How do Freight Brokers make their money?

Hide what they are actually paid? Why is it any of your business what a broker is making. What if you found out they were actually losing money to service a customer and save face? Would that cause you to lower your price. Basically you want to play god and decide if you feel the margin a broker is making is fair. In reality you need to decide if the freight is paying what you feel it should. If not simply decline but do not expect a broker to tell you what they are being paid. Several things could be a factor there.

 

I find that most brokers who handle produce seem to stay in a range of 8% to %12 margin but that is because it is widely know what the "market" is paying and the time frame and flex in pricing during the season insures everyone is getting offered about the same money

 

Double brokering is accepting another brokers load as if one were a carrier, then selling it to yet another carrier. This is illegal or frowned up because the first broker is still legally liable for the load, regardless of what the double brokering business does. Brokers are liable to pay whomever actually carries the load--the carrier of record. If end carrier doesn't get paid by double brokering business, whether its a carrier or another broker, the original broker must still pay the carrier of record, regardless of who the listed broker may have mailed the check to. It's usually easy for the carrier to collect, just keep the paperwork, and call the shipper or receiver. Shippers and receivers are legally liable to pay carrier charges in such cases, so they will quickly pressure the listed broker to pay up or risk further financial, legal, and business loss. So, the listed broker is liable and may pay double. This is also because the listed broker is required by DOT to ensure that the actual carrier, whoever it is, is properly licensed and insured to do the job. If the broker doesn't know exactly who is delivering the load, they are violating their authority agreement with the DOT, so can quickly have their business suspended were it to come to light.

 

I'm not a broker per say, but I do frequently cover loads for one of our accounts which works essentially the same way though these loads are usually contracted.

When a load is available and you get a call from me I'll ask if you are able to take the load, and of course, the best rate. I then compare that rate to our past loads for that lane and/or from rate averaging services such as Internet Truckstop and Transcore. I then will look at the averages paid by shippers and decide whether it will work or not.

On the other end of the phone it may seem I'm trying to knock you down as low as possible so I can make a bigger buck but often in reality I'm just trying not to take a loss as it is required of my position to send reports documenting the loads covered and gross revenue from those loads. If I stop making my company money, I may lose my job.

A lot of the people around these forums seem to take the perspective that dispatchers, TCs, and brokers are low life scum looking only to screw them over when that's just not the case...we're normal people trying to do our jobs and make a living!!

 

Trouble with comparing that on the spot bid with previous lane averages from ITS etc, it's a total waste of time. Really with no bearing on the here and now. Customer either needs the freight moved now or has the luxury to shop it for a few days. Either accept the bid, we both make some money, customer is happy - or move on to the next call. I move a lot of freight in what, according to ITS avg lane trends/rates, tend to be low paying lanes. But I'm not moving this stuff for ITS avg. Do you need my truck or not? Here's my rate I don't care what anyone else does it for. End result I lose out on a lot of low paying freight and make up for it when I do roll. Never did put much faith in lane averages

 

A lot of truckers think the broker is making tons of cash for doing no work. Many in this forum have stated they had good experience with smaller brokers who care about their drivers. Owner operators should also understand that shippers pay in between 30 and 90 days. Most owner operators want to be paid as soon as possible. If you're a small broker, you haven't got a ton of cash laying around to pay drivers, and rack up new loads all while waiting that long for your own payment. Freight brokers must then sell their accounts receivable to a freight factoring company. You pay them ~5% for them to pay you right away with recourse (if they cant collect on a bill, you pay), or 8%-10% or higher on no recourse. Kinda cutting it close when a standard freight broker commission is 10%, wouldn't you say? So if we seem like we're always hustling, it's so we have enough money in the bank to pay for the next move, and so on and so fourth. With the legislation that's been pushed through, the bond amount to BE a broker has not been double, tripled or quadrupled, but gone up by 7.5 times. The small brokers you all love will have serious issues as a result. Then have fun dealing with the CH (cheap and heavy) robinsons of the world.

 

Your not a Broker are you ? There is no reason for a broker to have to sell accounts to a Factoring Co. If you start up a company but do not have enough in the bank to cover your 1st few weeks of carrier payments, then that is a business that shouldn't of been started. Large or small Brokers. "Standard 10%" ???
I have been in Logistics 14 yrs, brokering 9 of them. There is never a standard % you shoot for. Its about customer service. Negotiate with your customer for the best rate possible that way you can pay your carrier better rates. Better rates = Better Carriers = Better Customer Service = MORE FREIGHT. If you have one of those customers that are stuck on cheap freight, then by god give the carrier everything you got. Make your $20 to cover any overhead, basically your time to post, call, system work, cut check and file. You do enough of those $20 loads , it adds up. And the new Surety Bonds are not going to kill all the small brokers, just the bad ones. If you have decent credit with a decent days to pay then you should have no worries. Its standard insurance.

 

Thats similar to what I do. First thing you have to do is "Not be afraid of going home empty or not getting a load. Second is to have saved a little money so you can afford to go home empty. Sometimes they call back and offer what you wanted to start with.

 

That's the only way to play the spot game... Like today, turned down several cheap 100 mile loads that would have set me up in a good location and also made a nice "round" rate wise on my full day as well... I had just finished up a 100 mile pick/deliv this morning and was looking for a reload... But I couldn't stomach it, the cheapness of the offers.. ..so I waited and held back.. ..then I get a call around lunch time "have a load 165 loaded miles you're an hour and a half away"... ..."needs to pick up today".. "can pay you $600"... ....$600 is not a great rate on that but not really a bad one either.. So I tell the guy ok I'm on it right now for $800, take it or leave it.. And so he got it authorized.. So instead of pulling the trigger on a cheap load this morning to make a nice round that averaged out good, I waited and it paid off with a much better average & overall gross... Worst case scenario I'd have went home without a reload.... empty..... as it is I'm loaded and headed that way now... ...and not for some lousy rate. When you're never in the situation where you "need THIS or THAT reload" then you're never in a position for these jokers to tell you what they're going to pay your truck.... That is the power EVERY truck out here has if they would only use it... ...but when you're always working to make the banks more money you never really have the patience to execute like that...

 

I have been in Logistics 14 yrs, brokering 9 of them.

These are the key words. It is clear you have not run a logistics business because no business person would last in business if they didn't have a target margin they are looking for.

And why shouldn't he be in business because he has to use financing to get into it? I can see your point if you are talking about monthly operating capital but factoring loads?!? I just hired a VP of Business Development that has the ability to generate over $150k a week in gross revenue and we are committed to paying within 10-days. Now I have the capital to cover the resources I need to put in place but didn't want to put us in a place that we had to turn down business or start paying slower because of the amount of business. So I put commercial credit in place. Are you telling me that I shouldn't grow my business or look to capitalize on the blood bath that this new bond is going to create?

Sorry, not going to sit back and let capital slow me down and neither should the small broker (but the rates are insane).