A broker’s margin is what’s left after paying the carrier. It has to cover your bond, software, staff and any shipper who pays late. Here is how to work it out, and how to use it when you negotiate.
The two numbers
- Margin in dollars: what the shipper pays, minus what the carrier gets.
- Margin as a percent: margin in dollars, divided by what the shipper pays.
For example, if a shipper pays $2,000 and the carrier gets $1,700, your margin is $300, or 15%. Divide by the shipper’s rate, not the carrier’s. Dividing by the carrier’s rate gives a markup, which is a bigger and less useful number.
Count everything on the load
Fuel surcharge, detention, lumper fees, layovers and extra stops all move your number. Decide for each one who pays and whether you bill it through at cost or with something added. A $75 lumper you paid and forgot to bill comes straight out of a $300 margin.
Find your ceiling before you call carriers
Take the shipper’s rate and your target margin, and work out the most you can pay:
Highest carrier rate = shipper rate × (1 − target margin)
At $2,000 with a 15% target, that’s $1,700. Going in knowing the number keeps you from agreeing to $1,850 because the truck is available and the shipper is calling. Our margin calculator does this for you.
What should move your target
- Lane direction. Freight leaving a market where trucks are scarce costs more than freight heading to one where they aren’t.
- Timing. Short-notice pickups, month-end and holidays tighten capacity.
- Equipment. Reefer, flatbed and specialised gear price differently from dry van.
- How the shipper pays. A shipper on longer terms costs you money while you wait. See the cash gap calculator.
Dollars or percent?
Percent is good for comparing lanes, but dollars pay the bills. A 25% margin on a $400 load earns less than 10% on a $2,500 load, for roughly the same work. Track both, and set a minimum dollar figure for any load.
Look at your margin after the load
The margin you quoted isn’t always the margin you got. Compare them when the load closes. In Juno every load carries its own numbers, including charges added along the way.
A worked example with extras
Say a shipper pays $2,000 plus $150 detention, for $2,150 billed. You pay the carrier $1,700 plus $100 of that detention, for $1,800 paid. Your margin is $350, or about 16.3% of what you billed.
Forget to bill the detention and you still owe the carrier $100. Now you have billed $2,000, paid $1,800, and your margin is $200, or 10%. One missed line took out almost half your profit on the load.
Common pricing mistakes
- Quoting before checking the carrier market. A quick call or two on the lane beats a guess.
- Ignoring the return lane. Carriers price the trip they will be stuck with next.
- Leaving accessorials vague. Put detention and lumper terms in writing first.
- Chasing percent on small loads. Set a minimum dollar margin as well.
- Forgetting what slow payment costs. Long shipper terms have to be funded by someone.
Common questions
What is a good freight broker margin?
It depends on the lane, the freight and your costs. Work out what a load has to earn to cover your overhead, then set both a percent target and a minimum in dollars.
What is the difference between margin and markup?
Margin divides your profit by what the shipper pays. Markup divides it by what the carrier gets. On the same load, markup is always the higher number.
Should I show fuel separately?
Showing line haul and fuel as separate lines makes the rate easier to compare and easier to adjust when fuel moves.
Who pays for detention?
Whoever your agreements say. Decide who pays before the load moves, and bill any shipper-owed detention through to the shipper.