Auto Shipping, Sales Tactics, Leased-On Drivers, & More | Final Mile 53

Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

• Car Hauling
• Leverage When Booking Loads
• Leaving Voicemails
• Capital Requirements for Freight Brokers
• Leased-On Drivers

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Transcript

Speaker 1: 0:19

Welcome back for another edition of the final mile where we answer your questions. We've got like five today. I'm excited to answer all of these, but please take a moment to check out the sponsors in the description box. We've got Quickscope, levity, bluebook, and DAT helps support this channel, and these are trusted products and services that we use ourselves. Additionally, make sure to check out the Freight Broker Basics course at Freight360.net, along with all of our other content to help you learn as much as possible about freight brokering. All right, ben, we'll get ready to our questions. Today We've got a handful from see. We got YouTube comments, we got our Facebook group and through email.

Speaker 1: 1:02

So first one asks how does the auto shipping niche work? I'll keep this very, very simple and basic. There's kind of two ways that people work in the auto hauling business. One is individual cars getting moved and they might consolidate them, and the other is typically like dealerships and rental car companies, things like that. But so if you're working with like dealerships, rental car companies, usually you're going to have an order for, you know, an entire trailer's worth of cars getting moved.

Speaker 1: 1:39

The personal vehicle niche is where a lot of people try to get involved, right, so they'll literally buy leads. Companies just have these websites set up, get a free quote to get your car shipped and people buy those leads. They might spend 20, 25 dollars per lead. They buy it, they call that person as a freight broker, arrange to get it shipped, and then they got to find someone who can haul that car, whether it's a hotshot, or maybe someone has an auto hauling trailer and they'll put a handful of cars on there. There's a web or there's a load board called Central Dispatch which is very commonly used in the auto hauling world. That's my, my rundown on auto shipping. What else would you add? Or did I miss anything?

Speaker 2: 2:26

No, you covered a lot of the basics. The thing I would say is right, there's two basically primary sources of customers. Right, you're either going to prospect dealerships small local companies like the car dealership on the corner of an intersection that has 25 cars on their lot all the way up to larger, larger ones all still use brokers a lot of the time, even like the very large auto sales companies, like the large dealerships, right From small to large. The other side is very dependent, like you said, on, like SEO and internet traffic. So it's either buying leads from a company that just is very effective at getting people. When they go to Google and say I need my car moved, they click that sponsored link. They sell those leads right to the brokers and then from there the industry operates very similar to freight brokerage. I mean it is freight brokerage but like a different load board, like you said. So instead of that it's central dispatch.

Speaker 2: 3:22

There's a second one that's really big and then all of the auto hauling carriers, basically just the trailers you see in the road that have a bunch of cars on them like kind of stacked, like they all operate in there. That's how you find them. They book that load, move the car for you and it works very similar to where you would move any shipment right. The thing I would say is something to be aware of that I've noticed we've had a few clients that do this and I've got a buddy of mine in South Florida that's been doing this for years and it's that a lot. We've seen a lot of this actually like where motor carriers double broker their loads to another motor carrier to haul it without insurance and make that margin. So just like we see double brokerage in our world it happened a lot in the auto hauling industry in the past few years.

Speaker 1: 4:13

Central dispatch is full of double brokerage. And then these people aren't intending to commit fraud. They don't have anything available, so they re-broker it to somebody else, and they're not supposed to be doing that, correct.

Speaker 2: 4:23

And then the thing we found, right, like we had a client that specialized in high-end cars in like Chicago, like Porsches and these high-end dealerships, and he would vet carriers, very similar to what we talked about on the show. He's a fan of the show, he's a client of ours, right, and he's like, listen, I would call my contact at the dealership and be like, hey, which MC showed up to move that Porsche, for instance? Right, and he's like, yeah, that's not the MC we booked. And then we would look it up, right, and they didn't have any insurance.

Speaker 2: 4:52

So it's like you're moving a $150,000 car you thought you booked with MC123456 that has the correct insurance. They send an MC5789, whatever, has zero insurance. They kept $150 or $200 margin to book the carrier without insurance because they're cheaper, because they don't pay insurance. But the car was literally being moved without insurance, right, and you think about that. I mean, like some of these can be really high dollar amounts. So even if you are in that side of things, it's really important that you use something like Quickscope, I think, to verify and vet that the carrier you're using is the one that's picking up that load, because you certainly do not want to be moving somebody's car uninsured, and the same way you don't want to move a shipper's cargo with a carrier that doesn't have cargo insurance. Agreed.

