Written by Paul-Bernard Jaroslawski at FreightCaviar.
There is a notion that it pays to be a broker in the world of freight. It can seem like carriers are doing most of the work for the least amount of money. But does this idea hold weight?
It’s common that dispatchers and truckers think brokers are making a lot more than they do. People often think these middlemen get to tilt the prices so that they come out with a bit extra for doing the least amount of work.
In order to find out the truth, let’s look at a proper breakdown to see how much a freight brokerage, and its employees take home at the end of the day.
How Much Does a Freight Broker Make per Load?
Let’s look at the numbers of what a brokerage is bringing in. Though it may surprise some, on average, brokerages are making a net margin of around 3-8 percent per load (source). So if the load was billed at $100, the brokerage would make $3-$8 on that load. When you’re managing a high volume of loads, this small number grows quickly.
For example, in 2021, C.H. Robinson – one of the largest freight brokerages in the world, wrapped up with total revenues at $23.1 billion, and its profit margin was 4.68 percent (source). This profit margin seems slim, but 4.68 percent of $23.1 billion is $1.08 billion in profit. These profits come with a lot of headache and risk.
While the overhead costs of running a freight brokerage may not be as much as running a trucking company, you still need to consider costs. Such as an office space, paying employees, insurance, keeping up with the newest software, and ensuring you have the cash flow to operate. Many shippers, especially the largest, tend to pay freight brokers 60-90 days, while a freight broker must pay a trucking company within 30 days.
Freight Broker Salary
Now let’s take a closer look at employee pay. A broker’s take-home pay is based on their salary plus commission. That means the numbers will vary depending on the broker, their location, tools, relationships, and more.
For example, your average first-year broker could make around $60,000 (source). Now, if we’re looking at someone with exceptional experience, who maintains a strong network and puts in long hours, the number drastically changes. That broker may see their base pay with added commissions totaling upwards of $150,000 to $200,000 at the end of the year.
In recent years, outsourcing has become more common. For example, we’ve seen a surge in outsourcing to Latin America and Eastern Europe. Outsourced freight broker employees might bring home around $1000 to $1500 a month. Freight brokerages that outsource will make a higher profit margin than those who employ strictly in the US.
The job can be lucrative for employees with the knowledge, skills, a desirable location, and the drive to make it happen. But as you’re learning the industry, expect to make an average salary.
The Reality of Being a Freight Broker
Remember: this is a business. A shipper is going to pay the market rate. Shippers usually have a few brokerages on the dial, whom they’ve built relationships. So they’re going to go with the one who will give them the best service at the best rate. And a good broker will do just that – provide a high-quality service at a profitable rate, while still reducing costs for those using their services to keep them coming back.
What Are the High-Quality Services Shippers Are Paying For?
It’s not hard to spot. These are the brokers who know the market. They put in the time to do the research and study changes to save time and money. Next, they work smarter, keeping up to date with the technology that makes the job easier. Finally, they take the time needed to build relationships with customers.
To learn more about building a successful freight brokerage, check out our article on 10 tips to win lanes and customers as a freight broker.
So in some cases, it may be true that brokers are making a lot of money, but at the same time, they’re putting in a lot of work to justify those numbers. A freight broker deals with two demanding parties: the shipper with high expectations and a trucking company demanding high rates. A freight broker has to do a delicate balancing act to keep them both happy. Brokers do that by keeping the costs within the market level and providing an expert level of service that keeps customers returning.
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