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Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:
Support Our Sponsors:
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Freight Broker Basics Course: Click Here
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Welcome back. It's the final mile where we answer your questions. Send them in through as a YouTube comment, through email, through Facebook group. However you want, reach out to us and we're going to answer your questions. Make sure to share us with all your friends. Do the subscribe thing. All that good stuff. Check out the sponsors in the description box to support this channel and make sure to check out the Freight Broker Basics course if you'd like to learn about our educational option to get your brokerage off the ground.
Speaker 1:All right, ben, we've got our first. We got four questions today. Uh, first one up. Hey guys, I had a question about factoring. I've got numerous customers but I'm having trouble getting my factoring company to get them approved. But they are. But they are customers. I've been factoring myself and they have great pay schedules, all right. So I think what he's saying is he's self-funded. He was self-funding them for a while and now he's using a factoring company and the factoring company says no, yep, um, so there is. I'll give you my, my general. Well, I'll give the reason this is happening first and then I'll give a general tip on it and then we'll see what else you have to add in. So if you were funding them yourself before, you potentially weren't doing due diligence, or you have a higher risk tolerance than the factoring company, because one of the factoring company's jobs is to vet that customer for credit. Since they're going to fund it, they want to make sure that that money is going to be paid by that customer, so customer might be On time.
Speaker 2:What's that Paid and paid on time and on time Very important.
Speaker 1:Yep, exactly, days to pay and actual receipt of payments are two big things. No-transcript, self-fund some of those loads too, if he wants. Actually, this whole conversation about credit comes up because your customer is going to want to know, like, why am I being denied? I had a girl call me last week. Ironically, one of my sister's friends happens to be a freight broker in the Buffalo area and she's like hey, how do I get my credit rating to be increased on DAT for a brokerage? And I was like million dollar question for any new brokerage entities how do you get your credit to look at them? Like it's going to be a manual thing.
Speaker 1:What you should do is reach out to whoever you are curious about their credit rating of you and find out what goes into it and what it takes for that to look better or differently. Whether it's a factoring company like DAT is pretty simple. It shows reported days to pay and a credit score or credit rating. But some of these factoring companies use different no-transcript who you know. What is it that you're looking at for these shippers? What are we missing? What can we do to make you feel more comfortable? It's pretty much the. It's like there's no magic pill here, right when we've we've talked through this, you know, numerous times with brokerages and customers, et cetera.
Speaker 2:Yeah, there's two things. One is that, like I had this happen recently too, and so what's pretty common in our industry is for a shipper to withhold, honestly, payment until a claim is resolved. It's not above board, it's not ethical.
Speaker 2:And I'm not a lawyer, but they definitely still owe that money and if you took them to court they would have to pay it, right. But basically what happens is like, hey, your customer tends to always owe you, just say like a hundred grand in receivables, and at the end of the month they pay it, but you've run up more invoices, so there's just always outstanding, right. But then you have a claim Well, a shipper, right. So the situation that I saw recently with, like, a client reached out to us same thing, and I was like we dug in, looked at their Antonio report and we could see exactly what was at like 90 some days and it was like a hundred grand, but the rest of their accounts were good, but their credit rating fell because they owed so much money for so long. And same thing the first thing you did was we told the broker hey, reach out to your customer and see if you can get some more information on this. Like, there's probably an explanation if there isn't, but we just need to learn more first. And what we learned was there was a large claim it was like three months ago and they were withholding payment to make sure the claim got resolved and they got reimbursed a hundred grand that was lost because I think the driver got into an accident or whatever. It was like a total loss in the claim. So, like the company's out a hundred grand, they want to make sure that they get repaid and the only leverage they really have is either to pull all their business, which they don't want to do, or they can hold some of the payments and that screws up their credit rating. And now you end up with a situation where, like they couldn't factor this customer because the factoring company didn't want to approve it. But once we got the explanation, they were able to provide it to the factoring company and the factoring company made an exception once they understood it Right. And again, I know a lot of this is automated, but in many cases, if you have the conversation, you can find a resolution.