Speaker 1: 5:38

All right. Next up, does a freight broker making a phone call to a carrier give the carrier more negotiating power versus the carrier making the phone call, which would give the broker more power? Great question, yeah, but let's explain why the answer is yes. Ok, it's you think about if I'm the one picking up the phone to call somebody? They, they have what I want. Somebody, they have what I want right, which immediately puts them in a position of strength for negotiating. For example, as this question states, if I'm a freight broker and I'm calling a carrier they have a truck, they know I want their truck, hence I'm calling them they know they have the power. If I have a load posted and a carrier calls me, I have what they want a load, right, they need a load, they want a load in this location of wherever it's picking up or delivering to, I'm going to have that negotiating power. So keep that in mind when you're working on covering freight or dealing with inbound calls is, if you receive a call, you typically are going to have the power.

Speaker 1: 6:43

Like, I was helping a guy move freight last week and I probably got five calls in, I don't know two minutes and very quickly. Like you know, I knew how much money I had in the load. The first carrier asked me for like $200 more and I was like no, like sorry, that's. You know, I'm not even going to continue this conversation now with you, because we're just not in the same ballpark. And you get another call and another call and you realize clearly this is a desirable load for enough people. I've got the negotiating power. I don't have a book in the load for 50 bucks less than the target. So yeah, that's so. That's why it's clearly the whoever whoever you're calling, whoever's being called, has what the other person wants, and that is exactly why they're negotiating. Power moves like that.

Speaker 2: 7:34

Yeah, there's also right, A principle in like negotiation whoever speaks first tends to have a disadvantage to the other person. Right, Just like you said, because and it's really simple, because whoever speaks first tends to provide information. But yet they haven't learned anything about what the other side needs, wants or is trying to get right, so that creates the disadvantage. Just like you said, the simple act of somebody calling you is information. They reached out. I know they've got a truck and they need this load. So, like they need something I have and I haven't said anything. The same thing is when you get into the conversation. That's why you'll hear it Like, especially like the very call, like the hustle boiler room brokers, Like, if you hear them covering loads, you'll hear when they're talking to a truck they're like hey, what do you need for that truck?

Speaker 2: 8:20

And then a good dispatcher is like what are you paying on the load? And the broker doesn't want to say that first, right, and neither does the dispatcher. So what do you need for your truck? Man, it's your truck. You tell me what you need for this load. Man, it's your load, you know what you got in it. You tell me how much money you want to pay two grand and they start at three. Okay, that starts the negotiation at three grand. Even if you only have two grand in the load, you got to bring them back down. So there are a lot of nuances that I think help you get more effective at negotiating over time, and I tend to see it's about a five to 10% difference between calling out and getting a phone call in and what you end up paying at the end of the day.

Speaker 1: 10:15

Yep, exactly. One last thing I'll add to that is know where the market's at right. Have some sort of tool Like I use RateView a lot from DAT, you'll at least know. Again, it's not going to mean because RateView says $1,600 that you should be booking it for $1,600. It's telling you right now here's where the market's at on average within this region and you could have some variance off that. But at least it gives you a ballpark range.

Speaker 1: 10:45

All right, next up, what are your thoughts on the effectiveness of leaving a voicemail when the voicemail is the furthest you're getting? Is it beneficial or can it be damaging to your chances of generating a lead with the shipper? What do you? What are you including in the message? What are you leaving out? Um? So I I'll give you my personal opinion on it. If you have not talked to this person yet, I I say don't leave a voicemail, just call them back another time. Um, this was on our facebook group and some people like we're we're very big fans of leaving the voicemail if you're. So what we're saying is you're calling a shipper. You never talk to them, um, do you Ben? What's your opinion? Steven says he leaves a voicemail every single time. What's your take?

Speaker 2: 11:36

on it. Here's the thing when I was first in sales training and I was doing more business to consumer so calling people as opposed to companies right the one thing I learned is the only objective when leaving a voicemail right is to get them to call you back. It's not to inform them, it's not to explain them. It's not to explain them. It's not to teach them something. People would leave voicemails especially new salespeople that are like three minutes long explaining all of these things they're trying to sell you on the voicemail.

Speaker 2: 12:03

Sell them through voicemail, right Like they're not even listening to that shit, let alone paying attention or ever calling you back, right? So what we got really good at was leaving voicemails that could get somebody to call back, and most of that is usually sounding urgent, being vague enough that somebody wants to call you back and creating some curiosity, right. So like, my voicemails would sound like hey, you know what? Hey, nate, give me a buzz back when you get a chance 412-491,. You know what I mean and I would just drop my number. Right, and you could get a lot of people to call back, mostly because it sounds like they need to. But also, if you do that too much, people just get irritated when they call you back and they realize it was a sales call Like, dude, what?

