Dollars & Sense

Kevin Rutherford

Pricing yourself right

| December 23, 2013
What sets you apart from the pack? Having a well-thought-out rate structure and a marketing plan can help.
What sets you apart from the pack? Having a well-thought-out rate structure and a marketing plan can help.

You can have the best product or service, but if you are unable to sell it, there is no business. That’s why – especially if you have your own authority – you should learn about proper pricing for your service and how you can strengthen it. 

Because loads are posted online, many owner-operators allow the customer – the broker – to set the price. Yet in most business transactions, the service provider sets the price, and the customer decides to pay it or not – or to negotiate.

So as an owner-operator – a service provider – you should have a written pricing structure in place. You should have multiple levels for shorter- or longer-mileage hauls, certain lanes or certain cities. 

FINANCIAL SNAPSHOT
Bookkeeping software, available for a monthly fee on my website, among others, is one way to create a one-page report with everything you need to understand your income and expenses. It takes less than an hour a month to enter the data. The payoff is having the numbers at your fingertips anytime you need them.
 

All pricing should start with your operating expenses – what it costs to run the truck and trailer per mile. If you don’t have an accounting system that allows you to track income and expense on a per-mile basis, that is step number one.

Once you know how much it costs to run your operation, determine a profit margin – what you want to make above your costs. Do you want to make 60 cents per mile? Would you be happy with 50 cents? 

Related

Computing the owner-operator business — Part 1

Part 1 of this series features software packages aimed at leased owner-operators and/or company drivers -- both web-based and standalone.

With those numbers determined, you now can price your service and continue to fine-tune it. You may find that certain lanes are more expensive because of fuel or other costs. You may see that it’s harder to find good-paying freight coming out of certain cities or regions, so you may want to charge more to go to those locations. You may want to discount certain cities or lanes because you know you won’t have any trouble finding another load once you’re there – or simply because you like traveling in those areas. 

Related

One hauler’s rate benchmark and more on pricing

Two operators share views on methods toward boosting rates to profitable levels -- one offering a perspective in favor of price re-regulation.

Now, just because you set a price doesn’t mean anyone will pay it. The nature of the free market is that your competitors might outbid you. 

That’s why you should market your service. Get your ideas down on paper: Where you want to haul, what areas or lanes are your specialty, what types of freight you like to haul, what makes you different from competitors. List things you do well, your special equipment or technology, your on-time record – anything that would benefit a broker or shipper. Ask yourself: If I were the customer, why would I choose me to ship the product? Would I be willing to pay extra?

Related

Are you ready to go independent?

Two upsides to getting your authority are the potential to make more money than a leased-operator and the almost complete freedom with how you run the business.

 

Once you have your plan roughed out, hire a designer to create a business card and brochure, both printed and as a PDF image for emailing. Here’s a great website for finding freelancers for jobs like this: fiverr.com.

Yes, this is hard work, but it will make all of the difference in your business. Even if you are leased to a carrier, I recommend doing this now so that you get a better understanding of your operation.

As time goes on, you might see bigger opportunities and be prepared to take them.

  • guest

    You will be competing with “logistics” companies who employ LOW PAY illegal aliens and Ex Convicts…who are willing to work for peanuts. Cop agencies do NOTHING to prevent this and it is Increasing each day….AMERICAN Truckers must have all the proper certification…..these CROOKED companies…are fly by night……COPS are told to leave them alone…they are good for the Economy..LOWER PRICES at our stores……ICE AGENTS dont lift a finger…..we see these illegals Filling up our truckstops today…this is the GORILLA that is NOT being addressed…but is an increasing Threat to the American Trucker……they are taking Freigh and Jobs and GROWING each day in numbers……like cockroaches….

  • JJMclure

    what a bunch of whiners…..they complain more than people that drive a Prius.

  • Mike Smith

    SO GOD DAMN TRUE!!!!!!!!!!!!!!!!!!!!!!!!!!!! Know your talk’n the truth.

  • Mike Smith

    Ur a CS, minority/illegal alien, a$$, kissing troll. What big carrier do u work 4.

  • MercenaryMan

    Wait till the TRANS PACIFIC PARTNER SHIP takes effect, NAFTA will look like a schoolyard play, there going to revoke rights, and the ability to negotiate, and use the courts, and make it so the lowest cost lowest priced, lowest cheapest, will win all bids, FAST TRACK and the inability to object, save and prevent American job losses, protections and prices…..The TPP is going to rip the American Job Market to shreds, and the Trained Factory driver”monkee” who works for 12 cents a mile will be doing the driving….you dont here about this on the news as its all being done IN SECRET…Ya better find out about the TPP before its too late, once that AGREEMENT is signed, Americans and there wages and way of life are gonna be FAST TRACKED right out of existence…

  • guest

    I would surmise that JJ owns a company or brokerage that employs illegal aliens..he figures WE the Americans need to LUMP it….

  • Fred Flintstone

    Rutherford is a joke….The only pricing that con artist knows about is the scam cd’s and books he scams…..

  • William McKelvie

    What about the principle of work SMARTER not harder? When did that go out the door? Because Rutherford and his followers say so? Please man please. Run more miles, surely your fixed expenses might drop, but do your variable expenses do the same? NOPE. And if you think they do, let me say that Obama math does not work in trucking.

  • Vrahnos

    If I were to get back into an owner operator again I would have to charge around $4.50 per mile to be able to run in all states and to put up with all the government crap to stay leagle.

  • Coffeeclue

    Stop being a commodity hauler, then you won’t have to compete with low rates. Anyone who competes solely on price in business is a fool. There will always be someone who will do it cheaper. This is true for any business, not only trucking. Differentiate yourself in what you do and choose your lanes carefully. Stop blaming others for taking away your business. And by the way, no, I’m not working for any big outfit. I drive my own truck with my own authority. Money is there, you just have to know how to find it.

  • Coffeeclue

    This explains why you’re not an owner operator…

  • Vrahnos

    Yep.An owner operator should be able to make twice that of a driver cause of all the responcablitys put on one.Seldome does one make more than a driver does and often less.

  • Coffeeclue

    $2/mile is a much more reasonable figure and provides a very good living even with all the “government crap”.

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  • Steve

    The key to pricing your service is knowing the market. Loads to trucks. Recently I was offered $1400 for a run and told that was great money and he moves it every day for that. I said not on my truck, and on the next call got $2450 for the same lane. Nobody makes money if you don’t move the load. Know your position, learn how to say no.

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