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PROFITABILITY & FINANCE
Short answer
Your true cost per mile is your total fixed costs divided by the miles you actually drive in a month, plus your variable cost per mile. The number that catches operators out is the denominator: you must divide by total miles driven, including unpaid deadhead, not by the loaded miles you are paid for. Using loaded miles alone understates your real cost, often by 30 to 50 percent.
Every cost in the business falls into one of two buckets, and mixing them is what makes most operator spreadsheets wrong.
Fixed — you pay these whether the van moves or not:
Variable — these scale with distance driven:
Total miles driven means every mile the vehicle turns: loaded, deadhead, and the drive back to base. If you divide by loaded miles only, you will produce a comfortable number that has no relationship to your bank balance.
Most NEMT contracts pay for loaded miles alone. That means every deadhead mile is pure cost with no matching revenue, and the ratio between the two decides whether a rate is workable.
The same rate, two different operations:
| Tight clustering | Low deadhead ratio | More paid miles per mile driven — the rate works |
|---|---|---|
| Scattered trips | High deadhead ratio | Same rate, far more unpaid driving — the rate fails |
This is why two operators can look at an identical contract and reach opposite conclusions, and both be right. Before blaming a rate, measure your deadhead.
Once you know your cost per mile you can:
Free resource
Calculate total trip cost, a minimum viable rate, and a suggested service-level rate using your operating assumptions.
Get it freeYes. Divide fixed costs by total miles driven, including deadhead and repositioning. Using only paid loaded miles understates your true cost, commonly by 30 to 50 percent, and makes unprofitable contracts look viable.
Anything you pay regardless of whether the vehicle moves: commercial auto insurance, vehicle payments, dispatch software, salaried wages, licences and permits. Insurance is usually the largest.
At minimum whenever insurance renews, fuel prices shift substantially, you add or remove a vehicle, or your trip mix changes. Many operators review it monthly alongside their dispatch numbers.
Covered in more depth on the Nemiton channel: Most NEMT Entrepreneurs Don't Know Their Real Profit Per Trip.
Educational use only. This article is not legal, tax, insurance, medical, accounting or official payer guidance. Requirements and rates vary by state, payer, broker and contract — confirm what applies to you before making a business decision.
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