Last Updated on October 19, 2023
The trucking industry has dealt with its fair share of ups and downs in 2023, but one aspect that’s been particularly challenging for owner-operators is low freight rates due to less demand. Because of this, knowing how to negotiate better freight rates has never been more important.
Running a trucking business is expensive, so it’s vital to cut costs wherever possible. You should never settle for a base rate or accept a rate that you feel is too low. And yet, even if you understand the importance of negotiation, let’s face it – negotiating isn’t in everyone’s DNA, including even the most prosperous business owners. The thought of telling a broker ‘no’ might be intimidating, but successful owner-operators must overcome that mental roadblock because doing so will help you land rates that ensure your business remains profitable.
Thankfully, even if you don’t have a sales mindset, there are several ways to help you conveniently settle on the best freight rates possible with your business partner. Continue reading to find out what those negotiation tactics are along with what information you should have top-of-mind to use to your advantage when negotiating freight rates.
What Information You Should Have Before Negotiating Freight Rates
It’s well-known that rates are computed mostly on a cost-per-mile basis. However, it’s more than miles — don’t overlook the importance of doing your homework.
Memorizing various aspects of your trucking business, the specific job you’ll be negotiating for, and the industry benchmarks will help you tremendously during your pitch to bring the price up so that your trucking business gets paid sufficiently.
Before negotiating, know:
- Your operating cost
- The average spot rate for the load
- Dates and times related to the load
- The number of loads vs. number of trucks available
- Industry standard for rates in the drop-off location’s state
We’ll discuss these five factors more in a bit but understand that using this information wisely can help persuade brokers to up the rates when they’re looking for shippers.
Now, let’s discuss a step-by-step strategy for how to get the best freight rates.
How To Negotiate Better Freight Rates
By following these steps, you’ll give yourself the best chance to find a reasonable middle ground with brokers.
1. Be respectful, but confident
It’s always important to come off as approachable and polite in any matter of negotiation. On the other hand, don’t sell your business short. You’ve worked hard to build up your trucking business, so make that apparent in your tone and demeanor. Showing a freight broker that you’re serious about your business will give them the peace of mind that you will complete the job on-time and that you’re worthy of potentially higher rates.
2. Enquire about fees, fuel, and detention times
There are many factors that may or may not go into rates, depending on the broker. Don’t use miles as your only metric. For instance, if you’d be delivering to a remote location, deadheading could be a hidden cost that significantly alters your profitability.
That’s why it’s necessary to be up-front and ask the broker if aspects such as deadhead miles, tolls, fuel surcharges, expenses for obtaining special permits (if applicable), and other freight charges have been taken into account. If, for example, fees for fuel surcharges are not covered or if the shipper is known for long detention times, those could be used as bargaining tools to heighten the rate.
3. Do your homework and find details to use to your advantage
Here’s where aspects like average spot rate, pick-up and drop-off times, truck-to-load ratio, and the drop-off location come into play.
Average spot rate: If you’ve found a load on a load board, you’ll also likely see the average spot rate for that load. If the proposed rate is below that average, respectfully ask the broker to up the price.
Load times: On load boards, you can see when loads were posted and when the freight is scheduled to be picked up. Use this to your advantage. For example, if a load has been posted for weeks, and it’s scheduled to be picked up in just a few days, the broker would probably be open to upping the rate to entice carriers so that delivery stays on schedule.
Truck-to-load ratio: Keep in mind demand for certain loads. If there are very few competitors for a high number of loads, that means demand is high and price should be low. If the demand is low yet the price remains low, you can politely point that out to the broker as a means of negotiation.
Rates by state: Shipping costs actually vary by state. Usually, higher-populated states equal higher demand, leading to higher rates. So, if a load requires drop-off in a state like Florida or California and you feel as if the rates are low, that can be used as a bargaining tactic because these states typically have higher freight rates.
4. Don’t settle, but don’t walk away too easily
If you’ve brought up a significant number of points that reflect the proposed rate being too low and the broker still refuses to up the price, you might feel you’re at a crossroads between settling for the rate or walking away.
However, the best negotiators find tactics to extend the conversation, which could lead to higher rates. Be honest with the broker, telling them you believe the rate is too low and that the current rate will lead to a potential loss for your business and potential cash flow problems. Explain the background behind why it wouldn’t make sense financially for your company.
A broker’s first offer is likely not the highest they will go. There’s a decent chance they’ve calculated that initial offer based on what a reasonable price would be when meeting you in the middle, so try meeting them in the middle! If by this point, they still aren’t willing to budge, you can politely decline and move on to finding a new load for your truck.
5. Get everything in writing and sign the contract
Don’t stress – if you’ve done your homework and negotiated politely, you will eventually find loads with freight rates that are fair for both parties.
Once you’ve secured a load with a rate that ensures profitability, have everything you’ve discussed put in writing. When the time comes to sign the contract, ensure you note the rate confirmation and read the entire document thoroughly.
Freight Rates FAQs
What is the current freight rate?
The going freight rate varies by type of truck and regularly fluctuates, even daily. In September 2023, the average rate for a flatbed truck was $2.51 per mile, for a van it was $2.11 per mile, and for a reefer it was $2.52 per mile.
What is a good freight rate?
This question is completely subjective, as it all depends on what rate will lead to the highest profit margin for your business.
If the rate exceeds your operating costs for the haul, you can consider that a good rate, as that means you’ll be making profit. The higher the profit margin, the better the rate.
Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.