When I first started as a freight broker, negotiating freight rates with truckers was one of the most intimidating jobs I had to do. Forget that I was only 16 and my voice barely sounded like an adult at all. Nonetheless this was a skill that I had to master because my ability to negotiate freight rates would ultimately determine the success or failure of a brokerage.
Negotiating with carriers, and dispatchers is a regular responsibility of a freight broker. At the end of the day your ability to make a profit as a freight broker will depend on your ability to negotiate fair rates with carriers and be able to sell that to your customer for a small markup to ultimately earn a profit. So the number one question on your mind should always be, “How do I negotiate freight rates with carriers?”
Negotiating freight rates with carriers depends on, the seasonality of freight, the supply and demand of trucks and your ability to negotiate as a freight broker or shipper.
Carriers are naturally always looking for the highest rates possible to move their truck, and it is only natural that they have their best interests in mind before yours. So, in this video blog we are going to look at everything freight rates so that by the end, you will be able to negotiate better trucking rates for your freight.
Contents:
- What influences a freight rate?
- What is a fair rate for truckers?
- What is a freight broker’s markup?
- 3 Tips to negotiating better freight rates with truckers
What influences a freight rate?
Before we learn our best tips for negotiating better freight rates, you have to develop an understanding about where these rates come from in the first place. Freight rates are based on a number of factors and change on a monthly, weekly, even daily basis.
A freight rate is influenced by the supply and demand of trucks at any given time, the truck driver’s operating costs and the region that the freight is picking up and delivering too.
When it comes to supply and demand, the market is simple. If there are more trucks than loads in any given area, the rates will be lower coming out of that location. The opposite is true, if there are more loads than trucks.
Load boards like DAT include tools that give you an estimate of these number based on millions of loads and trucks posted per day. It is an essential tool to have in your brokerage and one that I use every single day.
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The good news is, that these rates can always be negotiated because just like anything, different carriers will have different preferences. Here is an example using imaginary rates.
Assume that you have two truckers located in Newark NJ and you as a freight broker have a load going from Newark NJ to Houston TX. Driver 1 lives in Philadelphia so he calls on your load and offers to run this for you for $1000. The load would be good money for him, and it is slightly over market because the driver knows they will have to find another load to come back home to Philadelphia once this run is complete.
Driver 2 on the other hand lives in Houston TX and this is a perfect load for him to come back home. Assuming there are no special requirements, driver 2 might give you a rate for $750 because you are giving them a load that will take them to the exact location they want to be.
This is just an example to show you that each driver will have their price, and some will be lower or higher than others.
Pro tip: Always shop your carriers. As a freight broker you should try to find anywhere from 2-3 options to move a load to determine what the true market price is.
Luis Uribe, Founder of Freightskills
What is a fair rate for truckers?
The definition of a fair rate is not so cut and dry. As we already mentioned, every truck driver is going to have their own idea of what a fair rate means to them. At the end of the day, it is up to a trucker as an individual to determine a price which will make them a profit.
A fair rate for a truck driver is one that will cover their operating expenses for the truck including truck payment, fuel, maintenance and driver’s time as well as give them a profit after the load is complete.
Drivers should always have a clear idea in mind of their operating costs in order to provide these numbers to brokers. At the end of the day, the fair price of a load is up to the ones who are going to haul it and if you post a load too cheaply, the only choice you will have is to increase the rate until it becomes attractive for drivers to take from you.
What is a freight broker’s markup?
A freight broker’s markup is a percentage otherwise known as a margin which is the difference between the price for a truck driver to move the load and the price that was sold to their customer. On average a broker’s markup can range anywhere between 5-20% depending on the niche of freight the broker work’s in.
Freight brokers make a profit off of their markup and the market is perfect in a way that a broker will technically never be able to charge so much that it is unfair. If a broker is charging too much, the competition is so high that those broker’s simply will not receive work from their customers.
Which makes the accusations from some trucker’s that “freight brokers are stealing money” absolutely crazy to believe. If brokers were too expensive, shipper’s simply wouldn’t use brokers and would book their freight direct to carriers. The reason why shippers don’t prefer working direct to carrier is for another blog post.
3 Ways to Negotiate Better Freight Rates with Truckers
Now that we understand what influences freight rates. You understand the role of a broker’s markup and exactly how a fair rate for trucker’s is calculated, let’s talk about how you go about negotiating a better rate with carriers on the phone.
- Know your load
Knowing your load comes down to doing your homework with your clients. Before you ever get on the phone with a carrier, you should always have a clear idea of every aspect of your load. What is the load, what are the pickup hours, what is the commodity, are there any special requirements? You should always ask your customer’s these questions because if you don’t, your carriers will be asking you.
If you can’t provide this information carriers will have no choice but to give you a much higher rate while you’re on the phone.
2. Sound confident on the phone
Sounding confident has to do with your tonality and aggressiveness on the phone. Your tone needs to convey that you know what you are doing, because any sense that you are inexperienced will be met with a much higher than market freight rate from your carriers.
Speak clearly, enunciate your words and have a can-do attitude which will show your driver’s that you are not one to be pushed around. They will respect you for it. Oh yea, don’t forget to be kind. Give respect and you will get it back in multiples.
3. Develop trust with transparency
At the end of the day, carrier’s want to work with people they trust. You can build trust with your carriers by running multiple loads with them and paying them quickly. Ill never forget the line that a carrier once told me over email. It was on their email signature and after we ran a load with them, the carrier sent their bill with a line that read “fast pay makes fast friends.”
This couldn’t be truer.
Make sure you do everything you can to get your carrier’s paid quickly.
These are just 3 tips to get better freight rates with carriers, but if you are interested in our proprietary system, our processes that let us secure the fairest rates with carriers you may want to look into joining the Freightskills academy. It is our group mentoring program where we show you all of the ins and out’s of the industry taught by me, a broker with over 15 years of experience negotiating with carriers, servicing customers and more.
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