from DBSquared Inc.,A KPI is a key performance indicator; here are six trucking business KPIs every carrier should understand if they want to build a successful trucking company.
Why Trucking Business KPIs Matter
KPI stands for Key Performance Indicator. Like goals and measures, you can use these indicators to fine tune your business model to make it more profitable and productive.
Understanding which trucking business KPIs matter most relative to your business goals can also help you evaluate your current customers and prospects. For instance, if potential new business would come in under your average revenue per mile or require a higher per mile cost, it can negatively affect your company’s profitability. If you take on a lot of new business that doesn’t meet your desired or must-have KPI levels, profits will decline.
On the other hand, if you take time to understand your trucking company’s current and desired KPIs, you can be more thoughtful in taking on new business and developing strategies that will make your trucking business more successful.
6 Trucking Business KPIs that Impact Carrier Success
ROI stands for return on investment. This is a question that can be asked and answered every time you spend money on your business. For instance, if you can double your trucking company revenue by doubling the size of your truck fleet, the increased revenues produced as a result are the return on investment of all the time, money and resources that went in to acquiring trucks, hiring drivers, advertising and marketing needed to secure new business, etc. While the ROI of this activity might not exceed its investment in the first year, bear in mind that lifetime ROI might still justify the decision.
CLV stands for Customer Lifetime Value, which is a calculation based on customer retention, average revenue per mile and the cost per mile to deliver. Turning customers into repeat buyers is critical for increasing the ROI of the cost of customer acquisition. Plus, if you are spending as much to move each new load as you are making on that load (or spending more) then you’re actually losing money.
CAC stands for Customer Acquisition Cost, which can be applied individually as all the costs needed to secure a particular customer or understood as an average cost – the average cost to your trucking business for acquiring a new customer. If your trucking business KPIs reveal that your cost of customer acquisition is equal to or exceeds that of your customer lifetime value, you have a serious problem.
The more customer lifetime value exceeds customer acquisition cost, the bigger your return on investment for customer acquisition efforts. An uptick in customer acquisition cost compared to customer lifetime value could mean it’s necessary to raise rates or change your marketing strategy – or both.