Calculate your driver recruiting budget for fleet growth.
Do you know how much your fleet needs to spend recruiting truck drivers next year?
You might think you know the answer, but have you considered:
- How does your advertising cost per hire relate to your budget?
- What’s your annual turnover rate?
- How many drivers you will actually need?
If you haven’t crunched these numbers, your fleet can’t reach its growth potential.
Let’s walk through the steps to calculating how much you should be spending to recruit the drivers your fleet will need this year. (You can also fill out the form on the right to download our easy-to-use Driver Recruiting Calculator in Microsoft Excel, and let us do the math for you.)
Step 1: Gather the information you need.
You’ll need to have the answers to these questions:
- What would you like the size if your fleet to be at the end of this year (growth goal)?
- What is the current size of your fleet?
- What was your turnover rate in 2013?
- How many drivers did you hire in 2013?
- How much did you spend on recruiting in 2013?
Now that you have what you need, we can get to the calculations.
Step 2: Calculate your advertising CPH.
To figure out your advertising CPH (we’re not including costs outside advertising, though you may do so) simply divide how much you spent recruiting drivers last year by the total number of drivers you hired. So if you spent $40,000 recruiting drivers last year and you hired 120 drivers the formula would look like this:
Recruiting Spend / Drivers = Cost Per Hire
$40,000 / 120 = $333.33 CPH
If this number seems high to you, it’s probably correct. (But don’t despair! We offer free recruiting consultations.)
Step 3: How many drivers do you need?
You probably already know your recruiting goal for this year. Double check it by multiplying the total number of drivers you need by the end of the year by your annual turnover rate. Then, add that to the difference between your current number of drivers you have plus the number you need to keep all of your trucks on the road.
For example: You want to have 350 drivers at the end of 2014. You currently have 220 drivers on the road. Your annual turnover rate is 45%.
So to calculate the number of drivers you need, the formula looks like this:
Driver Goal x Turnover Rate = Lost Drivers
350 x 45% = 158
You will probably lose about 158 drivers between now and the end of the year. Now, we add everything together.
Drivers Needed – Current Drivers = Base Hiring Goal
350 – 220 = 130
Now we add in the drivers we’ll need to hire to make up for turnover.
Base Hiring Goal + Drivers Lost = Actual Hiring Goal
130 + 158 = 288
You need to hire at least 288 drivers to end up with the 350 drivers you need to have on the road at the end of this year.
Step 4: How much should you spend?
This is the easy part. Just multiply your CPH by the number of drivers you need. Continuing with our example fleet:
Hiring Goal x CPH = Recruiting Spend
288 x $333.33 = $95,999.04
In this example, you should budget at least $95,999.04 per year to reach your recruiting goals.
Step 5: How much is reaching my recruiting goal this year worth?
Maybe the number you came up with in Step 4 is higher than your actual recruiting budget for this year. If so, you need to figure out if your fleet should invest more money in recruiting, and if you do what that will that mean for the bottom line.
The average fleet makes between $100,000 to $160,000 per year per truck in revenue. If you know what the annual value of a truck is for you, use that number. If not, $120,000 is a good place to start. Assuming that recruiting an extra 130 drivers means 130 more trucks on the road, you’ll want to multiply your revenue per truck by the number of drivers you want to add to your fleet.
Hiring Goal x Annual Value Per Truck = Value of Drivers
288 x $120,000 = $34,560,000
This means that our example fleet’s recruiting goal represents over forty-five million dollars. Suddenly things just got real, didn’t they? Failing to recruit the drivers you need means losing enough money to buy 92 of these:
Make the math easier for yourself.
Download the Excel version of this formula, and let the tool do the work for you.
Step 6: What does this mean for the bottom line?
The average profit margin for a fleet in North America is around 3-5%. If you don’t know your fleet’s exact profit margin, lets assume it is 4%. This means that if you multiply your expected revenue from the drivers you plan to hire and multiply it by the the profit margin, you’ll know exactly what meeting this goal means to the people who own your fleet (aka, whoever signs your paychecks).
Value of Drivers x Profit Margin = Profit from Drivers
$34,560,000 x 4% = $1,382,400
Of course you can also get an idea of where your fleet will be financially by using the total number of drivers you have in the equations in the last two steps.
Hiring Goal x Value Per Truck = Revenue
350 x $120,000 = $42,000,000
Revenue x Profit Margin = Annual Profit
$42,000,000 x 4% = $1,680,000
Step 7: Realize the importance of meeting your recruiting goals.
What does all of this mean? It means that recruiting the drivers you need will be responsible for 80% of your fleet’s revenue (in this example of course). The numbers for you will be different, but the reality is the same. Your fleet can’t grow if you have trucks sitting idle in a lot somewhere.
Download to check your calculations.
Fill out the form below to download the Excel spreadsheet, fill in your numbers, and your report will be generated.