Feature Article: Beyond the Rate
Relationships that pay off today and long term
Brokers play a Jekyll and Hyde role in today’s trucking market. Many owner-operators at times depend on brokers, yet brokers appear to hold the upper hand when negotiating loads and rates.
Karen Albert and her husband Henry (Overdrive’s 2007 Trucker of the Year) understand the challenges of working with brokers and have focused on building solid relationship with shippers for their independent business. Nevertheless, over the past year and a half, Mrs. Albert estimates she’s “worked with brokers more than the entire first 13 years we’ve been in business.”
“There are days I’m glad [brokers are] there,” she says. “For instance, when I take a shipment for a customer that’s not on one of our normal lanes. But then you’ve got these other brokers who are taking advantage of you, and it’s frustrating.”
Any owner-operator can learn what the Alberts have learned – how to negotiate with brokers in a positive, productive manner. Too many owner-operators approach the process in the opposite way, says Kevin Rutherford, ATBS Trucking Business & Beyond host. “They say, ‘The brokers are just not going to negotiate. Every time I ask if I can get a better price, they say here’s the price, take it or leave it.’ ”
But price haggling does not have to be the name of the game in broker negotiation. Rutherford distinguishes two types of negotiation. “One-time negotiation is really all about information and power,” he says. “Long-term is about building relationships and problem-solving.” The latter approach offers the most opportunity for less frantic negotiations and fair rates.
Here are some tips for negotiating with brokers.
1 Know your costs. “I’ve been on both sides of the fence, both as an owner-operator and as a broker,” says Charlie Parfrey, who runs Parfrey Trucking Brokerage of Spokane, Wash., and is a board member of the Owner-Operator Independent Drivers Association. As an owner-operator, he says, “it was my responsibility to know what my operating costs were so that when I was contacting a broker and discussing a load and what it paid, I knew whether or not I could accept what the broker was willing to pay.”
The load should pay enough to cover all fixed and variable costs, and include deadhead miles. Determining how much profit you want above that should be settled before you enter negotiations with brokers.
Paul Todd, operator of Augusta, Ga.-based T&G Dispatchers, which finds freight for 18 owner-operators, emphasizes the need to know fixed costs and variable costs on a per-mile and per-day basis. For a rough estimate of fixed costs per operating day, “Add up, if applicable, your truck payment, trailer payment and insurance costs per month and divide that number by 17,” he says. Why 17? “There are typically 20 weekdays in a month and, with Murphy’s Law always in effect, you need to leave three days for something to go wrong or not having a load” on the hook.
Also know your variable costs – primarily fuel, tires and maintenance. Apply those costs per mile to any load you’re discussing with a broker, and include deadhead miles. In the choice to turn down a low-paying load, Rutherford says, “a lot of people say, ‘I’ll deadhead to wherever to get a better load.’ Sometimes that may be the best bet. But if you don’t know your variable costs, you have no way of making that decision intelligently.”
2 Know your broker. “It was my responsibility to check out the broker’s credit rating and pay history before I loaded the freight,” Parfrey says of his time as an owner-operator. The basic packages of both RTS Credit Service (www.rtscredit.com, $35 monthly) and the RedBook service (www.redbooktrucking.com, $160 yearly) offer an owner-operator the ability to obtain reliable ratings for many brokers.