October 20, 2022
7 Tips for Negotiating Better Rates
As an independent trucker, negotiating a fair rate for each job is one of the most crucial skills needed for unlocking long term success. Doing so requires an in-depth understanding of the current market, the value of your time and expertise, and a fair amount of people skills to ensure you’re building lasting relationships, even as you negotiate for better pay.
A good mix of industry knowledge and strong customer service can get you far as an owner operator, so long as you can master the art of securing rates that keep your business healthy. Read on for Motor Carrier HQ’s seven keys to navigating freight rate negotiations as an owner operator.
1. Back Your Position with Data
If your argument for a specific rate is based solely on what seems fair at the moment, it’s likely your negotiation will turn sour. Solidify your asking price for a job by preparing yourself with the facts. Start by calculating your average cost-per-mile so you know immediately what benchmark you need to hit for a job to turn a profit, then take into consideration your fixed and variable expenses so you can project possible changes in cost-per-mile for any given job. Remember to incorporate your maintenance, repairs, and fuel costs into the cost-per-mile calculation for the most accurate result.
With detailed research at your back, you can accept or reject each job with a clear idea of how it will impact your bottom line.
2. Keep an Eye on Similar Load Rates
Owner operators will frequently find themselves in a position to fight for a fair rate based on the ebbs and flows of the market. Peak season, fuel prices, and a thousand other factors can impact the cost of shipping industry-wide. You’re well within your rights to negotiate a fair market rate — just remember, as a newer operator, you may have to give a little at first in order to secure business and begin to establish a healthy network. If you’re easy to work with and prove yourself a reliable communicator, more lucrative jobs will become easier to access down the line.
Fortunately, jobs located on load boards are likely to include the average spot rate to aid you in negotiations. As you gain experience, you’ll come to notice the fluctuations in rate prices for each season and through shifting economic conditions. Don’t forget to factor fees and deadhead miles into your negotiated price.
3. Capitalize on Load Times
If a job lingers on a job board for a long time, brokers may be willing to pay a higher rate to get the load out the door. In fact, most jobs will often include some inherent urgency which plays to your advantage in negotiations. Pay careful attention to how long a load remains on a board, as well as its designated pick-up and drop-off times and locations. If a pick-up time is just around the corner, it’s likely you’ll be dealing with a broker who is anxious to secure a truck for their cargo and less concerned with driving the shipping rate down.
4. Know When to Walk Away
Backing out of negotiations is a challenge when you’re trying to get a business off the ground, but without a genuine willingness to walk away, you’ll bring very little leverage to your dealings with brokers.
Not every job will be worth your time, even as a new owner operator. Freight rates must either align with your calculated operating costs or hold significant potential to unlock improved rates once your rapport with a broker is more established.
There’s a lot of literature available online full of tactics and approaches to achieve a successful negotiation, but much of it can be distilled down to this one point: if a broker can’t reach an agreement on rates that work for you, you can always just say no.
5. Be Easy to Work With
To succeed in this business, you’ll want to put on your customer service hat when working with brokers and businesses. The goal isn’t just to secure a fair rate for yourself, it’s also critical to position yourself as a business’ preferred carrier for future jobs by developing a good working relationship. Truckers committed to working on their “soft skills” will see huge dividends by simply being easy to work with.
Work in the shipping industry long enough and you’re bound to experience working with someone you wish you hadn’t. Make sure your communication and demeanor with potential clients is positive and respectful from the outset. The more assurance you can provide that you’re worth working with, the more a broker is likely to ease up on rate negotiations when the time comes.
6. Confirm Rates in Writing
Protect yourself and your growing business by ensuring all negotiated rates and contracts between shippers and carriers are backed by written agreements. This includes a signed rate confirmation to safeguard you from any funny business once the job is done.
This tip might be considered one aspect of a broader rule of thumb which is to be vigilant when taking on any job with a new shipper. Unfortunately, scams aren’t uncommon in the trucking industry and failure to verify a business’ legitimacy can put your own in serious jeopardy. Verify you’re working with shippers who do what they say and who will pay you on time. Ask about the average days-to-pay and any other relevant questions that might impact your ability to take on a job.
7. Get Comfortable with Negotiation
Some owner operators may never have been in a position to negotiate pay in their careers, which can make the process seem intimidating. Recognize that shippers expect to negotiate their prices when posting jobs and that both parties should feel comfortable agreeing to a rate or walking way if it’s not a good fit. Rate negotiations happen all day, every day and shouldn’t be viewed as an obstacle preventing independent truckers from seeing success.
As always, the Motor Carrier HQ team is available for coaching, resources and advice to walk you through the finer points of a rate negotiation. We’ll make sure you have what you need to confidently approach brokers and establish yourself in this business of moving freight.