As a trucker or owner-operator, knowing how to negotiate your freight rates can open a myriad of growth opportunities for your business. It will let you maximize profits in every load you deliver, boost your bottom line, and eventually expand your operations.
In this post, we prepared a guide to help you navigate truck freight rates, tips to negotiate them, and some mistakes to avoid while doing so. Keep reading to see how you can bring in more money to your business with the same amount of loads!
What are freight rates?
The freight rate is basically the price you get paid for transporting a specific load. The specific rate depends on some aspects, including the destination of the freight, shipment weight, type of shipment, and the type of carrier involved.
When it comes to freight rates for trucking, the actual price is highly negotiable between you, the trucker, and the shipper. If you’re working with a broker, the latter will be responsible in negotiating the rates.
As we’ve mentioned earlier, there are some factors that affect US freight rates, especially the type of trucking. Here are some of them:
- Flatbed trucking. Flatbed truck freight rates are usually in-demand for industrial loads, like construction materials or machinery. It’s seasonal and so its rates also fluctuate heavily.
- Dry van/Box trucking. When it comes to box truck freight rates, you’re usually looking at an average of $2 to $3 per mile, but this varies widely on your route, distance, and type of cargo.
- Refrigerated trucking. Also called ‘reefer’ trucks, average freight rates for this shipping are often steady and always in demand since it transports perishable goods.
Aside from the type of trucking, average truck freight rates also differ on a contract or on-the-spot basis. Both are profitable, and many truckers enter both setups, depending on their business strategy.
How to negotiate your truck freight rates
Negotiating your current freight rates will help your business keep up with the rising cost of fuel, maintenance, and other operational costs. In that case, we prepared here some tips on how you can find a middle ground with brokers or shippers when negotiating better rates:
1. Calculate your operating costs
Before you get into the actual negotiation of your full truckload freight rates, it’s important that you know your own numbers first.
First, you should know your operating cost or how much it takes to run your business. This way, you’ll know the minimum freight rate you can accept when negotiating with shippers.
2. Focus on good customer service
The success of your rate negotiation also depends on your relationship with your shippers or brokers. If you provide excellent customer service for each load you deliver, they will be more amenable to adjusting their prices.
You’ll never go wrong with good communication when trying to get better prices. What’s important is you know your numbers and can objectively justify the increase.
3. Look at average spot rates
Almost every load board has average truck freight rates. You can use these rates to compare with shippers and brokers, which can also be your tool in negotiating the same or higher prices.
Always check if the spot rate falls within the market average on the same load type. Aside from negotiating rates, doing this step will also help you weed out low-ballers.
4. Check the loads-to-truck ratio
Another thing we recommend is checking the number of tracks on the lane or route you want to book. This will give you an idea about how willing shippers can be when it comes to giving a higher price.
For example, routes with lots of loads but very few trucks give you a negotiating advantage. It’s because trucks are in demand, and shippers are surely clamoring to get their goods delivered as soon as possible – even if it means paying you more.
On the other hand, if the route has too many trucks and very few loads, you have a lower chance of securing better prices.
5. Do the math on your cost per mile
Remember this: you can’t negotiate higher prices if you don’t know how much it costs to run your truck. So before you reach out to a shipper or broker, make sure you do some calculations first.
So what is the average freight rate per mile? To calculate, just add your total expenses and them divide them with the number of miles you drive. Take note that these expenses not only include fuel, but also salaries, maintenance, food, lodging, insurance, and so on.
Once you have the numbers, you’ll have solid data to present to shippers when negotiating their rates. This will help you justify a higher freight rate without sounding unfair.
6. Don’t forget about additional fees
Aside from the usual operational costs you incur when running your truck, you should also mind the other expenses you’ll accumulate along the way.
This includes toll fees, dock fees, fuel surcharges, permits, and more. Make sure all these are factored into your total expenses when calculating the cost per mile.
7. Consider the drop-off destination
Take note that once you deliver your haul, you also have to think about your return trip. You have to check if it will be easy to find loads on the destination or drop-off location and whether they offer good rates.
If there’s a high chance you’ll be hitting deadhead miles, you can use it as an upper hand when negotiating with shippers.
8. Put everything in writing
As a business owner, you know this very well: it’s not official unless it’s on paper. Make sure you get a written and signed confirmation of the new rate after the negotiation. This way, you won’t be surprised with an unprofitable payment once you’ve delivered the goods.
9. Aim for a win-win situation
You should also keep in mind that when negotiating, you’re not the only one who should win. You should find a middle ground with the shipper or broker so they won’t feel ripped off. After all, you would definitely want to do repeat business with them.
Overall, be reasonable with your negotiation and let the shippers have their chance to haggle.
10. Be ready to say ‘no’
Lastly, you should know when to walk away if the negotiation isn’t yielding any positive results. Almost every shipper will try to negotiate the lowest possible rate. And while some are willing to give better prices, others have their budget set in stone.
If you’re dealing with the latter, always remember that you’re a professional with excellent experience in trucking. If the price isn’t profitable, it’s best to say ‘no’ and keep looking at your load board.
Maximize your trucking company’s profits even more with Factoring Express!
When it comes to your trucking business, it’s not enough that you negotiate higher freight rates. It’s also a matter of getting paid fast in order to get better rates to work for your fleet.
So, if you want to receive your freight payments fast and easily, you should consider exploring a factoring company near me like Factoring Express.
With the help of our factoring trucking company, you’ll get an advance on your invoice amount while we take over the collections process. This way, you’ll have more time to negotiate your rates and accept new hauls.
Instead of waiting 30, 60, or even 90 days, you can skip the lengthy payment cycle when you partner with us. The best part is you no longer have to chase payments on your own!
So, if you’re interested or want to know more about factoring freight invoices, feel free to contact Factoring Express today! You can also sign up for an account today – with approvals as fast as 24 hours and funding within 48 hours!
