Percentage Based or Flat Rate?

[lenny52682]

What business model is more profitable?

The model where you are paid based on the percentage of the line haul or the model where you are paid based on a flat rate per mile?

What companies offer the highest percentages per load?

What companies offer the highest rates per mile?

If you are paid based on percentage per load, how can you be certain of what the load grosses in total? That is to say what is the customer actually paying for the load before the carrier pays you your percentage and takes their own?

 

[Jenny]

Either way profits depend on expenses and spending habits.

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[pearlpro]

Profits also dont depend on total miles run or length of trip in expediting..

 

[Crazynuff]

What business model is more profitable?

The model where you are paid based on the percentage of the line haul or the model where you are paid based on a flat rate per mile?

What companies offer the highest percentages per load?

What companies offer the highest rates per mile?

If you are paid based on percentage per load, how can you be certain of what the load grosses in total? That is to say what is the customer actually paying for the load before the carrier pays you your percentage and takes their own?

I'd say percentage would pay better . If the pay is flat rate it most likely is based on less than the average percentage .
If you are contracted you have a legal right to see the actual billing rate .
The one buying fuel should get 100% of the FSC which is a seperate charge in the billing .
Can anyone tell me if some carriers are still giving preferred shippers a "discounted " FSC ?

 

[Moot]

Can anyone tell me if some carriers are still giving preferred shippers a "discounted " FSC ?

I sure they are. When I was on a variable f.s.c. program, the f.s.c. could vary as much as .40 to .50 depending on the customer. Same goes for linehaul charges for preferred customers.

 

[rollincoal]

There is NO profit in a flat rate based situation. You'll be pulling in break even numbers if you run a tight ship at best on a flat rate. Percentage of the linehaul is the only way for a one truck operation to make a profit and you need the ability to negotiate price on EVERY potential load. As was pointed out any company you are leased to is required by law to show you the freight bills on any loads you book from them so you know exactly what the load pays before their cut comes out. If you're hauling spot freight from brokers then you will get to see the rate confirmations on that. It's a simple matter of emailing a pdf file showing the documentation on this that takes very little effort or time. Any company that pays percentage and is unwilling to share this information, and most won't is a crooked orgaanization skimming money and lying to you. One to be avoided at all costs.

 

[Turtle]

There is NO profit in a flat rate based situation.

Of course there is. A percentage based situation will generally pay better in the long run, but flat rate is very consistent, where you still get your flat rate even on loads that are low paying. With consistent rates, changing only for FSC, you can plan expenses and revenue easier than you can with a percentage contract. I've done both, and both have their pros and cons. Different factors come into play with regard to accepting or rejecting loads, depending on how you are paid. With a percentage base, for example, how much the load pays is important, but also important is where does the load take you and can you get another decent paying load out of there. With a flat rate, getting a decent paying load out of there isn't as important as getting any load at all out of there, because you'll get the same rate regardless. A lot of percentage people come back out of south Texas on the cheap, whereas flat rate people generally come out at their contracted rate. Pros and cons, pros and cons. I do think, if you know how to make big picture decisions, that you'll make more with a percentage. But if you're new and are just learning the business, maybe not.

 

[davekc]

And I would feel very comfortable saying "there is a whole lot of skimming going on out there".

 

[rollincoal]

Turtle, with percentage it is important, at least to my operation, to get a profitable rate on every load I haul. This means every load out and back in or all around or whatever I choose is going to a market I am familiar with KNOWING what I can get as a possible reload option before I even go there. Going to Texas is never an option as the market is always saturated with outbound drivers who happily haul cheap and I am not interested in doing intrastate trucking down there. I say again there is NO profit in flat rate based pay. All you can do is run up lots of miles in a week's time, week, after week and hope you always get plenty of miles with nothing breaking... and you run yourself ragged in the process. I have to ask this question, I don't have a clue as to what cargo van or straight truck rates are like flat or percentage (well some vague ideas on percentage for straights) but can use big truck numbers as I am very familiar with those. Typically the average trucking company leasing on contractors with big trucks provide a few things of minor expense (and hype it like they are saving that contractor huge money when they're not) and pay rates like 90 cents or 95 cents a mile loaded and/or empty with a surcharge based on and adjusted to the national average price of fuel weekly, right now at the high end a guy on a lease like that is getting 45 maybe 50 cents a mile on surcharge pay. Some companies pay that on loaded miles only and some pay it on loaded and empty. The thing is that puts the big truck at about $1.15 all miles in (this would include unpaid deadhead miles out of route EVERY mile driven) to a high end of maybe a $1.35 a mile. Now my equipment is all paid for and a $1.35 a mile would not even cover my cost to roll. I know how to manage money so don't go there. Explain to me how one can profit on flat rates like that? And explain to me why the big companies Schneider, JB Hunt or whoever (paying cheap rates like that to their contractors) do not run for rates like that themselves since there is profit??? Exactly.... Cause they make some money off contractors and have extra capacity on hand that they can move around just like company trucks to cover their contract freight...... There is no money in it....The only people who do it do so because they fall for the hype of "ownership" and don't take a serious look at the business side, not having a clue about what it costs to operate.....

