Negotiating rates with freight brokers and shippers requires strategy, know-how, and a steady hand on the wheel. For small trucking business owners, mastering the art of negotiation can mean the difference between making a fair profit or financial strain. Here are 9 tips to consider and prepare for the next time you get on the phone with a customer.
Know Your Costs
Understanding your costs is fundamental to negotiating profitable rates. Calculate all expenses associated with operating your trucking business, including fuel, maintenance, insurance, permits, tolls, taxes, registration, driver wages, etc. to calculate your cost per mile (CPM). Learn more about how to calculate your CPM here. Knowing your cost per mile helps you determine the minimum rate you need to cover expenses and generate profit.
Build Relationships
The foundation of negotiating successfully is building strong relationships with freight brokers and shippers that can lead to mutually beneficial partnerships. Communication is key —be responsive, reliable, and transparent. Establishing trust and credibility can result in repeat business and preferential treatment when negotiating rates.
Be Flexible
Flexibility can give you a competitive edge in negotiations. Be willing to accommodate varying pickup and delivery times or fair requests from the customer. Flexibility demonstrates your commitment to meeting the needs of brokers and shippers, which can translate into better rates and more opportunities.
Research Market Rates
Stay informed about market rates for transportation services in your area and service offerings (dry van, flatbed, reefer, etc.). Understanding market dynamics empowers you to negotiate from a position of knowledge and demand fair compensation for your services. Explore online load boards like DAT to access real-time market data, such as current market rates, load-to-truck ratios, and available opportunities.
Highlight Your Value Proposition
Differentiate yourself from competitors by highlighting your unique value proposition. Emphasize your track record of reliability, safety, and on-time delivery performance. If you offer specialized services or equipment, such as refrigerated trailers or hazardous materials handling, promote these capabilities to justify higher rates.
Negotiate Volume Discounts
If you anticipate consistent business volume with a particular broker or shipper, explore opportunities to negotiate volume discounts or long-term contracts. Volume commitments can provide brokers and shippers with predictability while securing better rates and steady income for your business.
Be Professional
Approach negotiations with professionalism and confidence. Clearly articulate your terms, expectations, and limitations. Maintain a respectful and constructive dialogue, even in challenging situations. Being professional fosters trust and facilitates productive negotiations. This is a crucial aspect of negotiations! Always be polite, professional, and positive even in the face of challenges.
Understand Market Demand
Stay attuned to market demand fluctuations, such as seasonal peaks or industry trends. During periods of high demand, capacity may be limited, enabling you to negotiate higher rates. Conversely, be prepared to adjust rates during slower periods to remain competitive and secure business.
Consider Deadhead Costs
Factor deadhead miles into your negotiations. Deadhead miles—those traveled without freight on board—represent lost revenue and increased expenses. Your negotiations and rate will need to reflect your deadhead costs.
Remember, that negotiation is not just about getting the best deal—it's about building trust, fostering partnerships, and paving the way for long-term success!
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.