Large carriers operate under the volume theory of hauling: “Make a minimal profit on each load, but haul a tremendous number of loads to grow the bottom line.”
Any small carrier who tries to compete with the large carriers on a large-volume, low-hauling rate will find they are limited by time (seventy hours in eight days), space (4,000 cu. ft. in a 53-ft. trailer), and too few trucks and drivers.
Being a smaller motor carrier means you're more nimble, giving you the ability to react to market changes quicker than larger, more bureaucratic carriers. As a small trucking company, you and your drivers can provide levels of service a larger carrier would have a difficult time achieving. But in order to do this, you must look for shippers who are not happy with the current level of service they're getting from their freight-hauling provider.
Here's a list of some services you could provide your customers:
- Uncrating and set-up
- Small shipment consolidation
- ‘Tip and tell’ or ‘shock watch’ for sensitive items
- Haul odd-shaped loads that most conventional carriers don't want to handle.
By providing services a traditional trucking company isn't interested in performing, you'll acquire both market security and greater control over your hauling rates. Be sure you think through the service or services you want to provide. To be successful, you need to be an expert in your niche and possess the skills to do the job right.
Find a commodity or service you can provide which encompasses the smallest geographic area possible. This reduces your fuel costs by placing you closer to your origin and destination points and reducing the distance if any deadheading is required. Also, look for loads that require disassembly and reassembly of equipment, crating and uncrating, etc. These services can add to your revenue without adding fuel costs.
Being a smaller motor carrier can be to your advantage, as you can adjust to changes quicker than your larger counterparts. The industry is changing. Fuel costs won't be going down any time soon; consumers are noticing how much energy is used bringing the products they purchase to market; and the adjustments shippers and receivers are making in how they do business means a hauler needs to be on top of the market.
If you are going to beat out the larger carriers, you must know the rules of the game:
Large carriers set and quote their hauling rates to the customer. Market forces may dictate price, but individual customers do not. You must do the same.
Market forces include what it costs you to do business along with what supply and demand is for the items hauled.
Letting shippers or brokers set your hauling rates will not bring you the level of revenue needed to operate and grow your company.
You must know the market you serve in order to succeed.
To set your rates, you must know your costs; your one-, three-, five- and ten-year growth goals; and the capital required.
Knowing what your customers need is important; knowing what they want is paramount; providing them both is success.
Understand that all hauling segments have economic vicissitudes — knowing the economic cycle of the market you serve is a must.
There will always be someone who will haul a load cheaper than you are willing or able.
The best paying loads come from diligent planning, knowing the correct rate for the services provided, distance traveled and time required, and knowing when and how to say “no” to loads that don't meet your revenue criteria.
Beating the large carriers for the best paying tonnage means you don't compete on price. If you provide top quality, go-out-of-your-way service, that “can-do” approach will make it impossible for someone trying to compete with a lower price to succeed in taking your customer. This also requires you to be selective with which shippers you choose to do business.
Always look for the value-conscious, not the price and discount shopper. A discount shopper will always go looking for a lower price every time you need to raise your rates. A value-conscious shipper will give you an opportunity to show him why the rates need to be increased, and if justified, will continue to do business with you. This means simply showing your shippers what it's costing you to do business and what you need to grow and better serve them in the future.
For every trucking company going out of business, there are shippers now needing haulers to fill their transportation needs. This is a time of boundless opportunity for those who have laid the groundwork to be a smaller, leaner, more nimble motor carrier.
Contact Tim Brady at [email protected] or 731-749-8567.