How Freight Brokers Actually Make Money (And Where They Quietly Lose It)
This article content comes from the TIA Livestream Leading for Growth: How Brokers Make Money & Coach Teams to Win
Revenue numbers look impressive on paper, but as Alex Fritz, CFO at NT Logistics, bluntly puts it: “If I have a trillion dollars in revenue and a trillion and one in expenses, that’s kind of irrelevant, right? You’re making net negative one dollar.”
The bottom line: In freight brokerage, the gap between what leaders think drives profitability and what actually does can cost them their business.
The Margin Mirage
Most brokerage teams fixate on gross margin, or the spread between what customers pay and what carriers charge. Focusing on that hides what really matters.
Hidden costs that erode profitability:
- Lumper fees and detention charges
- Technology and software expenses
- Salary overhead and benefits
- Debt servicing costs
- Days sales outstanding (DSO) gaps
“The most common misconception is that gross margin equals net margin,” Fritz explains. “There is so much more than just what you bill your customer and what you pay your carrier.”
Consider this scenario: You expect 10% margin on a $1,000 load. That’s $100. But add a $200 lumper fee and $200 in detention, and suddenly your $100 margin on what’s now a $1,400 load shrinks to 7%.
Why it matters: That 3-percentage-point difference can devastate a P&L. As James Kenny, PhD, who has taught TIA sales strategy courses for 32 years, puts it: “It’s amazing what 3% will do. The devastation to a P&L is overwhelming.”
Working Backwards From Profit
Smart brokerages flip the traditional approach. Instead of starting with revenue targets, they work from the bottom up.
The better approach:
- Start with net income goals
- Calculate true transaction costs (labor + technology)
- Factor in payment terms and cash flow needs
- Then determine what revenue you actually need
Kenny emphasizes this philosophy: “Work from the bottom up, right? You know, we just talked about that net income. Before that, what were your transaction costs? Before that, what did you pay the carrier? Then you get to the revenue.”
The Real Cost of Moving Freight
According to a recent FreightWaves article, a typical brokerage might have transaction costs of $205 per load when you factor in labor ($150) and overhead ($55).
“If your team doesn’t understand here are my unit costs, here’s what it costs for the truck, here’s what it costs to move the load—that load breaks down into two major expenses: labor and technology,” Kenny explains.
Translation: You can’t profitably take freight at $180 if you have $205 in true costs. Many brokerages do exactly that because their teams don’t understand the full economics.
Coaching Beyond the Spreadsheet
The solution isn’t just better accounting, it’s better coaching. Leaders need to connect financial reality to daily decisions.
“The difference between training and coaching is how do we do something and then why and how do we get better at it,” Kenny notes.
Effective coaching means:
- Showing reps the complete cost structure, not hiding it
- Helping them understand which accounts actually make money
- Teaching decision-making, not just following processes
- Setting output goals (quotes, booked loads) over input metrics (call volume)
Fritz advocates for technology adoption to scale effectiveness: “If you’re able to make your employees 2, 3, 4x more scalable than they are today based on technology, that’s going to be a win.”
The Path Forward
As competition intensifies, brokerages that survive will be those that truly understand their unit economics and coach teams accordingly.
The message is simple but often ignored: Stop chasing revenue vanity metrics. Start obsessing over the numbers that actually determine whether you’re building a business or just moving freight at a loss.
As Fritz reminds us about OpenAI’s $20 billion in revenue but zero profitability: “Companies that run on net losses year after year, they’re probably not long for this world.”