Speaker 2:And in some scenarios, even if you can't and let's just say the factoring company still says no, if you use a factoring company that allows you it's not exclusive, meaning you could self-fund some customers and factor some other ones, like Hall Pay or Comfreight is one that allows you to do that Then you can just choose to factor the ones that your factoring company isn't willing to lend credit to. I mean it's the same as anything else. It's like a bank not willing to lend credit, and a lot of the large factoring companies are banks. It's exactly the same. They just can't get a loan for their receivables, which affects you, the broker. If you've got the cash and you still want to work with them, great. But also there are things you can probably do to your point. If you go back to the factoring company and say, hey, can you give me some more details on why this customer wasn't approved. Sometimes you can lower the amount. So maybe you requested $50,000 or $100,000. They go look, we're not comfortable, we have no pay history on them.
Speaker 1:Maybe you can get a lower Submit your own data. If he's been, if he's been self-funding them, report it Report that stuff that you have.
Speaker 2:You have literal verification of their payment terms with you. Send that to them, see if that helps. Now to go one step further, if none of those things still help, resolve it. Right the thing and I'm going to switch topic a little bit like for brokers to increase your credit rating. One of the things I learned literally last week was if you pay a carrier in like one to three days or even five days as a quick pay and a lot of new brokers do that to help the carrier work with them because they don't have the credit the problem is they don't get reported. They only really get reported to the credit agencies if they're around 21 days. So what?
Speaker 2:The factoring companies we talked to because we asked them about this, like, hey, how does the reporting work? And they're like the sweet spot is really you want to pay it 21 days because it's less than 30, but it's long enough that they all get reported. That will build your credit history up faster as a broker, right? So there's three different factoring companies that kind of operate. Well, there's two real types, right? The brokers factoring for the shipper and the carriers factoring company. That needs to approve the broker, right, but they all function the same way. They're just like small banks or very large banks that lend money to either the trucking company or the brokerage until that person pays the bills.
Speaker 2:So you first want to understand why they're not and then dig a little deeper, ask more questions, present that information back to the factoring company, see if that helps. And then, just to your point, I would send over my history like hey. I would export all of this account info I have from QuickBooks and be like hey, here's their pay history with us. Can we get a smaller line approved? What else can we do? Because as you start to help report that, you're going to help your customer too. It's just another added benefit and they're going to be able to have better terms. Agreed.
Speaker 1:Interesting stuff. Next question this, I think, is a follow up to a previous one. I know realistically there's no way to know this, but how long, would you say roughly, should I expect to be not making any money when I first am starting out as a freight broker? So we responded to him and I told him we'd dig more into it. On this episode today, this one, it is impossible to know because there's so many variables that go into it. Right, yes, are you good at sales? Are you a good communicator? Are you putting in the work? Are you making the calls? Do you have a good, efficient way to get quality leads? There's just so much that goes into it. But I would say you came from a big box brokerage. What was that timeframe on average for a new sales rep? What did it look like between day one and when they're actually turning a profit?
Speaker 2:Okay, so general timeline out of 100 people, I would say somewhere between 90 and 95 outright. Don't make it.
Speaker 1:Literally don't After two years, right, I think it's like so they might've made, some of them might've had a little success, but ultimately really like single digit percentage are really going to succeed Into the next few years, yes, but beyond that, like your first few months, you're really just working underneath somebody to learn the ins and outs of how the industry works, right.
Speaker 2:So it's like how loads are moved, how to use a TMS and those tools. Then you jump into prospecting. So you're expected to be moving profitable freight inside of six months, probably not at break even yet. Because they're paying you a salary, right. You're getting roughly four grand or five grand a month. You should be moving about that amount of profit like very close to break even for what you get paid on a monthly basis by probably like six to eight months Around. There is the expectation you're at least bringing in your monthly salary and profit to the company and then you know it takes you a few more months to pay off. Basically your draw what you've been paid that you haven't paid back. Draws aren't as common anymore, but that's kind of how it used to work If you were trying to start this on your own, the thing.
