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What’s the Truth with Broker Profitability?
A freight broker’s financial activity is simply:
1. Revenues
2. Less (cost of sales) payments to the truck
3. = Gross profit margin
4. Less operating expenses
5. = Net profit margin
If you strive to pay your trucks between 85 and 90% of each load, your profit margin would be 10 to 15%.
This profit margin is usually considered the industry standard. You may be hearing from various sources that brokers take the bulk of the money they get from the shipper.
My take on this – poppycock!
Many brokers struggle getting a ten per cent profit.
Over time, however, you want to average at least a ten per cent profit margin and this is very doable as you weed out poor-paying shippers with those that pay better.
Good paying shippers are out there but you’ll have to work to dig them out – they won’t just fall out of the sky.
Again, with time, you want to strive to start consistently getting profits of 15% or more. You normally don’t do this by paying trucks less – you do this by getting better paying shippers.
With time and experience, you’ll eventually build your own “hot spots” where you won’t have to wonder – where can I go to get good rates?
To wrap this up, let’s say you’re getting an average margin of 14%. Let’s say you’re averaging loads that average $1,900. That’s $266 per load profit before your salary and other operating expenses.
Now let’s say you are consistently moving five loads per week – one a day and you’re working 50 weeks a year.
You’re income would be $66,500. Trust me, many brokers would be happy with this, but …
many would want to double or triple this outcome.
And, guess what?
You could make about $200,00 a year by moving just three loads a day for 50 weeks or you could be making about $133,000 a year by moving just two loads a day for 50 weeks.
This is doable for a one or two-person office.
I haven’t even mentioned about using agents. Using agents can skyrocket your income but, again, good agents don’t just drop out of the sky. This is a story for another day.
I hope you get the idea here.
But let me caution you – this kind of activity – two or three loads a day consistently – is not a piece of cake. Some of my competitors will tell you otherwise. I’m giving you the reality of it.
Lastly,
You may be interested to learn more about what skills are required to become a successful freight broker. Go here below – it’s free …