Freight brokers: 2019 salary and commission survey results
When evaluating the tangible costs of operating a brokerage, the most important factors in selecting a location are employee compensation and office rents. Telephones and other utilities, as well as computers and software are very similar in price no matter where a freight brokerage is located.
So, how do salaries and other compensation differ from region to region?
In October 2019, we surveyed 402 freight brokers in the U.S. and Canada to learn more about base salaries, commissions and talent.
The survey found the median entry-level base salary is $40,000. The salary difference among regions is small, with only approximately 10% separating the highest and lowest average base salaries in the U.S. (Mountain West at $42,615 and Southeast at $38,667).
How about commissions?
Whether a freight brokerage uses a cradle-to-the-grave or a split model, the key has always been and will remain how to pay for performance.
While commission plans based on team or company-wide performance have become more prevalent in the past 10 years, 61% of freight brokers still believe that being paid on individual performance is a key to attracting and retaining top talent.
This makes sense, as highly skilled freight brokers who can sell and manage accounts are vigorously recruited by all industries looking for the same sales skills to drive growth.
According to the salary survey, the average commission rate on gross margins is 13.2%. This varies slightly by region; Canadian freight brokers earn the smallest commissions at 10%, while brokers in the Mountain West earn 14.8%.
As an example, a freight broker based in the Midwest generating $250,000 a year in gross margin would earn $72,331. This can be calculated by using the average entry-level salary of $39,081 along with the average commission rate of 13.3% on gross margin.
What about the intangibles?
If a freight brokerage does not need to be located near the freight it moves or the customers it serves, then what are the advantages of operating in a city with higher rents and salaries?
In our survey, more than eight of 10 freight brokers agree the answer is access to talent. This stands to reason, as freight brokerage is a service business, and human talent is the most important asset in freight brokerages.
Compensation expenses and office rents were deemed less than half as important as access to talent. And only one-third of freight brokers thought being located near customers was an essential consideration when deciding on a location.
How is talent defined?
Since freight brokers think access to talent is by far their most important criteria when evaluating where to plant their flags, it is essential to define talent. Respondents to the survey clearly define this intangible as a combination of tenacity, hustle and persistence.
“Dialing for dollars” as they say on the brokerage floor.
Communication and honesty are the second and third most valuable attributes freight brokerages use to evaluate talent, whereas education and analytical skills are some of the least important skills sought out when hiring freight brokers.
Using this definition of talent, one can see why freight brokerages can thrive in any location. While the quantity of talent is always an advantage to a brokerage looking to scale quickly, it does not need to rely on a highly educated workforce to thrive. Tenacity, hustle and integrity in volumes large enough to scale a freight brokerage is the essential recipe in any market in the U.S. or around the world.
The full results of the survey, including compensation and rents by city and region, can be found in the Freight Intel Group white paper, “2019 Freight Broker Compensation Survey,” which is available to FreightWaves SONAR subscribers.