Have you ever settled for the freight broker’s rate, even when it’s not convenient for you? You used to attempt to negotiate higher rates, but they didn’t go your way, so you don’t bother anymore.
I've been a freight broker for over a decade now, and I can tell you that owner operators leave money on the table every single day.
From poor negotiating skills, to simply calling on bad lanes, there are a number of reasons why I've seen carriers and independent drivers not be paid the rates they deserve.
Since you are a loyal reader of trucker daily, I've decided to spill all the secrets you'll need to secure high paying freight on the daily...see what I did there.
Without further ado, the following are the steps you need to take to give yourself an edge when negotiating freight rates with your shipper or freight broker as an owner-operator.
1. Calculate Your Cost Per Mile
This is the first thing you should do because it is most likely going to be your starting point. When you calculate your cost per mile, you know exactly how much money goes into running your truck. This is the figure you must never go below when negotiating or you would be at a loss.
Also, it is important that you don’t just have an assumption of what your cost per mile is. Knowing the hard facts helps you seem to your freight broker that you know your onions, which may give you an advantage during the negotiation.
You can calculate your cost per mile by summing up your total expenses and dividing the value by the number of miles.
2. Observe Spot Rates
The spot rate of a haul is the rate it costs to transport the load at one particular time. Depending on factors, such as fuel prices, time of the year, demand and supply, and more, spot rates differ. But the best load boards offer up-to-date spot rates.
Why do you need spot rates? The average spot rate serves as the benchmark around which you want to pick up your negotiation once you know your cost per mile. If the freight broker offers you a price that’s below the average spot rate, negotiate for something better.
3. Observe Loads to Trucks Ratio
The loads to trucks ratio for a particular lane is the amount of loads there are to a truck on a particular lane.
A load to truck ratio of 3:1, for instance, means there are three loads for every one truck, and that the competition among freight brokers to get a truck to ship their load is fierce. This is a good thing for you as a truck driver because it gives you a favorable negotiation advantage.
But if the load to trucks ratio is something like 1:3, then there are more truck drivers looking to haul the same load. The competition is higher among truck drivers, and you might not have as much room for negotiation with the freight broker as you would have in the former condition.
4. Observe Load Times
Load times offer you great opportunities to up your bargain.
If you find that the load has stayed on the load board for long, it may be that other truck drivers are unwilling to take it, and the freight broker is likely now more desperate to get it off their hands. This is your bargaining chip.
The dock time is another load time that might earn you extra bucks, especially when they are stringent and may require you to go out of your way to meet up with them. For instance, if the load has certain pickup times and delivery times you must adhere to at the expense of your break or your normal comfort, you may use this as another bargaining chip for you.
Pick-up times are also important because the less time the load has on its pick-up time, the more desperate the freight broker is likely to get. And the more you're able to bargain.
5. Strategically Plan Your Drop Off Locations
In the trucking business, head-haul and backhaul rates between two destinations can, many times, differ.
For instance, heading to Boston from Philadelphia is more expensive than starting the journey from the other end. The reason for this is that there are more consumers in Boston, hence, fewer outbound loads. And there are more producers in Philly, hence more outbound loads, than in Boston.
So, if you know the haul takes you to a drop-off location where it's hard to come out with another haul, it might be better to factor that into how much you’ll charge your freight broker. Sometimes, the broker may offer you a load coming out of the location. Other times, you are allowed to raise your rate higher.
6. Don’t forget to include deadhead
Deadhead is the operating cost incurred while you take your unladen truck to the pickup point of your load. Sometimes, it is unavoidable. And that is why you should factor it into your negotiation.
7. Don’t Let Them Spring Additional Fees On You
Additional fees, if not taken care of by the shipper or the freight broker, will have to be removed from your pocket. These additional fees include toll fees (if there’s any along your route), permit costs (if the load requires one), lumper or dock fees, terminal or storage charges and the likes.
Ask the freight broker if there are these fees waiting on the trip for you. Try to do your research as well.
Fees required to finish your load should not be the responsibility of the driver so make sure you are never out of pocket for these fees.
8. Normalize Saying “No”
A negotiation could go one of three ways. The first is that you get the edge and you haul at your preferred rate. Another is that you don’t agree with the freight brokers' rate, and you say no. The last is that you agree to a rate that’s bad for you, and you grumble your way back and forth during the trip.
While the first scenario is considered an obvious win (it’s why we wrote this article), we believe the second one where you get to say “no” is as well a win. It is better that you don’t haul anything than running your business aground. The third scenario is what we try to avoid, which is also why we wrote this article.
Long story short, win by either getting your preferred rate or by saying “no” to bad rates.
9. Put Agreed Rate Into Writing
After you come up trumps in the negotiation, what do you do? Throw your hands in the air and celebrate? No. Not yet.
First, put the agreed rate in writing. Contract it. Because otherwise, the freight broker or shipper is not obligated to do as you both have specified. Also, ensure that the contract contains everything you just negotiated.
Only after this can you throw your hands in the air to celebrate.
10. Look Up the Broker Or the Shipper
Before you get into business as a freight broker or shipper, ensure you check their credit performance. The reason is that you may need to factor the invoice from this freight. And if they have a bad credit history, you might struggle to get a factoring company that will factor your invoice.
This removes the risk from you as a carrier and helps you get paid much faster.
Conclusion
Before you go, it is important to know that that negotiation isn’t just about who is better at haggling. Negotiation is a skill, and it can be taught and learned. And that is why we believe those tips up there should help you secure higher freight rates.
In summary, negotiating a higher freight rate as a truck driver or an owner-operator involves calculating your cost per mile, looking up the spot rates, loads to trucks ratio, and load times on the load board. Other tips that would give you an edge in the negotiation game are remembering to factor deadhead miles and additional fees into your rate.
Ultimately, don’t hesitate to say “no” if the shipper or freight broker isn’t bulging. But if they do bulge, put the agreed rate into writing so that your freight broker is bound by contract to act accordingly.
We’ve equipped you with the skills. Practice them and win those negotiations. Good luck.
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