When we saw him last time, Nicky Hammerlane was at a Bordentown, N.J. truck stop waiting for a load assignment when Jason Black, a young trucking company owner, spotted him. Jason was failing to land direct ship customers for his fledging trucking business and was seeking Nicky’s help. Let's see what kind of solution Nicky came up with...
I was waiting for them to finish loading hurricane relief supplies in Athens, Georgia, when the Grateful Dead’s ‘Truckin’ ringtone started up on my phone.
“Mr. Ham – Nicky - this is Jason Black, the trucker you met at the Bordentown truckstop on Monday.”
“Hello, Jason, what can I do for you?”
“Uh ... I've almost got the list of companies I've contacted put together and what I said to them. Is there anything else I need to have by Saturday?”
“Do you have a hauling rate range developed?” I asked.
“A hauling rate range?” Jason queried.
“You should have a rate range that goes from your break-even point, which should include your own pay, to a higher amount that provides you with the money needed to sustain and grow,” I answered.
“I think I've got what you want. My accountant helped me put a rate sheet together when I first got my authority, and she's continually updated it since.”
“Great. Anything else?” I asked.
“Nope, see you at 9 a.m. on Saturday.”
The trip to Atlantic City was uneventful, but the folks there were mighty pleased to unload the disaster supplies for New Jersey from my trailer.
I pulled into the Bordentown truckstop about 8 on Friday night. I lucked out and got a parking spot towards the front, just as another trucker pulled out.
The next morning I got a booth in the far corner of the restaurant around 8 and ordered breakfast. Around 8:45 I got out my laptop and print-outs of instructions on negotiations. It sure was a help having that printer on the truck.
In typical trucker fashion, Jason arrived at 9 a.m. sharp. He had all the information I’d requested: the list of shippers he'd contacted, along with the script he’d used in negotiating with them. I looked over the two documents, probably looking like a physician studying a patient’s chart.
After some ah's and oh's and a couple of hmmm's, I turned to Jason. “The first thing I see here is, you’re giving control of your carrier's hauling rates to the customer, not just the negotiations.”
Jason looked startled, then frowned. “What do you mean?”
“Well, I don't think it's your youthfulness that's the problem with getting turned down. It's your approach. Your first scripted question is 'How much does the load pay?'”
“If I don't ask that, how am I supposed to proceed?” he asked.
“Let me explain it this way. If you went to the shop here for an oil change, and the shop manager asked you how much you wanted to pay for the oil change, what would you say?”
Very quickly Jason said, “I'd tell him a hundred dollars, to get a bargain.”
“And how much do you know about that shop's overhead costs, needed profit margin and so on?” I asked.
“Well, I don't know those things. There's no way I could.”
“Exactly,” I retorted. “The same way the customers you're negotiating with don't have a clue about your overhead, break-even point or necessary profit margin.”
I sat there and waited, watching as the BFO (Blinding Flash of the Obvious) came across Jason's face. Excited, Jason said, “So if I go in knowing this rate range, I begin by quoting a higher rate. If they don't accept the higher rate, then I negotiate to a rate that’s still above my break-even point. And I’m in control of both the negotiations and my money.”
“By Jove, I think you've got it,” I responded. “I’ve printed out what I call ‘Negotiation Rules of Engagement’ to help guide you through the minefields of getting the best rate on the freight you haul.”
Here’s what I handed him:
Negotiation Rules of Engagement when dealing with brokers and shippers:
- Know your current break-even point; not last week’s, last month’s, or last year’s.
- Establish a hauling rate range based on your break-even point and additional revenue need to sustain and grow your company.
- Know the load potential both of the area in which you’re negotiating and the destination area where the load is going. (Loads-to-truck ratio.)
- When you’re paying for something, it’s human nature to quote the lowest price possible. Brokers and shippers are no different. Having a hauling rate range for the freight you’re negotiating to haul will help you land the best rate for your operation.
- Know the facts of the load before providing a rate. The more detailed information you have, the fairer rate you’ll quote. When, where, how long, and what’s expected are necessary answers to establish the correct figure.
- If the broker/shipper gives you a rate before you’ve had a chance to figure yours, simply continue getting your load facts. Once you have all the required information, calculate your rate. Then politely provide him with your hauling fee, explaining it’s based on the actual cost of providing the service.
- Never give them your lowest rate; make them work to get any rate lowered. And remember they must offer you a reasonable incentive, such as multiple loads, return tonnage, etc.
- Negotiating hauling rates works with the law of gravity - it’s easy to lower a rate; next to impossible to raise one.
- Always do a credit check before agreeing to haul a load for a new customer or broker.
- Never ask how much the load pays.
- Verify your load information is correct.
- Know the absolute rate you must have, and never let your focus drift from it.
- Quote a hauling rate which includes all required miles, days, fuel costs, tolls, special services, etc. and is well above your break-even point.
- If they accept your rate, you’re home free; but if they balk at it, be prepared with a counter-offer.
- Be prepared for the unexpected. Anticipate.
- Know your worst-case scenario, and know when to say ‘No.’
- At all times, have your break-even figures in front of you.
- Be prepared to say ‘No,’ and walk away.
- Always be polite and courteous. You never know when you might need them again.
I completed our session by explaining to Jason, “The tricks to effective negotiating are these: Always keep your cool, listen to what they have to say, answer their questions completely and honestly - but don’t volunteer any more information than they need.”
“For a negotiation to truly work, there must be a desire and effort on both sides to be fair and equitable. But remember, don’t always assume this is the other side’s responsibility. Be sure they’ll work to earn your respect, as you’ll put the effort forward to earn theirs.
"Remember, it wasn't your youthfulness that was your problem. Your problem was that you appeared to be negotiating from a position of weakness. Now you have the tools to work from strength.”
Follow Up: Jason is now thriving, having developed a handful of direct customers to go with his brokered and load board freight. He's thinking about adding a couple more trucks to his operation as he slowly grows his trucking company.
The story you just read is true. The names and locations have been changed to protect the identities of the parties involved. Join Nicky next time for his biggest challenge yet: The Case of the Empty Space.
Timothy D. Brady is a speaker, business coach, and trucking industry guru. He provides training and educational presentations for small to large trucking companies, logistics organizations, and community groups. Learn more about Tim at http://www.timothybrady.com/