to be a usage rate of at least 58% for the year. You will be higher in some months and lower in others, but shoot for 60% and you’ll be fine. Same goes for adding the second bus and so on. If you look at the sidebox for fixed cost, you’ll see there are many line items. You’ve got to calculate all of those line items because that’s what it costs to own a bus.

Now add on your variable cost. Total them both together. Add in the expected net profit you intend to make: 10%, 15%, 20%, 25%...pick the number that works for you and your clients. Remember, you need to make as high of profit as possible during your busy months. Think about the hotels in your area. They have surge prices when a special event is going on.

Even if you charge the 20% net profit line, chances are something might go wrong. A mechanical problem, traffic, an unexpected stop, needing to add in a last-minute relay (which was not added in the quote), the list goes on. You will not hit your net profit all of the time.

You can add a lot of profit or you can lose your savings. It’s up to you to figure out which path is best for your company.

What Are All The Fixed And Variable Costs Of Owning A Coach Bus?

You need to understand your market and have a real knowledge of your finances. So many companies don’t even know their numbers until tax time. That’s too late.

Examples Of Fixed Costs

• CSR Dept.
• Dispatch Dept.
• Fleet Dept.
• Mechanics
• Porters
• Motorcoach Dept.
• Safety Dept.
• Accounting Dept.
• Human Resources
• Management
• Officers
• Overtime
• Taxes
• Wages
• Commission
• Vehicle Refurbishing
• Parking Lot Rent
• Vehicle GPS Fees
• Vehicle Insurance
• Vehicle License Tags
• Vehicle Taxes
• Vehicle Depreciation
• Vehicle Loan Interest
• Radio/Cell Expense
• Advertising
• Amortization of Goodwill
• Auto Expense
• Bank Charges
• Compliance & Preemployment Fees
• Computer Supplies & Expense
• IT Maintenance
• Consulting
• Contributions
• Depreciation Expense
• Dues & Subscriptions
• Freight
• Gifts
• Insurance: (General, Key Man, Officer’s life)
• Workers Comp.
• Utility Vehicle
• Interest Expense
• Leased Office Equip.
• License & Permits
• Meetings & Educational Exp.
• Merchant Fees
• Professional Fees
• Payroll Service Fees
• Accounting Fees
• Legal Fees
• Rent & Lease
• Other Repairs & Maintenance
• Property Tax
• Telephone Expense
• Mobile Phone Expense
• Cleaning Supplies
• TV/Cable
• Utilities
• Uniforms & Laundry
• Travel Expense

Related Topics: buses, buying vehicles, cost efficiencies, cost savings, finance, motorcoach operators, motorcoaches, profits, revenues, vehicle costs, vehicle financing

Comments ( 0 )
More Stories