As a carrier or owner-operator, rate negotiations can be frustrating. It takes valuable time and energy to come to an agreement that works for both you and the broker. But knowing how to negotiate freight rates or load rates is critical to a successful business. Good rates mean more money in your pocket and a better bottom line for your business.
11 tips to negotiate better freight rates
There are several factors that go into freight rate calculations. Understanding those factors can help you negotiate rates from an informed position. Here are the top tips to use when negotiating with brokers or shippers to make sure you’re getting the best rates possible.
Negotiation tip #1: Pay attention to spot rates.
A spot rate is a one-time rate for transporting a load. Spot rates can vary widely depending on time of year, fuel prices, hot and cold lanes, supply and demand, and more. Good load boards will have average spot rates for a particular load specific to the lane and type of equipment.
Truckstop.com Rate Estimate is an industry-leading spot market engine for specific lanes so you can compare shipping rates for negotiation. You can see same-day freight rates, rate trends, and even truck supply and demand in the origin and destination locations.
See if the offered rates fall within the spot market average. If not, try to negotiate for a better rate.
Negotiation tip #2: Understand the loads-to-trucks ratio.
Always check the number of trucks posted for the lane you want, so that you know what kind of wiggle room you have when you negotiate load rates. Lots of loads and few trucks? You have the upper hand to ask for a better rate because trucks are in high demand. But the reverse of this is also true. If there are more trucks than loads, rates will likely be lower and with less room to negotiate. A good load board will let you see that information when you’re negotiating rates. The Truckstop.com Load Board does just that.
Negotiation tip #3: Calculate your cost per mile.
If you don’t know how much it costs to run your truck, you have no idea what to charge to keep it on the road and still make a profit. If you’re accepting rates less than your operating costs, you’ll run yourself out of business. Calculate your cost per mile, so you make good decisions while on the road.
To determine your cost per mile, simply add up your total expenses and divide them by the number of miles. Don’t forget to include your fixed expenses, such as your truck lease and insurance, your variable costs, such as food and lodging, and your salary expenses (the amount you pay yourself or your drivers).
Brokers will always negotiate for a lower rate, while you’re trying for a higher one. Make it easier, with data to back up your rates negotiation. Knowing your cost per mile will make you a better negotiator.
Negotiation tip #4: Watch load times.
Watching load times serves multiple purposes:
1. The longer a load is on a board, the more of an advantage you have in negotiating. If the broker has been working the load for a while, you may be able to get a better rate.
2. Pay attention to the pick-up time. The less time there is until the cargo needs to move, the more likely the broker needs a carrier, STAT.
3. Find out about dock hours. If there are specific pick-up and delivery times making it tricky to deliver on time, if it requires you to work after-hours, or you have to drive in rush-hour traffic, bring it up to the broker or shipper.
Monitor load times with Truckstop.com Load Searching. Older loads offer better bargaining opportunities.
Negotiation tip #5: Consider the drop-off location.
For example, getting good rates into Florida is easy, but coming out is a different story. If you know it’s unlikely you’ll get a good rate on a load when you’re coming out of an area, prepare by negotiating for a higher rate going in. It’ll help cover the cost of getting out. You can also ask the broker for a load coming out of that area, or use Truckstop.com Decision Tools to view truck supply and demand at the drop-off location.
Negotiation tip #6: Find out if there are additional fees.
Some lanes are more expensive to run than others. Ask questions about fees you know are likely to be an issue:
- Do you have to pay dock or lumper fees?
- Are there any tolls along the route?
- Is the fuel surcharge covered in the rate?
- Does the load require any special permits?
These are only a handful of fees that may be involved, so make sure you ask anything that might be relevant regarding the shipper, receiver, late fees, etc.
Likewise, consider any accessorial charges that might be appropriate to add to your rate. Is the load oversized? Do you need to deliver to a residential neighborhood or provide advance notice to the receiver? Don’t forget to factor these common charges into your negotiations.
Negotiation tip #7: Factor deadhead miles into your rates.
Deadhead miles happen whenever you’re driving an empty trailer. You can minimize them by trying to arrange return loads, but some deadhead miles are unavoidable. Be sure to take them into account when you negotiate freight rates.
Negotiation tip #8: Compare load rates.
Not all load rates are equal, so do some research. It’s easy with Truckstop.com Load Comparison, which lets you compare various loads side by side. You’ll need to take other factors into consideration as well, such as deadhead miles and fees, but this is a great place to start.
Negotiation tip #9: Be confident enough to say “no.”
You’re a professional with a history of hauling freight. They can trust you to get the job done. But sometimes, brokers simply don’t want to pay a fair rate for the haul. There is never a good reason to take a loss you can’t afford.
In addition, if you’re wondering how to negotiate freight rates, learning to play hardball should be near the top of the list. Rather than going back and forth, sometimes it’s worth gambling on a hard “no.” In this case, the broker may offer you a fairer rate. It’s always a risk, of course, but sometimes risks bring rewards.
Negotiation tip #10: Get written rate confirmation.
Without a signed freight contract, a shipper or broker is not obligated to pay the carrier. So make sure you get everything in writing. Look it over to be certain that everything you negotiated is included.
Negotiation tip #11: Provide good customer service.
Remember, both you and the broker are trying to get the best price you can. You can’t go wrong with good communication. If you know your cost per mile and understand the market, you can state clearly, quickly, and directly why you’re quoting a certain rate, which a broker will appreciate. Listen to their needs, as well. If you’re respectful, you’ll develop a good reputation for fair negotiating skills. Plus, what if they decide to pay your rate? You want to be the one they call back, not just this time but in the future.
Time is money for everyone; keep it brief but respectful.
Confidently negotiate better freight rates.
A big part of learning how to negotiate freight rates is understanding which tools can help. With Truckstop.com Decision Tools, you can gauge the strength of your negotiation with loads-to-trucks ratios and truck activity based on your origin and destination locations. Following the above tips, and bringing it all together with the Truckstop.com Load Board, can help you improve your negotiations and ultimately get better freight rates for all your loads.