Use honest and ethical practices when you write a carrier rate agreement or carrier contract. Doing so will result in more long term satisfied customers. This carrier rate agreement or carrier contract will be be your template for creating a formal proposal for every customer you negotiate your services with. Many times the customer will provide you with a counter proposal and you will need to make adjustments. This is to be expected as their number one concern is to be competitive in the market and to be profitable. A good way to view the negotiating process is that it is a desire by you and the customer to enter into a long term business relationship that provides dependable residual income both of you are able to profit from. While solid, consistent, reasonable, profits may be hard to accept they are far better than a few high paying loads that only come once in a while. Successful trucking is all about consistency.
Base rate in most cases will not be the same from one customer to another. Therefore we will leave this blank for your contract template. Once you begin a formal proposal you will then establish and enter your base rate.
Detention pay is always a delicate topic to discuss with any potential customer. It requires the utmost in tact while at the same time being a little cunning. Before you talk to any customer about detention pay you need to predetermine an expected rate of pay. Then use the following formula....
gross rate (miles x base rate) = G miles = M
national average of fuel = A hours = H
cost = C fuel = F
mpg = P detention = D
M ÷ 60 = H
M ÷ P = F
F x A = C
(G ÷ H) – C = D
In most cases the customer will undoubtedly begin pointing out how “it's not costing you anything to sit there.” We both know that's not true and if the customer is completely honest they know it's not true either. Your goal now is to show that to them and have it included in your carrier agreement or carrier contract. To negotiate with your customer you must be prepared to answer with accurate facts and figures. Using the formula above be prepared to negotiate with the following figures...
Rate per hour this load will generate while in transit.
Rate per hour less fuel cost.
Now it gets a bit more complicated and the real negotiations begin. The reality is the truck must generate revenue for you to pay the bills and to be profitable. On top of the customers desire to minimize their total transportation cost we have the DOT and FMCSA restricting our hours of service. The customer will not like hearing it but according to the FMCSA the truck is on the clock while waiting to load or unload, while loading or unloading and while in transit (14 hour rule). Therefore the longer it takes to load or unload reduces our overall billable rate if we have not agreed to detention pay. Familiarize yourself with the following facts and be prepared to discuss them honestly and tactfully while remembering the first rule of trucking. “Getting your customers product to market so they can succeed and in turn make you successful.”
Limited number of hours in a day you are allowed from the time you begin “On duty not driving” or “On duty driving.”
More time than scheduled on any one load reduces your overall revenue.
No matter if moving or sitting you must still cover your operating costs such as insurance, IRP, highway use tax, facility expenses, etc.
Labor (unloading, tarp, etc.) is generally far easier to negotiate with a customer than detention pay. For example in the perishable foods business most customers wish to keep unloading costs below a set amount per case or weight (most commonly referred to as “hundred weight”). Customers know and accept that there are charges for labor no matter if it as a grocery warehouse or protecting their product with the tarping they have required.
Fuel surcharge tables have become second nature for both carriers and their customers. Customers realize that they will not get their product to market with a reliable carrier if they fail to provide a fair rate that includes a fuel surcharge.