The big mistake we make in the trucking industry is we allow sales to set price. Any sales department allowed to set price will invariably let the customer control the price rather than the marketplace. When an owner sets a threshold on how low a salesperson may quote, they will in most cases, go directly to that lowest price without attempting to sell a higher price. Sales people who sell price are not sales people. They’re order takers. The definition of a "Sales Person" is someone who sells the value of the service or product they represent. Customers don't buy price; they buy value. If a product or service's sale price is less than its cost, it has no value. It's the VALUE of the sale. No Value, No Sale. Discounts can be a great sales tool if used properly. When a hauling rate doesn't add value for the shipper, it’s a ball-and-chain dragging a trucking company to extinction.

Frankly, I don't believe any service or product's value is determined by price alone. If I sell services at prices that are less than it costs me to provide them, I'm not going to be in business very long. When the customer has a problem with the service and I'm not around to help solve the problem, suddenly that service loses value to that customer. What gives a service value is a combination of reasonable price (one that is profitable to the provider), acceptable quality to the customer, and a provider that solves problems when the service doesn't attain its objective.

The attitude of "Price is Everything" in the trucking business has caused what was once a vibrant and prosperous service to become an afterthought, where a select few control the industry.

But who is to blame?  The broker? The shippers and receivers? it’s really easy to point the blame at someone else. But ask yourself:

• Do I really know what my hauling rates need to be?
• Do I understand the concept of supply and demand?
• Do I have the knowledge required to determine the value of a load?
• Do I understand the market I’m trying to serve?
• (and, if I know all of this information) Do I have the skills and negotiation savvy to convey this to a broker or shipper?

Imagine a professional football coach entering a game without knowing how the game is played, without knowing the strength and weaknesses of his team, without having a game plan customized specifically for the opponents he’s going up against. 
The opposing team’s coach game plan will steam-roll the unprepared coach’s charges, and the outcome isn’t going to be pretty.

The same holds true for trucking. The one who understands how business is conducted, the more he knows about logistics, the concept of supply and demand, and has precise information on what it costs to haul a load for his operation, is the one who has the greatest opportunity for success. This knowledge is real power.

Going back to the first paragraph, if you use brokers, they are your sales staff. And like any sales staff, they are only as good as the information you provide them. If you don’t know what your real revenue needs are, how can you expect the broker to know? I would wager if you asked most freight brokers what the Break-Even Point was on a particular load for your trucks, the broker couldn’t tell you. And he shouldn’t have to know. It’s not his concern, because he doesn’t have access to your numbers.  

• It is up to the trucking company to know the Break-Even Point (BEP) of each of its trucks and for the entire company.
• It’s up to the trucking company to be sure it has included in the BEP wages and salaries for all of its essential personnel.
• It is up to the trucking company to be sure it covers all its operating costs including fuel, maintenance, tires, repairs, etc.
• And it’s up to the trucking company to incorporate enough profit as seen on a monthly and quarterly basis to grow the operation.

But the biggest challenge a trucking company has is to convey this information to the freight broker. The mistake most truckers commit is they try to convey this information without being able to back it up. If you are working on estimates, or what you heard was someone else’s costs but don’t have the cost analysis to back it up, those figures are worthless.

The businesses which see opportunities in others’ faults and weaknesses rather than attempting to place blame on others, will be the ones who succeed.  All a trucking company does when it doesn’t know its numbers is provide ammunition to the brokers and shippers to take advantage of the situation.

And finally, there is a two-letter word in the English language that, when used in conjunction with a concise, correctly-figured hauling rate range, will guarantee you’ll be hauling the best-paying freight for your operation: No!

It’s every trucking company’s choice whether they take the ‘blame game’ road, or work to bridge the rate gap between themselves and the freight brokers with which they work. Small motor carriers must work diligently to know Break-Even Points, capitalization figures, the market they serve, and have an established hauling rate range which is communicated to the brokers and shippers.

So what’s yours?

Good loads and safe roads, everyone.

Timothy Brady
©2009