In my last two posts, I�ve covered the first two rules of beating the large carriers in the hauling game:
1. Large carriers set and quote their hauling rates to the customer. Market forces may dictate price, but individual customers do not. You must do the same.
2. Market forces include what it costs you to do business, as well as supply and demand for the items hauled.
Now, we move on to Rule #3:
Letting shippers or brokers set your hauling rates will not bring you the level of revenue needed to operate and grow your company.
Sometimes, the path of least resistance isn�t the best route to take. True, it�s far easier to ask a shipper or broker what they�re willing to pay for your carrier to haul a load than taking the time to 1) know your costs and the capital (money) requirements and 2) set your hauling rates using those figures. But any time a trucker asks the question, �How much does the load pay?� he leaves money, his money, sitting on the table. You and your motor carrier should not ask that question.
No large carriers permit a shipper or broker to set the rate they are paid. Why? Because there�s no way a shipper or broker knows the trucking company�s cost and revenue requirements. This fact is also true for every small carrier. The only person who has access to that critical financial information is the owner of the small carrier. So if the shipping customer doesn�t have the cost and revenue information, there�s no way the shipper can decide the best rate for the freight to be hauled by a particular carrier.
But if you don�t know your costs and revenue needs, you�ve just given financial control of your trucking company to the shippers and brokers for which you haul.
Now, this is not to say that just by setting your own hauling rate range, you get a guarantee that you�ll receive only freight rates within your range. Many other factors determine the rate at which a load will be transported. But not knowing and setting a hauling rate range and allowing others to determine what you�ll be paid is a formula that will continually leave your money on the table.
To be a truly independent trucker, you must learn to control the revenue you receive on every load. This process begins with knowing your:
- Daily, monthly, quarterly and annual fixed costs
- Per-mile operational cost
- Per-mile fuel cost at the current pump price
- Load-specific costs on each load you haul
Determining these figures is the beginning, but in order to start growing your company within a reasonable amount of time, you need to create specific growth goals and determine how much above simple costs your rates must be to achieve them.
Knowing your costs and needed revenue isn�t the only thing you need to be successful in trucking, but it�s definitely top priority. Don�t let shippers set the rates for your trucking company. The only money you should ever leave on the table is a tip for the server.
Good loads and good roads, everyone.