How Innovative Entrepreneurs Are Cutting Fleet Costs

by Melanie Griffin August 09, 2020

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Fleets are expensive to create and maintain. For some businesses, they are the primary cost after wages. Keeping expenses down is, therefore, a top priority for many entrepreneurs.

Unfortunately, fleet management experience in not within the skillset of many business leaders, so many do not know how to keep costs under control. And, ultimately, that can eat into productivity and return on capital.

The good news is that some entrepreneurs are applying smart, generic techniques for managing their vehicles, and seeing remarkable success. Most of the time, you do not have to do anything radical. Simple strategies work across industries and regions.

So, what are innovative entrepreneurs doing to cut the costs of running their fleets? Take a look at the ideas below.

Apply the Principles of Preventive Maintenance

Private motor vehicle owners typically drive their vehicles for months without thinking about maintenance. Eventually, the time arrives for a periodic service, and all the things that have gone wrong since the last tune-up are revealed.

This approach may work for regular motorists, but it is not ideal for companies that run fleets. Waiting for things to go wrong increases the overall cost of running a fleet and leads to unnecessary repair bills. Components wear out faster than they otherwise should.

Smart fleet managers, therefore, conduct preventive maintenance. Vehicles get inspections every 3,000 miles, often by in-house staff, performing simple tasks known to extend their life. Nothing complicated is going on here - simple oil changes and wheel alignments can suffice. But small, proactive actions like these can have long-term positive consequences for profitability.

The most sophisticated fleet managers research the likely points of failure of a vehicle in their fleet. If a particular van, for instance, is prone to developing gearbox problems, they research the issue thoroughly and prepare a mitigation plan in advance.

Save on Insurance

Getting discount car insurance as a private motorist is a piece of cake. You go onto a price comparison website, type in your details, and purchase the least expensive deal.

The same, however, is not always true when you need to insure a fleet of vehicles for a company. Entrepreneurs, however, are finding ways to cut their costs.

First, they fit all of their vehicles with trackers that monitor how they are driven. These devices feed information to insurance companies that are used to measure the risk of the drivers in the fleet. If they pilot their vehicles sensibly, then insurance premiums come down.

Additionally, entrepreneurs cut deals with insurers to cover vehicles based on utilization rates. As any fleet manager knows, vehicles are not all used at the same time. Rather, utilization rates can vary wildly. Thus, trackers are used to prove to insurers how much each vehicle in the fleet is used on average to further decrease premiums.

Reduce Fleet Size

Reducing the size of your fleet is one of the best ways to reduce overall costs and ensure that your business remains efficient. Light vehicles cost companies in the range of $5,000 to $8,000 per year, meaning that they are a significant expense. Eliminating even a handful of vehicles from the fleet, therefore, can result in substantial savings. This is especially true when it is remembered that trucks still eat into your profits even while sitting idle in the depot.

Entrepreneurs therefore focus on increasing the utilization rates of individual vehicles so that they can afford to run fewer vehicles in total. Due to fixed costs, running one car for eight hours per day is less expensive than running two cars for four hours each.

Improve Mileage Per Gallon (MPG)

While insurance and taxes increase the cost of vehicles, fuel is usually the most significant expense. Minimizing fuel costs is therefore important, but unfortunately, oftentimes easier said than done. This said, thanks to improvements in engine technology, it is becoming an easier cost to manage.

For example, if your business does a lot of short trips around town, you might want to invest in an electric powertrain, a move that can potentially half your long-term fuel costs. Alternatively, you can now buy light vans that offer similar mileage to modern private vehicles, often in the range 50 mpg.

Increase Sale Value

Eventually, the time will come when the company needs to sell vehicles. Smart entrepreneurs, therefore, work hard from the start to maintain the resale value of their assets using the strategies set forth above. Additionally, they sell to a captive market, including selling second-hand vehicles to employees who value and have first-hand knowledge of the care the car has received.

And, do YOU have additional tips that will help the SYS community?! We’re sure you do, so please share your advice by emailing us at Melanie@SpreadYourSunshine.com or by sending Spread Your Sunshine a message via Facebook, Instagram, LinkedIn or Twitter. We love hearing from you, as together we perform our best.