How is freight broker commission calculated?
Freight broker commission is calculated on the gross margin of a booked load. You can determine gross margin by subtracting the amount the shipper is charged from the amount you (the broker) pay the carrier. The margin left over directly impacts how much money a freight broker earns.
According to a Freight Waves survey, the average commission is 13% to 15% of a load's net revenue. Example: A shipper pays $4,000 to a licensed freight broker to move a load. The freight broker negotiates $3,000 with the trucking company to transport the load, leaving $1,000 net revenue.
Freight Shipping Rates Are Calculated Based On: Supply and demand in your freight's origin. The type of equipment (trailer) you need. The urgency of your shipment.
Freight Agent Commission Split
According to Freight Tec, companies within the industry offer commission splits that range from 25 – 70% being paid to the agent. The amount of commission varies depending the third-party logistics company/freight broker you work for and how they structure their agent's compensation.
Freight brokers make their money in the margin between the amount they charge each shipper (their customer) and what they pay the carrier (the truck driver) for every shipment. Although it varies from one transaction to the next, healthy freight brokers typically claim a net margin of 3-8 percent on each load.
- Lack of control: When you use a freight broker, you're giving up some control over your shipping process. - Dependence on technology: Freight brokers typically rely heavily on technology, so if there are any problems with their systems, it can cause delays in your shipments.
The average commission for a freight broker is 13%-15% of the gross margin. The final income depends on what types of freight are involved and what carrier performs the delivery.
Many freight brokers earn both salary and commission, or even just commission in some circ*mstances, so these numbers are likely only part of the equation. In terms of employment status, freight brokerages typically employ freight brokers as either W-2 employees or 1099 independent contractors.
Interestingly for the long-distance OTR crowd, the study found that "margin decreases as the length of haul increases," which Adamo attributed to fixed costs of truckers and brokers on a per-load basis amortizing over longer distances. The average margin under 250 miles sat at 15.2%.
This means that the more business you bring in, the higher your income. It's important to note that different freight agent programs have different commission splits, so it's essential to discuss this upfront. Most programs will offer an agent split of 70/30 or 60/40, depending on the quality of your book of business.
What is the ideal commission for sales?
The industry average for sales commission typically falls between 20% and 30% of gross margins. At the low end, sales professionals may earn 5% of a sale, while straight commission structures allow a 100% commission.
Inbound freight costs for domestically sourced product typically range from 2%-4% of gross sales, while for imported product, inbound freight costs 6% to 12% of gross sales. Outbound transportation costs typically average 6% to 8% of net sales. And these costs are going up.
Logistics sales positions that offer a base salary with a commission typically offer uncapped earning potential with some stability to go with it. In this case, you'll always earn your base salary, no matter how much you sell. You'll also earn more, above and beyond that base salary, depending on how much you sell.
The national average salary for a freight broker in the United States is $62,105 per year , with an average additional compensation of $28,000 per year for commissions.
On average, the yearly freight broker salary in the U.S. is $71,500 ($36.67 per hour). Entry-level positions begin at $45,000 per year, while most experienced professionals earn up to $107,500 per year. As a freight broker, you can start your own trucking business and become your own boss.
While freight brokers generally are not liable for cargo claims (i.e. loss or damage to cargo), there are several ways brokers can become liable for cargo claims. The primary ways a broker can become liable for cargo damage are: The broker agrees to be liable for cargo damage via contract with its customer.
One of the biggest downsides to using a freight broker is not having total control over the shipment. Once the load is given over to the broker, the shipper's ability to manage that load may be hindered. Freight brokers must make money somehow. They do that by charging more for a load than they're paying the carrier.
Freight agents have less liability in comparison to a freight broker. Freight agents need freight brokers to operate, whereas freight brokers can operate without freight agents. A freight broker will have a more consistent brand look and feel across its office(s) versus freight agents that operate under the broker.
Your work as an Independent Freight Agent presents a unique array of stresses. Perhaps the most challenging of them is finding a healthy work-life balance. With only 24 hours in a day, it often feels difficult to successfully juggle relationships, exercise, family, hobbies, and of course–work!
| State | Annual Salary | Hourly Wage |
|---|---|---|
| New York | $73,975 | $35.56 |
| Vermont | $72,702 | $34.95 |
| California | $71,405 | $34.33 |
| Maine | $69,342 | $33.34 |
Can freight brokers make 7 figures?
The task of scaling your brokerage to 7-figures can actually be rather simple, but I can guarantee you, it will far from easy. The transportation industry by nature is quite demanding, but if effective systems are established early on, it makes things a whole lot easier.
W-2 brokers typically earn a base salary with a commission directly tied to their profits. According to a recent Freightwaves survey, median pay in this model is $40,000 salary plus an average commission rate of 13.2% on gross profits.
Load Boards
This is one of the most common ways brokerages find loads. They look at load boards, which the oftentimes have a subscription to, and they choose loads they may be able to cover, those within their purview and available lanes, and bid on them.
A commission-based advisor or broker makes money by selling investment products such as mutual funds and annuities and conducting transactions with the client's money. A fee-based advisor charges a flat rate for managing a client's money.
To be a successful freight broker, you can't stress about the things you can't control. When an issue arises, act quickly, solve what you can and communicate your solution with all impacted parties.
