More 'big rips': Owner-ops flag biggest broker margins they've seen

user-gravatar Headshot
Updated Apr 20, 2024

DAT analytics chief Ken Adamo's "Big Rips and Fat Lips" look at broker margins -- the percentage of a shipper's payment the broker keeps after paying the carrier -- focused on outlying large takes (those rips) and very-small cuts or even money-losing loads (the lips). As Alex Lockie reported, Adamo hadn't much studied the outliers on either end before, though given intense focus among spot market carriers (and some brokers, for that matter) on dwindling revenues and profits over the last year and more, light on brokers' margins serves the interest of market trust and transparency. 

Adamo's data-driven look at the matter isn't exactly the kind of broker transparency most owner-operators in Overdrive's earlier-year survey reported wanting -- whether the kind of post-load automatic disclosure of transaction records sought from the feds by the Owner-Operator Independent Drivers Association or more up-front information sharing that might help in spot negotiations. Adamo pointed out that both big rips (broker margins higher than 40% of what the shipper put into the load) and fat lips (when the broker lost money) together represented just 5% of the total transactions Adamo analyzed for March 2024. With better recognition of those realities, might carriers and brokers come to a better understanding of the broader market?

It's transparency, of a kind, though Adamo's working with anonymized data and doesn't ID those responsible for the loads on either end of the scale. 

We asked Overdrive's largely owner-operator readership what they'd seen at the far end rip side of that scale throughout their careers. Results showed a majority of respondents at one time or another have pulled a load where the broker kept far above the average 15% or so margin Adamo continues to see in data shared with DAT. Results of that recent question to the audience follow. 

Partner Insights
Information to advance your business from industry suppliers
The ALL NEW Rand Tablet
Presented by Rand McNally

There was plenty cynicism about brokered transactions in respondents' commentary. As one owner-operator put it, "Every time I ask for a rate, I hear 'That's all we have in it,'" but the shipper's full payment is "never disclosed. If I had a dime for every time I heard that my finances would be great!"

Others were realistic, noting the almighty dollar guides the pursuit of big rips, and it's just a "business practice that's been going on for years," another commenter noted. Among brokers, shippers too, "there's no loyalty for service or longevity. Low bids get the job. I don't understand why a shipper would use a broker to begin with. That's another finger in the pie that doesn't need to be there. Call a trucking company directly."

Still, others took the time-honored approach to effective management of any small business: Focus on taking full control of just what you can control. 

It was the general message around brokered-transaction transparency and rates that longtime owner-operator business coach and radio host Kevin Rutherford took in the Mid-America Trucking Show talk he delivered -- and the brief argument with an owner-operator in the audience that derailed part of the talk's end.

[Related: Keeping cool, in control as difficulties heat up: Was business ownership supposed to be this hard?]

The view was best summed up by this commenter under our poll question, who cut straight to that point: "If I'm happy with the rate to the truck, I don't care what the broker is taking."    

Finally, a big theme in the commentary had to do with the consequences of learning about the big rips -- something an automatic post-load records disclosure requirement might make the standard in brokered-freight transactions, should FMCSA choose to write that regulation and get it across the finish line. One commenter detailed a conversation with the receiver of a load that ended up disclosing the biggest margin he'd ever seen a broker take.

The upshot for that owner-operator: "I never will haul for that broker again."

More recent coverage around the broker "transparency" issue

**Download the "Broker margins, rates data and transparency" special report
**FMCSA forces transparency from Uber Freight after double brokering scam
**Big Rips, Fat Lips: Biggest broker margins, fails reported in March
**Kevin Rutherford's MATS talk derailed by broker transparency argument
**Ikea v. Convoy: Lawsuit reveals glimpse at contract rates, broker margins
**More via this link

The Business Manual for Owner-Operators
Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the Partners in Business book, updated annually.
Download
Partners in Business Issue Cover