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Knowledge Is Profitable

Sept. 18, 2018
To get the best hauling rates, understand all the variables

There will always be brokers, carriers and shippers who will want and try to get you to haul freight at a rate that is less than you feel is fair. But what is fair? Is there really a valid answer to this question? What is perceived as fair to you may seem like a gouge to the one paying the freight bill. Now I won’t say there aren’t individuals and companies that desire to control the revenue you receive when you haul one of their loads, but remember, you possess the same desire to control the hauling rate you receive from them. Sounds like the proverbial financial tug of war. The best weapon you need to have in your armory is knowledge. The more you know about the market and sector you serve, your cost of doing business and your necessary rate range, the more weight you’ll have on your end of the rope.

Think of knowledge as the weight that provides you the needed strength to control your end of this hauling rate tug-of-war. The more knowledge you have of the freight lane and customers with which you work, the more strength you have pulling on your end. Now add to that an anchor weight at the end of your rope by knowing your numbers. Knowing what your costs are and what you need as a profit margin adds tremendous weight to your anchor.

On the other hand, by not knowing your rate range based on your numbers, you’re giving the broker, 3PL, shipper or carrier more weight on their anchor. There is no possible means for a provider of freight to know your numbers and capital needs.

By not knowing your numbers and your rate range you’ve passed all the strength and weight to the freight providers’ side. So hang on. You are the only person who has access to the information required to establish your hauling rate range.

You can’t control where the economy is headed, and you can’t control the load-to-truck ratios in the areas where you haul. The one area you can control is knowledge of your lanes, your customers, and your numbers, the required revenue and the rate range from where you need to operate.

“How much does that load pay?” This is the worst question you can ask when talking to a freight broker or shipper. Why? Because it puts total control of what they’ll pay on the load into their hands.

Picture this: You’re at the top of a cliff with a 400-lb. boulder. You need to keep the boulder from rolling off the cliff to the bottom of the ravine, so you’ve wedged the leading edge to keep it steady.

On the other hand, what if you have the same 400-lb. boulder at the bottom of the cliff and you need it on the top? This is a much more difficult task. Now think of this boulder as your freight rate: do you want it at the top of the cliff or in the ravine? If you ask, “How much does the load pay?” you’ve just put your rate boulder at the bottom of the ravine. If you don’t ask the question, your rate boulder is on the top of the cliff. To be sure you’re not pushing it over the edge, have a log chain and come-along attached to the boulder. If you have to drop it, you can control its descent.

To keep your rates from dropping like a rock, you need to know:

  • how many days the load requires;
  • how many actual road miles will be traveled;
  • the space and weight the load takes in the trailer;
  • cost of fuel for the trip;
  • market forces affecting available loads; and
  • your break-even point for the trip under consideration.

To make sure you get the best hauling rate possible, follow these instructions:

  • Never ask how much the load pays.
  • Verify that your load information is correct.
  • Have a negotiation strategy and stick with it.
  • Know the absolute rate you must have, and never move off it.
  • Quote a hauling rate which is well above your break-even point and end goal. If they accept your rate, you’re home free; if they balk, you can negotiate.
  • Never give something away without getting something of equal or greater value in return. If they ask you to give up something, make it seem like it’s painful.
  • Anticipate the unexpected.
  • Know your worst-case scenario; know when to say no.
  • At all times, have your break-even figures in front of you.
  • Be prepared to say no and walk away.
  • Always be polite and courteous. You might need them again.
  • If the broker quotes an unacceptable rate, politely explain to them that the rate is too low to meet your revenue needs. Leave them your contact number, and invite them to call you if they are unable to cover the load. You’ll be surprised how often you’ll hear back—and with an acceptable rate.

Negotiating hauling rates works like gravity—it’s easy to lower a rate; next to impossible to raise one.

Not every load is going to fit your revenue needs. Don’t be afraid to say no. Just be polite and leave them a means to get back in touch if they should change their minds and find your rate acceptable. In other words, keep your 400-lb. freight rate boulder under control and at the top of the hill, and you’ll make the money you need.

We may be improving, but the only way for you to get where you need to be is by having the right information and the knowledge to use it. Your rate range gives you a firm grip on the rope and greater weight at your end, so use that weight as the anchor to keep your rates at the top of your rate range.
Remember, as capacity tightens rates will become higher; when freight is more difficult to find, rates will be lower. However, it’s up to you to control how low you’re willing to go before saying no. Having a rate range will help make that decision easier.

About the Author

Tim Brady

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