Speaker 2:That's why we always advise like you want to learn as much as you can from everyone you can, as quickly as possible. That's what's going to speed that up and make it more likely you succeed. So in my opinion, I think you should probably work underneath even an agent or somebody that knows how to do this, or work with them. See if you can work with somebody that is doing this all day, because if you can have a mentor right and you work on a lower commission split, they're going to get a piece of your business in order to train you right. That's the trade-off. You'll earn less in the short run, but your likelihood of success, in my opinion, goes way up.
Speaker 2:And to me, I think you should look at, like the first six months in any business, specifically this not trying to make money, which sounds silly, but trying to learn, Because if you can learn a ton and make a bunch of mistakes, even if you're not really making enough money yet to survive, from that point forward you will get there much quicker.
Speaker 2:But again, not everybody has that ability to just not make money for four to six months, right? So the real truth is you should probably have another source of income or be able to do this in a way where you're learning or have money saved, because it's it's impossible to predict. It's impossible for me to predict this myself, right? Like I teach this work with clients all day have been dealing it for a decade. And if you said how long would it take me to go from zero and call customers that I didn't have relationships with, to start from scratch? Like it could take me a month. It could take me three months, and it's taken a week sometimes for me to build a new book of business. It's taken me three months or four months to build a book of business.
Speaker 1:The market's a big part of it too. Think about like three years ago. Man, you make a phone call and an hour. Yeah, and I did add this in my response to him as like and and I don't necessarily think this is a bad way to go about it, but you know we could. I wish we would do this on a show live one day. You can call a lot of these building material companies and they'll just put you on their load list. Sure, yeah, we send out our loads every morning, every lumber company.
Speaker 1:Yeah, every lumber company stone brick literally all of them. And that might not be a bad way, at least for some of your time is to understand how the quoting and the competitiveness for that jump ball freight. You know how that is, but spend a lot more time prospecting more valuable customers so you can get a customer day one. But are you going to actually make money and move their freight?
Speaker 2:And then you've got to improve on your negotiation skills to find the right fit and the right carriers for the right lane to be able to make that work. But yeah, great advice Call every lumber company, call every cinder block company, every company that ships nails, everything that's a commodity that's on like load lists You'll get loads offered to you faster. You still got to put the work in to find the right carrier for the right load on the right day at the right price.
Speaker 1:So I'm more in the sales management side now, but we've had folks that come to us as agents at Pierce, where it's non-solicit, or they took a year off from a non-compete whatever and they get back in and they're starting from scratch. And these are seasoned, trained freight brokers who have done it before and it's still. It can take six to eight weeks before they're like hey, I got something here that I'm able to turn on. This is good. So, figure, you know that timeline and probably double it, if not more, if you're brand new and don't have the experience.
Speaker 1:And I like, how you said, have a mentor, because it's extremely helpful to have you. It's not that they're smarter than you they might be and they likely are but it's not because just that it's having another perspective, right, because you have your thinking traps and you might think, oh, this is great, I talked to this guy, it's great. Then you talk to your mentor and they're like you're talking to the wrong person over there, like that person's talking, you're having a great conversation, but they're not the one that's going to onboard you Like, right.
Speaker 2:So we've all done that Like. I've learned from that and have literally done that. Like I remember the first couple of prospects there was one or two I talked to for two or three months had the best rapport. I was so excited and then I found out they shipped like one load every other week and I was like, oh great, I just spent six hours over a month and a half to build rapport with somebody that has not enough business for them to ever be valuable.
Speaker 1:Yep, all right. Next question let's see. So this was about back soliciting as a carrier to try and this actually might have been the same guy, if I remember correctly. But he said just to follow up on my question can I later reach out to a shipper after a load is dropped off and it's been a few months down the road and I'm no longer driving for that company or am I not allowed to contact any of the hundreds of companies that I've picked up from over the last three years ever? Because then in the future I could call a company I've picked up at before not remembering and would I have issues? So basically he said can I?
