How to bid and value freight

No, I didn't misunderstand the chart Gentlemanfarmer. I realize it's merely a guide that's probably out of date; however, I found the coffee in the budget laughable (there's also many associated costs of trucking the chart doesn't address). When one has to actually budget for coffee, that's when it's getting a little too tight for comfort if you ask me. Why would profit margins have to be cut that close? When necessary but not very often, I pay for my coffee out of my $.70 per mile driving wage. In all honesty, if the author of the Common Cents chart was really out here in the real world trucking, they would have know that most of the time truckers don't have to pay for their coffee.

I believe if we (independent owner/operators) could generate $2.00 per mile or better with the current costs and keep our operating costs down as much as possible, it would probably suffice for a comfortable living. An extra $.20-$.40 would definitely give one that cushion needed for new equipment, unexpected expenses, break-downs or mishaps.

When I get home after a week on the road and figure out my total revenue earned and miles traveled, if it comes out to over $2.25 per mile, I glean a smile and know I covered costs and my wages with room to spare. When that number is $2.50 or better, I smile even more as I know I can then contribute to my son's future college fund.

I also strive to make sure that number never falls below $2.00 per mile. Granted, there may be a bad week here and there when we lose money (below $1.75 per mile); however, when you average it in with all of the good weeks, hopefully the yearly average will be above that $2.00 per mile minimum Gentlemanfarmer mentioned.

Back in the trucking boom of the mid-nineties, I used to average $1.25+ per mile (with own trailer) as a leased owner-operator. Being diesel fuel was only $1.05 per gallon or less, that was some pretty nice money back then. With inflation figured in, everything now costs 1.5 times more compared to back then (other than fuel which has almost quadrupled in price).

In my estimation, adjusting for inflation combined with fuel costing $.50 more per mile to operate, I need to earn about $2.40 per mile to be at the same standard of living I enjoyed in the mid-nineties earning $1.25 per mile.

 

Are you are a leased owner/operator under their dispatch?

Do you pull their trailer?

Do they pay for liability insurance, license plates, fuel tax, etc.?

Do they provide a fuel card?

Do they pay you as soon as you turn in paperwork (no invoicing customers and waiting 30 days to get paid)

Do they pass on discounts to you for fuel, tires, truck maintenance, etc.?

If you can answer many of the above questions with a yes, $1.60 per mile very well could be "rolling in the cash".

In my opinion, with trucking or any other venture, the less one has to think for themselves, the less money they will earn. The more a company does for their lease operator (employee), the less they are going to pay them.

I have to admit, there are times when I would like to just hold onto that steering wheel and not have any other worries; however, reality sets in and I realize I'm a big boy now.

 

This is a really good question that I wish I knew the answer to (as far as to how brokers come up with a rate). In years past there may have been a rhyme and reason for trucking rates; however, now I think it is mainly based on the profitability and ethics of the shipper. I've hauled for successful shippers that have paid excellent rates when they very well could have shipped their freight at a much lower rate had they chosen to.

You may ask, why would a shipper pay more than necessary to have their freight/product shipped? If you have ever heard about company loyalty and good company employee morale, I believe that is the answer.

Also, as a truck driver you are their representative when delivering their product. If you are well paid, you are going to represent them well and take extra steps/precautions to do your job even better than normal. This in turn prompts their customers to prefer/choose to do business with them even if their prices are a little higher. Some companies are still willing to pay for service.

Companies that are commercially successful that have good ethics in my opinion tend to pay better than a "barely making it" company.

Another factor involved in rates (in my opinion) is the item being hauled. Something that is in great supply (a very common commodity) is obviously going to pay a lot less than something that's very rare which requires special treatment along it's shipping path to the customer. When there's dozens of trucks waiting in line to get loaded, chances are, that freight probably won't pay as good compared to a place with no other trucks waiting and three employees and the boss are all present to make sure the product is being properly loaded onto the truck.

There were other good answers in the beginning of this thread.

I've lost many jobs due to being outbid by other truckers/trucking companies willing to work much cheaper than myself. If they love their job that much, the more power to them; however, I like to be able to look at the load on my trailer with pride and take care of it like it's my baby (if it's cheap, I am too ashamed to look).

