Beat the Spot Market: 5 Tips for Small Fleets to Drive More Revenue and Profits
Many small fleets and single truck operators leverage the spot market to drive revenue without committing to long-term contracts. It’s a popular strategy, with nearly 30% of freight moved via the spot market. While this can sometimes be an effective strategy, today’s spot market isn’t performing at the level it has been in recent years.
This should come as no surprise to small fleet owners and owner-operators. According to DAT, volumes are tracking at around half what they were at 2022’s midpoint and are nearly 17% lower than expected at this time of the year.
The spot market experiences regular ups and downs every few years. Currently, spot market load posts are the lowest they have been since 2019. Take that year out of the mix and load postings in 2023 have reached a seven-year low.
Relying on the spot market is extremely risky, especially with double-brokering instances on the rise, which can result in less revenue and cause small fleet owners and single truck operators to question if they’ll be compensated when working with new customers.
There are five actions you can take as small fleet owners and owner-operators to create a more reliable, revenue-driving operation. It requires truly understanding what your costs are to avoid making decisions that chip away at profits, focusing on the right metrics, and building strong relationships with your shippers and brokers.
5 Tips for a More Controlled, Reliable Operation
- Negotiate Fuel Surcharges: When you work directly with shippers or have longer-term contracted freight with brokers, a fuel surcharge will almost always be added on top of the line haul you negotiated. Whereas if you’re in the spot market, fuel surcharges are rolled into the flat rate, if at all considered. This leaves you with limited insight. Being able to negotiate fuel surcharges as a separate line item allows you to understand all costs associated with the line haul so you can measure the true cost of fuel per mile instead of a variable cost that goes up and down based on market pricing.
- Prioritize Human Connections: In an increasingly digital world, human connection and strong relationships will always remain important. Prioritize finding regular freight lanes that you can run with a direct shipper customer. It doesn’t matter if you are a 1,000-truck fleet or a one-truck fleet—smaller fleets that build solid relationships with shippers and brokers are better positioned to negotiate solid pricing on their outbound freight.
- Focus on Utilization: If you’re a single truck operator, you need to find a shipper that executes a handful of loads a day, not hundreds. Keep in mind, however, that you may not always get the same lane with a direct shipper, and it’s typically more important to do the same lane than it is to run a direct shipper load so that you can reach the ideal utilization on the truck.
To truly understand and optimize utilization, it’s important to prioritize revenue per day rather than revenue per mile. For example, if you get $1,500 per mile and drive one mile, that’s a great load; if you get $3 per mile and drive 500 miles, that’s also great—but if you get $10 per mile and drive 30 miles and it takes half the day, that’s a problem.
Looking at revenue per day provides a different perspective that enables better planning. Say you can’t reach your destination because of extra mileage on the load, and you must extend into the next day—this results in suboptimal mileage for the truck and can severely impact the truck’s revenue per week. To avoid these issues, look for outbound loads that can get unloaded in a day and ideally loaded again the next day to avoid wasting half days sitting idle.
- Determine Your Own Numbers: The cost of operating a truck in 2022 was $2.251 per mile, surpassing $2 per mile for the first time ever in ATRI’s Ops Costs report, largely because of high fuel costs. Without a clear and accurate understanding of cost per mile, choosing profitable loads is an impossible guessing game. Every fleet will have its own cost per mile and should determine what works for them based on expenses and revenue goals rather than what everyone else is telling them they need to use.
- Find a Trusted Partner: Managing expenses and tracking other critical operational elements in a manual way becomes time-consuming and repetitive. Small fleet owners and owner-operators have another option. They can use a modern, cloud-based TMS to free up time and grow their businesses by driving more miles, finding and planning better loads, and connecting with more customers.
TrueTMS does just that—it’s an affordable, accessible, and essential technology solution designed for small fleets that helps with determining expenses, analyzing revenue, and managing all aspects of their business through a single platform.
The reversal in spot market pricing this year has hit small fleets and owner-operators especially hard, but now is the time to come out ahead. Applying these five strategies to your business will get things moving in the right direction. Using a technology platform to automate routine office work, like invoicing customers, will give you more time to focus on important areas of your business and use better information to make informed – and more profitable – decisions.
You don’t have to take our word for it. Experience the benefits of using a modern TMS built for small fleets like yourself. For a free trial of TrueTMS (no credit card required) go to https://info.truetms.com/signup.