How to Negotiate Freight Rates

Freight rates can fluctuate rapidly due to a variety of reasons. This can be frustrating and makes it necessary for carriers and owner operators to negotiate rates since they are not consistent.  Fortunately, with a few tips, you can negotiate a fair rate that will help to build important relationships while also improving your financial bottom line.

Here we will discuss how carriers and owner-operators can successfully negotiate rates for loads in a way that creates optimal outcomes for everyone.

Understand the Environment you are Negotiating In

Supply and Demand: A big part of what decides the offered rates on a load is simple supply and demand. When there are fewer available carriers, you will have the upperhand and can more easily negotiate a higher rate. It is good to pay attention to this because you can ask for higher rates when supply is low and then accept lower rates when supply is high. Being able to negotiate rates in both low and high demand times will help to ensure you do not waste time or fuel being unable to fill your truck.

Load Timing: Another major factor in determining what rates you can request is how long a load has been waiting for a carrier and how long before it needs to be on its way. If a load has been hanging out for a while and/or it needs to go soon, you will be able to ask for a higher rate. Getting the load on its way on time versus waiting for a cheaper carrier will typically be worth it to the shipper or broker.

Overtime Hours: When a particular load has a tight deadline, you may need to work overtime hours in order to get it there on time. If this is the case, you have leverage to negotiate for a higher rate.

Know Your Operating Costs

Cost Per Mile: How much would your costs be to carry a load? This includes everything needed to get the load from point A to point B including insurance for your truck, the salary for yourself/the driver, fuel, etc. Calculate this in order to understand the minimum you would need to take a particular load.

You may find your operating costs may be lower than you expected and you can accept a lower rate or you may discover just the opposite. The important thing is that you know this amount in order to avoid working for less than what would cover your costs.

Deadhead Hours: Any time spent driving without a load in the truck is considered deadhead hours and they can really cut into the rate you are getting. While you can always try to fill your truck with a load heading back from a dropoff, this is not always possible. If you know deadhead hours are likely to occur, you should try to build this into your rate. For example, it may be easy getting a load going into a major city but much harder getting one coming out.

Inquire About Extra Fees: While most loads will only be as expensive as your operating costs, some may have additional fees. These fees include things like road tolls, fuel surcharges, or perhaps special permits.  When negotiating, make sure to ask about these to ensure they get covered in your rate.

Value Your Own Time

Though the prospect of walking away without a load may be daunting and could lead to deadhead hours, it can sometimes be the best option. If you find yourself in a position where a broker is not willing or able to provide a fair rate, it is better to turn it down.

Worse case scenario, you may have to wait to get another load or waste some hours without a load. However, there is a chance that your refusal may push the broker to offer a better rate. This is another reason why it is so important to know your own operating costs and understand the environment you are working in. If you know there are limited carriers in the area and the load needs to go out soon, it makes more sense to take a risk on saying “no” to an inadequate freight rate.

Do Your Research

Average Rates: Before attempting to negotiate it can be helpful to know the average rate that the load you are taking typically pays. If the proposed rate is already within the average range, you can look to push it up to the upper limit if there are not many carriers.

However, if the rate is on the low end or even below it, consider why this might be. Are there more carriers than loads? Does the load not need to be taken soon? Etc. Depending on the answer you can choose whether or not it makes sense to try and negotiate up.

Background Check Your Broker and Shipper: If you have never worked with a particular broker or shipper before, it can make good sense to run a quick check on them. A credit check and internet search can reveal if there are complaints against them or anything else suspicious.

Similarly, you should also look into how long a broker tends to take to pay out. Some brokers may take significantly longer than others. If this is the case, you should discuss it during negotiations in order to organize a quick pay option.

Practice Good Communication

While things like safe driving and on time delivery records will always be at the top of what makes a good driver, good customer service and communication are also important.  When you are aware of things like your operating costs and why one load may be more difficult than another, you can effectively communicate this.

Being able to tell a broker why you are charging a rate will make it easier to negotiate in a professional way. Communicating your reasons versus just listing a rate will let the broker know you understand your job and will not waste their time making them guess your reasoning.

Professional, effective, and courteous communication will help to build a good reputation and relationships which can lead to more work and even better rates in the future.

Grow Your Network with RoadLinx

One of the best ways to consistently achieve fair rates as a carrier is to grow relationships with trusted freight shipping companies. At RoadLinx, we make establishing good relationships with carriers, brokers and technicians a top priority as we know our network is what makes our company great.

To learn more about our services and how to work with RoadLinx, call us at 905-760-1141.

Get a quote today!

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