Sometimes, shippers/brokers assign a rate to a specific shipment that seems outrageously high (doesn't seem to happen very often); however, it could be because of customer demand/need. I've had customers complain about the rate they agreed to pay during delivery when they see their shipment. I just tell them I'm only the driver and for them to take it up with the broker. Other times, certain shipments are rated extremely low when the customer is in no hurry.

The trick is to start high but not too high (be competitive but don't scare them away) - you can always come down, but you can't go up.

 

Are you are a leased owner/operator under their dispatch?
NO, you must have your own authority and the required insurance levels are the highest we have seen so far.

Do you pull their trailer?
NO

Do they pay for liability insurance, license plates, fuel tax, etc.?
NO, NO, NO, NO

Do they provide a fuel card?
NO, but can arrange a partial fuel advance.

Do they pay you as soon as you turn in paperwork (no invoicing customers and waiting 30 days to get paid)
Not sure on that one, but should be yes, withing a couple days, and there might be a fee attached.

Do they pass on discounts to you for fuel, tires, truck maintenance, etc.?
NO, NO, NO, NO

If you can answer many of the above questions with a yes, $1.60 per mile very well could be "rolling in the cash".

In my opinion, with trucking or any other venture, the less one has to think for themselves, the less money they will earn. The more a company does for their lease operator (employee), the less they are going to pay them.

I have to admit, there are times when I would like to just hold onto that steering wheel and not have any other worries; however, reality sets in and I realize I'm a big boy now.

And being a "Big Boy" I have big expenses, as I am not living with "mom and dad" so if they expect higher insurance levels than the industry norm, they should pay better than JB hunt (who asks for a lower insurance level), not less!

 

Very funny!

 

I would love to be able to bypass those brokers all together and get the loads directly.

How much do they take off the top anyway?

Anyone have a solid idea on their profit margin?

 

Ethical ones generally take about 20%; however, if they have really good paying rates, they may take up 30%. Some of the unscrupulous brokers keep the fuel surcharge they charge the shippers and fail to pass it on to the trucker. Also, some unscrupulous brokers may take up 50% of the revenue or more which should be illegal. Some may only take 10%-15% if their rates are already really skinny. Also, truckers should be aware of double brokering (brokers making money on brokers - the rates really get dwindled down in these cases).

I hate when they ask me, "what will you do it for?" When ever I get asked this I always give them a sky high rate to get their maximum out of them. They always have a maximum for every load; however, some like to make an easy buck on unsuspecting truckers.

Some of the good brokers are very honest and pay their trucks well. One particular load I called on, I was willing to haul it for $1,000 but the broker told me no, the load pays $1,500. I was blown away by their honesty! Some loads I instinctively know not to ask for more money; however, those loads seem to be less plentiful these days.

In many ways I think freight brokers are our friends. They tend to keep the rates up as they have to make a living on top of us making a living. It seems like when shippers find their own trucking services, many times they expect to eliminate the broker's portion of the rate which gives us the same as what we were making working through the broker. I would prefer to haul cheaper broker freight than cheap direct freight. Then at least, it's comforting to know the rate started out good. Also, shippers may be more willing to pay a broker higher rates than a trucker doing direct freight. It's really all just a fun game.

I've noticed some shippers are starting to cut costs by finding their own trucks (the internet helps them to be a lot less dependent on brokers). Surprisingly though, some shippers simply don't want to be bothered with the hassle. They know when it get busy and they need to get their product out, reliable trucks are a lot harder to find.

 

Here's some "Common Cents" quoted by forum member Starline:

"If you own a truck, you are in it to make a profit. And like any other business on this planet, the object is to make the most profit as you can... When you make good profits, then you can take time off and go home and enjoy life a little. So many people have convinced themself that they need to work 18 hrs a day /340 days a yr... This is insane !"

 

Yep you can take that to the bank. I saw another member on here post that it costs him $200 a day just to have the truck sit. I wonder what it's costing him to roll in a down market? You ride the upswings and bank money then you sit at the house when things are slow. You network when the times are busy and that will give you a few things to work when everything else is down. Which may not be a lot of work but you'll be rolling for profitable rates now and then between that down time while the "roll up big miles" crowd with the "wheels are turning I'm earning" mentality are blowing money out the smoke stacks just for the sake of having the wheels turn. You'll net more money at year's end and work about 2/3's or maybe 1/2 as much/often as they do.

 

Well said - great strategy!