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Revenue assumptions and the spot market

Posted by Avery Vise on Jan 27, 2021 9:49:00 AM

The FTR Experts were posed with the question, "What is the impact of spot rate increases/decreases on a company revenue profile? We are getting conflicting views. Does a 30% increase in spot rate means a 30% increase in revenue. In other words, how should we incorporate spot market changes into our revenue assumptions."

Key Takeaways:
  • Dependent on mix of freight
  • Loads are posted in the spot market because they cannot get capacity through their usual channels
  • Many one- and two-truck operations depend exclusively on the spot market for revenue, and that's a big reason why there's so much turnover

FTR Expert Response:  

It is completely dependent on the mix of freight that the company moves. A large asset carrier is likely to move only a small portion of their freight on the spot market so the big swings in spot would only have a small impact on their freight revenues. Of course, it is difficult to explicitly measure because you also have contract changes, organic growth, and acquisitions.

Conversely, many one- and two-truck operations depend exclusively on the spot market for revenue, and that's a big reason why there's so much turnover as we noted in our November State of Freight Insights report, only 56% of the carriers that got authority in 2018 were still in business by the end of 2020.

 

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