New Customer wanting round trip rate...

[Twinsteer]

Hello, I have been owner op since 2001 and OA for just a little over a year now utilizing the main brokers and their load boards. I was contacted by a major customer the other day that wanted to ask me about quoting some work for them. It involved a meeting with individuals from their corporate headquarters on a conference call with several people on the line. Talk about being out of my element. It seemed quite combative at first, since they asked me how many trucks were in my fleet (1). I thought it would be a brush off, but I pressed on with the meeting. I pushed on the strengths of independents such as commitment, work ethics and people skills. At the end, they gave me 7 routes to quote pulling their preloaded trailers to destination, dropping and bringing back an empty trailer to point of origin. In other words, roundtrip. I understand the 15-20% added that brokers take...but what I don't know is the rate charge for bringing back an empty. For sake of argument, a 400 mile trip 2.00+mile is right, but bringing back an empty trailer seems like it would be somewhere around half of that. Am I wrong? Please keep in mind, these guys are already using the big outfits to move 10,000's of loads every year so I am probably more of an experiment than anything else. I don't want to fail or give us independents a black eye, so any advice from real pro's in this area would be appreciated. I am really out of my comfort zone and don't want to screw this up. Thank you in advance for your help.

 

[mndriver]

I'd suggest you go get this book. Bidding contract freight is entirely different than spot market.

Truckload Transportation: Economics, Pricing and Analysis: Leo J. Lazarus: 9780982784815: Amazon.com: Books

Truckload Transportation: Economics, Pricing and Analysis [Leo J. Lazarus] on Amazon.com. *FREE* shipping on qualifying offers. Truckload Transportation: Economics, Pricing and Analysis covers every facet of truckload pricing including the truckload business model

www.amazon.com

 

[Twinsteer]

Thank you. Just did. I think I've enrolled in an entirely new arena...lol...

 

[mndriver]

You may want to go get a 0.3 mm mechanical pencil and start working on your numbers figuring out your expenses.

Contract freight operates on pennies for the margin not dollars like the spot market.

until you can handle the volume of 3 to 7 loads per week per truck for one customer, contract freight is very tough to break into.

Where you might make 3 to $500 on a load for the spot market you might be lucky to get $40 or $50 on contract freight.

Mega's makeup for that on sheer volume.

 

[Mike]

You figure a round trip rate. Doesn’t matter if the the return trip is empty, you still have to do it and it costs your operation close to the same amount of money. A few pennies per mile in fuel expense is all that you save on the empty run.

If it is a long term contract you are seeking out, be sure to factor in a trip rate, plus a fuel surcharge. Saves you from potentially operating at a loss if fuel costs go through the roof, protects the customer if fuel costs were to drop significantly.

Don’t forget accessorials in the contract. If you are waiting on the loading end, you want to be compensated. If you are waiting for an empty trailer to be ready, you want to be compensated.

 

[mndriver]

Then you have to ask yourself, "how am I going to cover this contract if my truck breaks down?"

 

[Ruthless]

I placed a bid on some contract work a couple months ago. Chopped my rates pretty hard to feel like I was being realistic. Hyper local power only van work.
Turns out my version of cheap and theirs is about 60% difference. I told them I wanted a 3 month commitment n then we could revisit rates and commitment terms; payable in 7 days check or wire transfer was non negotiable from the start. They weren’t hearing any of it lol
I believe that they also have a skewed vision of their actual costs to do it in house; as their safer score shows some noteable abnormalities, and judging by their employees, I’d bet even a cursory roadside inspection (Or worse a minor accident with injury) would show them why relieving themselves of some liability is a worthwhile expenditure for a multi million dollar manufacturer with their own name on the truck’s door.

I think dedicated contract freight is the way toward growth (size/volume/revenue) and therefore an increase in market share and money in both my saving and spending hands, plus getting out of the drivers seat and more in to the office. Getting it... I’m still working on that. What I have for dedicated works; but it’s never enough once it’s going on.
I want more. More. MORE!

 

[Humble pie]

I’m in the oversize overweight market I have started to price everything as round trip. Even if I find another load I price it round trip as well. My gross is off by 60 grand this year, but my net is up 10. I realize this isn’t feasible in other segments of trucking, but it’s how most successful guys in my segment do it.

 

[Mike]

I’m in the oversize overweight market I have started to price everything as round trip. Even if I find another load I price it round trip as well. My gross is off by 60 grand this year, but my net is up 10. I realize this isn’t feasible in other segments of trucking, but it’s how most successful guys in my segment do it.

Makes sense to do that. I drag a dry van around, and spend as much time as possible running close to home and booking things the same way.

On longer runs, I obviously can’t get round trip, but I don’t settle for market average either. I get enough to move me to where I need to be after delivering, and will still try to hit a homerun from wherever I am at as well before relocating.

And same for me with the numbers. Gross is down, but net has maintained. Not sure if I am up or not at this point (behind on the numbers due to moving to a new house), but figuring out each and everyday to make more with less.