Speaker 1:Someone said I'm working in the trucking side and I want to prospect business as a broker. Can I just prospect my existing places that I'm loading out of? And we said well, typically no, because you have a no back solicitation clause in your carrier agreement with the brokerage that you're working, uh or contracted with. Um brings up a good point how long? Well, there's usually a clause in there that states exactly how long, and usually it might be six months, 12 months, 24 months. Just look at it, it's usually about a year, though. Um, it's not forever right, that's just not realistic. Um, but yeah, about a year. Just look at the carrier broker contract you've gotten. Do you know what yours has been? I want to say ours is a year. I can't remember.
Speaker 1:Yeah, it seems about right, but there's your short answer on that one. Last one what are the signs of double brokering to look out for man? We've got so much content on this but I want to rattle some off here. We did it. We actually did a two part series video series on this um earlier this year, I think in may or June. Um, if the price is too good to be true, probably yes, meaning profit seems too high in the load, carriers offering way too low of a rate. Um, and it's a sign, it's a red flag. Other things that like in this. All these are like highway insights no inspection history. They don't have any trucks registered. They have. They're on a do not use list. They've been reported of double brokering. The if they sound like they're calling from a call center in a foreign country doesn't always mean it's double brokerage, but that's a telltale sign. If they can't tell you the truck and trailer number, that's going to show up. What else? I rattled off a bunch there, but what are some other warning signs?
Speaker 2:I mean most of the warning signs I see through vetting software, because anybody I talk to, the first question on my mouth is what's your MC? I'm immediately putting it into Highway RMIS and I'm looking at the TIA Watchdog or 411, and I'm looking at all three as I'm talking to them. That's how I'm going to usually find it, in addition to what you just said. So I'm going to look there and then if the phone number they're calling me from doesn't match the verified phone number, then I'm going to look there and then if the phone number they're calling me from doesn't match the verified phone number, right, then I'm going to.
Speaker 2:After I get off the phone, I call the verified phone number and see if I can get to the same person. If I can't, then I know it wasn't really them, right. Does it match the one in the software vetting tool you're using? Or just look at the FMCSA, because that's free and you can at least see if that company has a domain that they probably are using. Or again, I call that phone number to check and see if the person calling me, if I can get to them, and I'll ask like hey, is Marco there? Hey, is Patricia there, hey is whoever, and if they don't know who you're talking about, okay, well, I got a pretty good idea. That wasn't who they were supposed, to be right Carriers do the same thing.
Speaker 1:I get calls all the time from carriers saying, hey, I was offered this load, just want to make sure it's legitimate from one of your brokers. And there's been a lot of calls where I'm like that is not our load and I'm like can you share the rate confirmation that was sent to you? That way we can make sure it's known throughout the company and we can let all of our carriers know.
Speaker 2:And that's the thing I want to stress the most. I am a huge advocate and trying to say this to everybody I talk to on the motor carrier side. Motor carriers should be vetting brokers in the same way. Brokers are vetting motor carriers, right? Every motor carrier I talk to, I'm like if you are running a load for a new company that you haven't moved one for yet and it's a new broker, right, you should be doing the exact same things we're talking about the other way.
Speaker 2:Go to the FMCSA, call the listed phone number for that brokerage, right. Look to see if the name matches what's in the FMCSA letter by letter, right? Yep? Look to see if the email they sent it from is it a Gmail or is it the domain listed in the FMCSA. But a short phone call will eliminate 99% of these. It's just nobody wants to take the time to do it. If I'm a motor carrier, I am doing this on every load from every new company I work with until I can verify that that's them and who I'm doing business with. Yep, exactly, if all of us do this, they're going to have a lot harder time stealing things. If we get more carriers and brokers all verifying that we're working with the people. We think we are right. It's going to make it so much harder for people to steal from all of us and make everything harder in our industry to function right. It's one of the things pretty low effort that all of us can do that makes this a lot harder for people to steal from us 100% Good questions.
Speaker 1:Keep sending them in. We'll keep answering them.
Speaker 2:Final thoughts Ben Whether you believe, you can or believe.