How do Freight Brokers make their money?

The majority of our people clear 40-50k a year solely on commission so long as freight maintains.

 

I don't operate in the US but there are a number principals that apply globally.
I never intended to go in to broking.
I however found that if I wanted better customers I had to supply what they needed when they needed it.
There was no way I could meet the varied demand with my small fleet.
Customers did not want to check with me to see if I could cover a load.
They were to busy or to lazy I'm not sure to call round looking for trucks.
They needed someone to make their life easier.
They just wanted to send info on loads to cover and I would be expected to cover them.
They did not care if I covered those lanes or not.
They did not care if I had trucks available.
It was basically make it happen and don't make your problems mine.
The only way I could do this was to act as a broker.
Let me tell you , 95% of the time it is far easier dispatching , tracking and controlling your own trucks than it is a truck owned by another.
Good subcontractors (the other 5%) are so valuable to a broker.
A contractor who is punctual , takes responsibility ,has initiative , communicates well and handles the paperwork as required.

 

What, you mean responsible, personally accountable people who don't constantly blame others for their problems? You mean that exists in this industry???

 

The copious avenues brokers use to make money are only limited to their imagination. I've been "on both sides of the phone". When I was a young man, (the de-reg and the years that followed era) I saw my grandfather make money as a broker one way- he paid the truck 92% of the linehaul. This was decades before fuel surcharge.

The brokerage I am most familiar with now still uses a version of this model. Rates per mile never change, only the FSC, and it goes up, or down, accordingly to EIA.gov

Most brokers, and by most I mean 95+%, make money by doing this: "What do you need to haul it?" (they want you to put out the first number) then they usually counter, and it's like a watered down pawn shop negotiation. They will take loads from other brokers (double brokering, triple brokering) and they have no problem making 40% of gross on a load.

In sum, brokers make a killing by middle man'ing a miniscule amount of communication and do the "five minutes, five hundred, faxed, ######" act.

However, there are some brokers out there who still operate as though they work for the truck and success can only be attained if it is mutual, and while they are few and far between, they are worth the 10% they generally charge and their services are worth it when they are working for you.

 

Excellent reading

 

That is basically what a truck agent for somebody like American Transport, Greentree or Admiral Merchants will get is around 8.5 % of the linehaul. Brokers make their commissions as any other type broker would. They get a certain rate from the shipper and sell it to you at a lower rate. They keep the difference between the two rates as commission. It's simple math.

 

Simple explanation is the broker gets you to work for as little as possible and keeps everything else.

 

Your correct with a lot of that statement. That is how they make their money. However all are not like that. A successful broker will build a network of reliable carriers who he uses all the time. He does that by sacrificing part of the profits and paying on a higher scale. When you deal with larger brokerages you will not get that type of treatment though. You will only get it from Small to Mid Size brokers.

 

I've been finding that I fare better with smaller brokers. I have cut LS and chr by 50% or more in the past two years.

 

Yes this statement has some merit but it is a broad brush you are painting with but ultimately true and yet fair to all if viewed in the correct context.
If I cut your statement up I can explain in more detail.

The key word here being you and not whoever. If the broker does not care who they get then obviously the deciding factor is not the service supplied.It is your job as a service provider to make sure you are not interchangeable with just anyone otherwise you are not that valuable.

This is true but if you are of value to the broker because of your service levels or expertise the good brokers want you to be around in 5 years and willing to assist them.They therefore know that the little as possible has to be enough to keep you going and also enough to keep you interested in working for them.If you don't differentiate yourself from everyone out there then it is just going to come down to the supply and demand equation of you only being valuable when they can get no one else . Being an O/O is basically a small business owner.Being a business owner is not for everyone and it is not easy.If it was then everyone would be business owners .People are not owed a living they have to make a living.If you are an O/O then make what you do valuable because if you don't then you wont be valued and will only be used because you are cheap.