Relationships Works Better than Focusing on Rates.The Road
A few months ago, I wrote about how important accurate accounting really is for small carrier profitability. Today I want to continue on the topic of profitability, but from a slightly different angle. It’s my experience that many owner/operators and small carriers have one approach to find loads—one that’s not always the smartest, or the most profitable.
Many small carriers spend all their time chasing the highest rate. Browsing load boards for the highest listed rate isn’t always the best way to make a profit. There are many reasons why this is and we’ll get into that in a bit, but the first thing to keep in mind is that the rate you are paid is not the same as your profit.
I recommend looking at each load in two ways: per mile, and per day. For example, you find two loads on a load board. One pays $2 a mile; the other only offers $1.50 per mile. Some small carriers automatically jump for the $2 a mile load. But they failed to look at the fact that the first load will take an extra day and a half to deliver. So ultimately, the payout is the same but the first load ties up their equipment for twice as long. This is just one example. There are other similar situations where the high paying loads are in lanes with higher fuel prices, or are to locations that will be difficult to find freight on the way back.
So if browsing load boards for the highest rates isn’t the answer, what is? While it may not seem obvious, the best answer is to build relationships. Pick out a few lanes or an area of the country you like to operate in and find transportation providers who often have freight in that area. Focus on creating a relationship with a handful of third party logistics companies (3PLs)—starting out with just two or three. Because the secret is that 3PLs aren’t posting their best rates on the load boards. They’re giving those rates to carriers they’ve worked with in the past who they trust to get the job done.
Whether you like to admit it or not, the 3PL is your customer. The way to succeed in any business is to provide value to your customers. So be sure to provide value to your 3PL of choice. Randomly grabbing loads off boards isn’t adding value because you’re always going to be the new person. You’re constantly forced to prove what you can do. When you add value and build relationships, you’ll have more opportunities for revenue and better loads.
Working closely with only a few providers can quickly help you establish yourself as a reliable carrier who arrives on time, checks in regularly, and holds up your commitments. That goes a long way the next time they have freight available. Rather than hire “the new guy” they’ll want to choose you.
To hear more from Kevin, read his blog post, The Secret to Small Carrier Profitability.