The typical response to even the idea of increasing hauling rates is that, “Truckers don’t set the rates, the brokers and shippers do.” But in reality, the market place and the laws of supply and demand are what determine hauling rates. In the current trucking environment, estimates show there are between 250,000 to 300,000 more trucks available to haul loads than there are loads to be hauled. Just by the over-supply and less demand, this fact alone explains the low freight rates.

With that said, it’s still your responsibility to know what it’s costing you to operate. As I discussed in the last post, cutting costs comes before increasing hauling rates. But when a higher rate is required, how you approach the process will determine your success or failure.

With the increases in fuel prices, the publicity thus generated and the increase in equipment purchase prices and maintenance costs, if shippers and brokers don’t know this is going to affect shipping costs, they’re living on a mountain in Tibet. Shippers, receivers, brokers, trucking companies and consumers are expecting this increase. But, understandably, all of them want to put it off as long as possible.

Back to the basics. You’ve got to know your costs. In addition, you have to know your daily Break-Even Point. If you are unable to substantiate your need to increase your rates to your customers, they won’t go along with your plan. The only way to do this is by the numbers; your numbers. Your rates must be figured by using your costs, not anyone else’s.

An analogy: imagine you walk into your favorite truck service facility for a PM Service. As you amble up to the service desk, the service manager asks you, “What can we do for you?”

You reply, "I need a PM Service.”

He says, “How much would you like to pay?”

It’ll never happen, right? Why? Because the truck stop has figured its cost for providing this service, and they know the profit margin needed to stay in business.

Your trucking operation isn’t any different. No one can know your costs except you. Not dispatch, not sales, not the shipper, not the receiver, not the broker, not the consumer, just you.

So it’s imperative you know your fixed costs per day, cost per mile, and load specific costs; reduce these costs where you can, and know when, where and how much you need to increase your rates to bring in the revenue to make a profit.

It’s also very important to do small incremental rate increases when it’s necessary. Waiting to do a rate increase until it’s a painfully large one puts a weighty strain on your shippers’ and brokers’ budgets and can cause them to flee to other carriers.

A final note: Too many truckers are under the belief one has to be profitable on every load. Especially in today’s difficult economy, this will put you at a distinct disadvantage. A better way to approach the revenue versus profit dilemma is to know what your monthly and quarterly income needs to exceed your monthly and quarterly Break-Even Points. You may have to haul some less-than-desirable loads to stage your trucks for the quality revenue loads. It’s the combination of the revenue of all the loads over a month or a quarter against your total costs for the same period which needs to show a profit.

Good loads and safe roads, everyone.