 

[Turtle]

Well, you make a statement in absolute terms, "there is NO profit in flat rate based pay," which means no one under any circumstances can make a profit of any kind with flat rate pay. Yet I ran for five years on a flat rate contract and I made a profit. How is that even possible? According to you it's not. One certainly can't make a profit running for a flat rate that's unprofitable. Perhaps you need to define your version of "profitable". For a cargo van driver, they can expect to take home after expenses and taxes about $25,000 a year. I did better than that, but even if it was only $20,000 a year, that's still profit.

 

[rollincoal]

Then I see you are one of those drivers who considers 100% of any settlement check as all "profit". Profit is not what's left after fuel has been paid for driver. Profit is what's left after all fuel, insurance, plates, permits, maintinence, taxes and a reasonable comparible wage to that any company driver would pull in, plus health/dental insurance, retirement and household expenses come out of that settlement, what's left is profit... If after all of these things have been covered you had $20,000 to $25,000 left in the bank at year's end then you made one heckuva a profit that year.... You did that on cheap flat rates?

 

[davekc]

We do both with straights and yes, money can be made with both.

 

[rollincoal]

You do it with a fleet. There's money in numbers but not a lot and the margins must be razor thin on flat rates at best. Do you 1099 your drivers otherwise I don't see how it would be possible to scrape by, and I would not want to get busted by the IRS for that trick... I'm talking about a single truck operator here. There is no money in flat rates with that. And a well managed percentage lease will beat out flat rates every time.

 

[davekc]

You do it with a fleet. There's money in numbers but not a lot and the margins must be razor thin on flat rates at best. Do you 1099 your drivers otherwise I don't see how it would be possible to scrape by, and I would not want to get busted by the IRS for that trick... I'm talking about a single truck operator here. There is no money in flat rates with that. And a well managed percentage lease will beat out flat rates every time.

Do you know what straight truck rates are on a flat rate system?

 

[Turtle]

Then I see you are one of those drivers who considers 100% of any settlement check as all "profit".

You see incorrectly.

Profit is not what's left after fuel has been paid for driver. Profit is what's left after all fuel, insurance, plates, permits, maintinence, taxes and a reasonable comparible wage to that any company driver would pull in, plus health/dental insurance, retirement and household expenses come out of that settlement, what's left is profit... If after all of these things have been covered you had $20,000 to $25,000 left in the bank at year's end then you made one heckuva a profit that year.... You did that on cheap flat rates?

Yes, after taxes and expenses, yes. However, that's not after household and other living expenses like food, clothing, and other expenses. I didn't have $25,000 just sitting there in the bank at the end of the year, no. But I follow the Rule of Thirds, where one third of my gross revenue is for operating expenses (fuel, oil, food on the road), one third goes to the truck (maintenance, tires, insurance, van payment if it's there, etc) and the other third goes to me (which I spend however I like). My one third was in that $25,000 range, yes.

 

[paullud]

You do it with a fleet. There's money in numbers but not a lot and the margins must be razor thin on flat rates at best. Do you 1099 your drivers otherwise I don't see how it would be possible to scrape by, and I would not want to get busted by the IRS for that trick... I'm talking about a single truck operator here. There is no money in flat rates with that. And a well managed percentage lease will beat out flat rates every time.

There is money in numbers but if all the trucks in a fleet are using a system with no profit you still end up broke, just faster.

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[Bruno]

We have made good money with both. It all depends on the many different things. What is they percentage your getting? What flat rate your getting? We have made GREAT money with FedEx Custom Critical who does percentage and flat rate now from what I'm being told. We have made GREAT money with Panther Expedited Services who is on a flat rate. We don't have any trucks at FedEx Custom Critical so I really can't speak on how they do things. All of our trucks are on with Panther and we are VERY happy with them.

 

[jaminjim]

Then I see you are one of those drivers who considers 100% of any settlement check as all "profit". Profit is not what's left after fuel has been paid for driver. Profit is what's left after all fuel, insurance, plates, permits, maintinence, taxes and a reasonable comparible wage to that any company driver would pull in, plus health/dental insurance, retirement and household expenses come out of that settlement, what's left is profit... If after all of these things have been covered you had $20,000 to $25,000 left in the bank at year's end then you made one heckuva a profit that year.... You did that on cheap flat rates?

So your utilities for the house are part of your business expenses? ( You may be the one who has to fear the IRS)

I think you posted that you didn't know what the going rates are for expedite straights, and vans. If you don't know that, how can you say their cheap?

 

[OntarioVanMan]

So your utilities for the house are part of your business expenses? ( You may be the one who has to fear the IRS)

I think you posted that you didn't know what the going rates are for expedite straights, and vans. If you don't know that, how can you say their cheap?

My household expenses are also tax deductible....well at least about 10% of them....since about 10% of the total sq. footage is for OFFICE use....aka computer room...

 

[davekc]

So your utilities for the house are part of your business expenses? ( You may be the one who has to fear the IRS)

I think you posted that you didn't know what the going rates are for expedite straights, and vans. If you don't know that, how can you say their cheap?

Since the OP didn't respond, I believe he doesn't know what other vehicle classes are paid and also indicated as such in his original post. It would be my guess he is either basing it on .95 CPM or 1.35 since that is his rate or reference and likely assumes they run under either of those two numbers.
Both would be a false assumption on straight trucks if looking at the majority of expedite carriers.