Trucking load boards remain popular with Canadian carriers looking to get freight loads. Load boards offer a simple solution for shippers who need freight moved and for carriers with available capacity. Many new owner-operators hope to rely solely on load boards to grow their business. Perhaps this strategy sounds easy because you can find loads from any place that has an Internet connection. While it looks convenient, this strategy often fails. Instead, the best approach is only to use load boards strategically while looking to establish direct relationships with shippers. This article discusses how to use a load board to grow your trucking business. We cover:
- What is your cost and rate per mile?
- The problem with load boards
- How to use load boards strategically
- Avoid this financial problem
1. What is your cost and rate per mile?
You should not start hauling freight until you have a good idea of your expected costs per mile. This information is essential to determine the rate per mile you can charge shippers. Otherwise, you risk running your company at a loss.
The cost per mile is your company’s cost for driving each mile. It accounts for all your fixed and variable costs. On the other hand, the rate per mile is what you charge shippers for your services. It covers your cost per mile plus the profit that you want your company to make.
Knowing these two figures is key to running a profitable trucking company. Without this information, you could charge shippers a rate per mile below your actual cost per mile. Making this mistake will use all your cash reserves and quickly put you out of business.
2. The problem with load boards
Working with load boards is not as easy or profitable as many owner-operators hope. There is fierce competition for every load, especially dry van loads on popular lanes. The fierce competition ensures that you bid rock-bottom rates to win a load. This is why knowing your cost per mile is essential. Small trucking companies that don’t have a good estimate of their cost per mile can easily end up hauling loads for a loss.
You will find that many loads are posted by freight brokers rather than by direct shippers. There is nothing wrong with working with a broker, but keep in mind that you share profits with them. Additionally, this approach also exposes you to some financial risks. Most brokers ask for net-30 terms rather than offering quick pays. You can minimize risks of slow payment, or non-payment, by working only with brokers who have good commercial credit.
Lastly, you usually end up pulling loads for many companies instead of building long-term relationships. You will need to go to the load board whenever you need to book a load. Ultimately, you end up pulling a lot of loads at very low rates for companies you may never see again. In our opinion, this method is not the best way to grow a trucking company.
Remember, we are not saying that you should never use a load board. Load boards can be very useful when used correctly. Instead, we suggest you use them strategically.
3. Use a load board strategically
The best way to grow a small trucking company is to find profitable loads from direct shippers. Building direct shipper relationships helps you get regular loads from clients that pay reasonable rates. It takes time to develop a client base, but the effort is worth it. Load boards can be very helpful when starting and building a client base. They help with your excess capacity. They are also a helpful tool for market intelligence. Here is a list of Canadian load boards.
a) Market intelligence
Load boards are very helpful for new carriers looking to get a feel for the market. The information available on load boards enables new carriers to determine how much shippers pay for the type of loads they haul on popular lanes. It’s a good idea to see the rates in both directions of the lane – going to and from your destination. If the going rates are below your cost per mile, you must make changes before you can haul loads.
b) Handle excess capacity
Most trucking carriers use load boards to handle their excess capacity and avoid deadhead trucking. You can use load boards to get started while you work to get direct shippers. As your business grows, you should be able to increase your direct shipper’s miles and use load boards only to handle some deadhead trips.
4. Avoid this financial problem
One of the challenges of running a trucking company is that few shippers and brokers offer quick pays. Instead, they insist on paying your invoices on net-30-day terms or longer. This payment delay can create financial problems for small and growing carriers.
When you offer net-30-day terms, you are extending credit to your shippers. You have to pay all the hauling expenses out of your cash reserves and wait 30 days or more to get paid. Offering these terms may work initially on a small scale, but eventually, you may run out of funds. Ultimately, it depends on the size of your cash reserve.
You can solve this problem by using freight factoring. Factoring allows you to finance the invoices from creditworthy shippers that pay slowly. Instead of waiting 30 days to get paid, you get immediate funds to pay for fuel, repairs, and other expenses. The main advantage of freight bill factoring is that it’s easy to get, and most small trucking companies qualify. To learn more, read “What is Freight Bill Factoring?”
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Are you looking for financing? We are a leading provider of factoring in Canada and can offer competitive terms. For information, get an online factoring quote or call toll free (877) 300 3258.