Every micro- and small trucking company owner has asked, “How can I break the cycle of depending on brokers to find my freight?”
Many are tired of hauling wholesale freight and want to find direct ship customers so they can haul retail freight. However, making a cold call is extremely difficult and very stressful; most of the time, the person at the other end of the call simply hangs up. And you’ve hit a dead end. If a micro- and small trucking company owner can’t break through the retail freight wall, they worry that they can’t grow their company.
So, what should they do?
Well, it depends on how you approach those shippers. Remember, with fewer trucks, you don’t need 20 or 30 shippers to fill your trailers. Adding just a few shippers, or even one or two, will help add retail freight revenue to your cash flow.
Finding those one, two or three shippers isn’t as big a task as you might think. It’s all about how you approach the process.
It’s not about selling your services to the highest bidder; it’s about making your services preeminent, so shippers know your trucks are running in the lanes and areas where their freight needs to be hauled.
To sell your hauling services, you have to convince a shipper to purchase that service. But what if all that’s required is to locate the companies needing freight hauled and provide them with freight rates upon request? This is not as involved as cold-calling or knocking on doors, just to be told they’re ‘not buying freight services today.’ Forget about selling your freight hauling services and start freight prospecting.
Become an approved carrier in a shipper’s data base.
Freight prospecting is a lot like panning for gold. You start with a pan full of rocks, sand and water. Shaking it back and forth allows the lighter rocks and sand to spill over the edge, while the heavier gold falls to the bottom of the pan.
Freight prospecting is similar in that you begin with a large list of shippers. Narrow it down to specific areas and lanes in which you need your trucks operating. Then start the shaking to find the shippers worth their weight in gold.
The gold shippers are the ones with freight that works with your regular brokered and load board freight, going in the direction you need your trucks to travel, to create the greatest amount of revenue over the shortest time and distance. Once you’ve narrowed the list down to these shippers, the plan is to contact them and become their ‘approved carrier.’
What’s an approved carrier? You become the trucking company that will be contacted each and every time a shipper has a load that fits the criteria you’ve established with them. When a shipper has a load that’s a match, they will email or fax you an RFQ (Request for Quote). All you have to do is write the best rate for which you’re willing to haul the load on the RFQ and return it to them. If the rate is in line with the range they’re willing to pay, bingo, the load is yours.
If you do this enough times for regularly scheduled shipments, you can then request the load be placed on your trucks every time it becomes available.
Provide rates that work with the shipper’s needs.
This is where many owner-operators and micro-carriers drop the ball. There’s more to calculating a freight rate than just quoting what you think is the rate per mile a shipper will accept. In fact, the quickest way to become ‘unapproved’ from their carrier list is to quote a static per-mile freight rate. If you want to be thought of as a serious freight-hauling entity, you must develop a hauling-rate range from which you derive the rates you’ll provide to your direct ship customers.
A static per-mile rate doesn’t work for many reasons.
Do you know what miles a shipper is using? Is it PC, HHG, or something else? The problem is, if your rate is just based on providing the shipper with a per-mile amount, how does that relate to the actual distance and time required to complete a load?
Are there empty miles involved? Is the mileage basis used by the customer an actual reflection of the true miles required? The most important component is time. Is it reflected in your per-mile rate? Without question, time is the most underestimated factor when developing a working freight hauling-rate range.
When determining a profitable rate, the following numbers are necessary:
1. Daily fixed costs are those expenses that are necessary to your operation but are never ‘turned off’ when your truck(s) are parked and idle. Typical fixed expenses must be paid on a regular basis, i.e., weekly, monthly, quarterly, or from year to year. This includes insurance, utilities, office rent and expenses, licenses, permits, and employee and owner salaries.
For every day a truck sits idle, fixed costs continue to add up and increase your cost per mile. Depending on your fixed costs, idling can add as much as 25¢ to $1 per mile per day in your cost per mile. Fixed costs are reflected by a cost-per-day number.
2. Operational costs are expenses that are related to the operation of your business and occur each time your truck is running down the road, loaded or empty. Examples of operational costs include tires, maintenance, repairs, and fuel; if you pay your drivers by the mile, their pay and associated payroll costs are included as well.
3. Load-specific costs are expenses related to a specific load. Requirements such as tolls, special loading or unloading equipment or labor, load permits, etc., are a portion of the actual expense.
4. Profit margin is determined as a daily factor.
Following is the rate formula to be used for your company’s profit margin: (daily fixed costs + daily profit margin x total days required) + (operational costs + per mile x total destination to destination miles) + (total of load specific costs) = total revenue required for the load, which is your top hauling rate.
To determine your low-hauling rate (your break-even point), just remove your profit margin from the first calculation.
So,when prospecting for freight gold, be sure you build a carrier customer relationship with a direct shipper. Become an approved carrier in their data base. Provide rates that work with their needs, be on time and on schedule with the load, make sure their load is damage-free, and make sure there are no unexpected events with their loads.
If you do, the next thing you know, you’ll be hauling for good, retail-paying freight.