A $34 Profit on a $1,500 Load? Really?

Update: DAT report on freight brokers' financial results from October 2017.

If you own or manage a freight brokerage, you’re keenly aware of all the expenses associated with running the business. But do your employees know how much you spend for payroll, benefits, rent, taxes, etc.—and does it matter?

Many successful brokerage owners believe that their employees need to understand how their company makes money. Sales employees are typically aware of the company’s top-line revenue. But if they understand costs, too, they can make better decisions and are more motivated to support profitability. These company owners don’t usually reveal confidential financial information or burden employees with details only a CPA would understand. Instead, they create a “Profit Per Load” worksheet, with a breakdown of all costs associated with moving a single load.

Here’s an example, based on industry averages, using typical expenses and profit margins.

Profit Per Load

Another way to convey the information is to create a pie chart for your employees, like the one below.

Breaking down your business in this manner is an eye opener for most employees (and even some owners). Brokers commonly focus on the $1,500 paid by the shipper or the $225 margin that goes to the brokerage—or even the portion that is paid to them as a commission—but they rarely think about the slim profit of $34 that remains after all expenses are taken out.

When employees grasp how small the profit is on each load, they’ll be more aware of the importance of controlling costs or increasing the top-line revenue by even a few dollars on each load. Alternatively, you might encourage them to increase top-line revenue by moving more loads per week.

GROW YOUR BUSINESS

A good transportation management software will help you manage your revenue and expenses. DAT Keypoint®, a TMS designed specifically for freight brokers, handles accounting and operations in one single-entry system and offers a variety of analytics functions. It’s an affordable and easy-to-use system that allows you to grow your business without growing your back-office staff.

TMS can help

Your transportation management system (TMS) can help you to reinforce corporate objectives. As the owner or manager, you can set up policies and use tools in the TMS to enforce compliance by operations staff and independent agents. For example, you might require a minimum gross margin on truckload moves, or impose a credit limit that minimizes your exposure to slow-paying customers.

I’d like to hear from you. Do you have a tip to share on educating your employees on the financial aspects of your business? Please share your insights in the Comment section, below.

If you’d like to learn more about DAT Keypoint broker TMS, please call us at 800-728-7305 or send us an email.

Categories: Best Practices and Benchmarks

Steve Blair

For the past 25 years, Steve Blair has served as a senior manager for DAT Keypoint®, a transportation management software (TMS) designed solely for brokering freight. The TMS enables brokers and 3PLs to control virtually every facet of their business, from capacity planning and operations, to accounting and business analytics.



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