Does your motor carrier have a hauling rate range based on the actual costs of doing business? Are you letting brokers and shippers set your rates? If so, you need a hauling rate range to know where you must start the negotiations.
Anyone can get loads by letting the customer set the hauling rate. But if that hauling rate doesn't meet the revenue needs of the trucking company, all the loads in the world won't keep the carrier from failing. In other words, if you allow shippers and brokers to set your rates, you will drive yourself out of business.
If having the lowest price was truly the way to succeed in business, everyone would be successful, but we know that's not the case.
So how do you set a hauling rate range? Follow these five basic steps:
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Create real value for your customers. Selling on price alone is not selling; it's order taking. Any salesperson worth his weight in gold sells value based on knowledge of what the customer wants and needs.
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Set your hauling rates based on the cost of providing “beyond expectation” customer service. No matter what type of operation you have, to be successful you must know all of your costs (fixed, variable and load specific), work to control these costs, and set your rates for a reasonable profit. Then you can negotiate for loads within that rate range.
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Take into consideration what level of income is required for the company to have enough cash in the bank to sustain operations during lean times, otherwise known as sustainable capitalization. Also, at what revenue pace does your company need to grow to keep up with your customers' needs and to bring in new business? That's your growth capitalization.
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Determine your market share. What is the size of the total market you serve? What percentage of this market can you handle?
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Address the current hauling rates within the market you service. What are the expected services? Will you be competitive within your market at your cost and capitalization need levels?
Provide a level of service that is greater than the hauling rate you charge and its value will be worth the price. By providing the highest level of customer service, you make the customer service bar too high for your competitors to reach. It's not whether you're charging the highest or lowest hauling rates; it's whether you're providing value beyond your customers' expectations for the price.
This practice creates revenue to cover your costs, creates the capital to sustain and grow your company, and keeps your customers returning time and time again. As you know, it costs a lot less to keep customers rather than develop new ones.
Contact Tim Brady at 731-749-8567 or at www.timothybrady.com
