New broker - need help understanding carrier rates

Discussion in 'Freight Broker Forum' started by alextherussian, Feb 13, 2013.

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  1. Feb 13, 2013 #1
    alextherussian

    alextherussian Bobtail Member

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    Feb 13, 2013
    OH
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    Greetings all.
    Cut story short - I am a broker (small brokerage) returning to business after 1.5 years of idle time.
    Even when I was working in past, i did not have any clue of how carrier rates (base rate per mile + fsc) are formed.
    How to understand this? Where to start?
    Thank you.

    P.S. Please dont go into broker bashing.
    When i was working back in 2009-2011, I usually paid my carriers within 2 weeks of the faxed confirmation.

    I will add to my question any equipment , lanes, dates, etc.
    Just want to start conversation - I know that this is a big topic.

    Where am I coming from with this?
    I read few topics on this forum and all of them are carriers bashing brokers that brokers are bad/crooks/whatever.
    So what rate YOU carriers would be comfortable with and do you calculate this?
    This will drive my rate to my customers or prospects. If it is acceptable to them, that means you will get the freight.
     
    Last edited by a moderator: Feb 13, 2013
    alextherussian, Feb 13, 2013
    alextherussian, Feb 13, 2013
    #1
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  3. Feb 13, 2013 #2
    Marduk

    Marduk Bobtail Member

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    May I add to the question as well, what is the best way to understand how markets/lanes work based on the time of the year?

    For example, why are rates out of Southern California so underpaid but they may be more promising next month?
     
    Marduk, Feb 13, 2013
    Marduk, Feb 13, 2013
    #2
  4. Feb 13, 2013 #3
    windsmith

    windsmith Road Train Member

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    ..........

    :|
     
    windsmith, Feb 13, 2013
    windsmith, Feb 13, 2013
    #3
    Taildragon Thanks this.
  5. Feb 13, 2013 #4
    alextherussian

    alextherussian Bobtail Member

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    @windsmith - Very informative. :):)
     
    alextherussian, Feb 13, 2013
    alextherussian, Feb 13, 2013
    #4
  7. Feb 13, 2013 #5
    windsmith

    windsmith Road Train Member

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    I will start by telling you that when I ran my numbers for a hypothetical carrier, $1750/month truck and trailer payment, paying the driver $1000/week and running 2500 miles per week, the break-even rate would be $1.64/mile to the truck.

    edit: That means that running the truck for $1.20/mile would be enough to pay for fuel, fixed costs and maintenance reserve, with the driver working for free. Anything less would be a net loss.
     
    windsmith, Feb 13, 2013
    windsmith, Feb 13, 2013
    #5
    alextherussian Thanks this.
  8. Feb 13, 2013 #6
    alextherussian

    alextherussian Bobtail Member

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    Feb 13, 2013
    OH
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    Yeah - I am trying to get the logic.
    2500 miles per week @ $1.64/per mile will be $4100 in a week.
    Minus $1000 to the driver will be $3100.
    Minus $450 ($437.50) to the truck/trailer will be $2650.
    What is a price of your operating consts on let say a van (excluding fuel): fixed costs, truck depreciation, insurance, maintenance, oil changes. etc?
    Fuel is paid separately and is driven by fuel surcharge, i would think.

    Forum did not aloowed me to edit it.
    What is a price of your operating consts on let say a van (excluding fuel) PER WEEK : fixed costs, truck depreciation, insurance, maintenance, oil changes. etc?
    What is a price per week to keep your truck on the road rolling?
    Because then, I can add popularity of pickup/drop, load/truck density there, commodity, equipment, etc.
     
    Last edited by a moderator: Feb 13, 2013
    alextherussian, Feb 13, 2013
    alextherussian, Feb 13, 2013
    #6
  9. Feb 13, 2013 #7
    windsmith

    windsmith Road Train Member

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    FSC is only applicable for contract freight; I haul spot market freight so the rates I'm giving you are inclusive of FSC.


    Here's the monthly expenses based on the numbers I gave above:

    [TABLE]
    [TR]
    [TD][/TD]
    [TD="width: 86"][/TD]
    [TD="width: 86"]Fixed Overhead[/TD]
    [TD="width: 86"][/TD]
    [/TR]
    [TR]
    [TD]Authority Escrow[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$1,060.88[/TD]
    [/TR]
    [TR]
    [TD]Truck Pmt[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$1,500.00[/TD]
    [/TR]
    [TR]
    [TD]Trailer Pmt[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$250.00[/TD]
    [/TR]
    [TR]
    [TD][/TD]
    [TD][/TD]
    [/TR]
    [TR]
    [TD]Postage/Document[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$100.00[/TD]
    [/TR]
    [TR]
    [TD]Load Boards[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$100.00[/TD]
    [/TR]
    [TR]
    [TD]Cell/Internet[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$300.00[/TD]
    [/TR]
    [TR]
    [TD]Total[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$3,310.88[/TD]
    [/TR]
    [TR]
    [TD][/TD]
    [TD][/TD]
    [TD][/TD]
    [TD][/TD]
    [/TR]
    [TR]
    [TD][/TD]
    [TD][/TD]
    [TD]Variable Costs[/TD]
    [TD][/TD]
    [/TR]
    [TR]
    [TD]Maintenance Escrow[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$2,540.42[/TD]
    [/TR]
    [TR]
    [TD]Salary[/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$4,333.33[/TD]
    [/TR]
    [TR]
    [TD]Fuel/IFTA[/TD]
    [TD]$0.700[/TD]
    [TD][/TD]
    [TD]$7,583.33[/TD]
    [/TR]
    [TR]
    [TD][/TD]
    [TD][/TD]
    [TD][/TD]
    [TD]$14,457.08[/TD]
    [/TR]
    [/TABLE]




    edit: For accurate weekly figures, you'll need to multiply by 12 and then divide by 52.
     
    windsmith, Feb 13, 2013
    windsmith, Feb 13, 2013
    #7
  10. Feb 13, 2013 #8
    rank

    rank Road Train Member

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    I can tell you how I calculate my rates but I am fairly sure most carriers don't do it this way.

    I calculate my costs to do the load and I add $75/hr to that number.Unless I know they load/unload quick, I've recently begun building in 2 hrs for loading and 2 hrs for unloading because I got tired of brokers telling me that time was "free". Yeah, it's free now because it cost you $300.

    DH to pu 151 miles + loaded 167 miles + DH to next load (my yard) = 188 miles = 506 miles x $1.65/mile = $835.00
    Tolls = $20
    1 hrs load + 1 hrs unload = $150
    480 miles / 60 mph = 8 hrs x $75 = $600

    This all adds up to $1605, or $9.61/mile. Of course this a high rate but it picks up in a bad area, delivers to a bad area, requires a step deck and a tarp.
     
    rank, Feb 13, 2013
    rank, Feb 13, 2013
    #8
  11. Feb 13, 2013 #9
    thelushlarry

    thelushlarry Road Train Member

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    glasgow ky
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    You got cash I will travel!!!!!
     
    thelushlarry, Feb 13, 2013
    thelushlarry, Feb 13, 2013
    #9
  12. Feb 13, 2013 #10
    windsmith

    windsmith Road Train Member

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    To me, that seems like you're doubling up on driver pay. You've already included driver pay in the $1.65/mile, so why add the $75/hr for the driving time? I'd think it should be one or the other. It does make sense though.

    I've simplified it a bit in that we have a minimum $800/day rate to the truck (flexible in some cases and esp. this time of year).
     
    windsmith, Feb 13, 2013
    windsmith, Feb 13, 2013
    #10
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