Speaker 2: 12:45

So my preference now is unless I've spoken to them, I'm not leaving a voicemail. I will typically send a follow up to let them know I tried to reach. Like, if I've tried to reach somebody two or three times and someone else in their company told me I need to speak to Rob in shipping, for example, right Like, I'll call Rob a different time of day, a different day of the week, three or four times to just see if I can reach him before I do anything else. Then I'll usually send an email like hey, rob tried to reach you a couple of times, didn't want to leave you a VM. Thought, it would be easier if you could just shoot me an email when you might be free. Something very simple, because what I want to do is make it easier for him to respond.

Speaker 2: 13:22

I don't nobody likes listening to voicemails. I don't even like listening to my own voicemails. When people leave them, I'm like dude, just what do you need? Just tell me like if you, you can send that in an email. So if it's somebody I've already talked to, for sure and they're always brief hey, we're just reaching out, jimmy I and it's usually a service thing It'll be like hey, I called you Cause you asked me for a quote. And if you didn't pick up, I'll be like hey, we're just giving you a buzz back. I just saw your quote.

Speaker 3: 13:56

Right, that's about the only time I'm really using voicemail. Yep, I'm curious, steven, what do you say in your voicemails? Uh, yeah, it's usually one minute, it's just a oh man, sorry I missed you, but I always leave it with. I just wanted to learn more about x, y or z, because usually the people that call me back are people that want to talk about whatever it is that I'm asking about a good point, and those are the people I want to talk about. Whatever it is that I'm asking about Good point, and those are the people I want to talk to anyways. Yep, and now, if those people listen to this, they're going to be like oh, that's why he did that Good deal.

Speaker 1: 14:26

All right. Our next question I'm almost done with my freight broker training, but I have an important question how much capital should a new broker have set aside after initial startup costs? So we're talking about just so everything's been paid for to get started up, but how much liquid capital do you need to have to operate? Don't have? I mean, this could take a long time to answer, but I'll give you the basic right. It depends Are you factoring with a factoring company?

Speaker 1: 14:59

Are you going to cash flow? If you're going to cash flow, you need enough money to float all of your payments that go out the door. We recommend a few months worth in retained earnings, like three months. You figure there's a gap between when you get paid and when you make payments to carriers and we've broken this down, ben, in different ways, but at a minimum you tend to have like a 20 to 30-day spread on that gap between when you receive funds and when the money's already been paid out to the carrier. So to account for fluctuations and having a buffer, we usually say have a few months worth. If you're factoring, you literally need nothing because the factoring company is going to cash flow for you and pay your carriers for you and they just take a fee out of it. But cashflow is obviously the ideal way to get to because you're not paying a fee. What else would you add in here without getting-? I would just keep it simple.

Speaker 2: 16:04

I literally just did this with a company that was very well funded and even though they had the ability, it is incredibly difficult to predict how many loads you'll get run, what you'll pay, what the load dollar amounts will be, how often and what that'll be in your first few months in business. So what I always recommend is, even if you have the money, factor it first for a month or two. One, because it helps you get someone else vetting your customers. They're giving you the credit line and also you can start to see their payment history and what they actually give you. Even if a company says they're going to give you a certain amount of loads per week, it usually doesn't just start all in one week. You get a few here, then it builds up. It is next to impossible to guess correctly what that number is. So you either end up with a whole bunch of cash in an account not earning interest you don't need it to be or you don't have enough and you got to go and liquidate things. So for me, I think it makes far more sense to factor. It also makes it easier for the startup, because that's one other thing you don't need to do to be responsible for. You know that the invoices are going out. It's going to help you with your credit rating anyway because you know they'll be reported when you pay the carriers. They go directly to the credit rating agencies and then, once you've got a month or two under your belt as long as you use the factoring company, that's non-exclusive you can just start self-funding your loads from that point and go okay, my first two months we had this amount of credit extended to the customer. They paid in 35 days. Second month they paid 35 days. Paid all of it, no issue.

Speaker 2: 17:35

Now you can start introducing your cash, like to me, the goal is profitability, obviously, and to keep as much of your money as you can. But you don't start where you want to finish. You take the steps to get there. So it's like work to get the credit, work to get more insight and pay terms with your customers, get some personal experience with how they pay your company. Once you have a month or two under your belt, then transition to increasing your margins by literally not paying the factoring fee and introducing your own capital. And to me it mitigates a lot of the risk, the chaos, the work, and it also doesn't really cost that much to factor for a month or two. In the bigger scheme of things maybe even a whole quarter of a year. You'll get better pay terms, better carrier terms, better credit reporting, and you're not going to be paying I mean, you're paying factoring every month. It gets really expensive when you take that out over a year, but it's pretty negligible if you're doing it temporarily and you can work in your own capital.

Speaker 1: 18:36

Not a bad piece of advice there. I didn't think about it that way Kind of gives you like a little bit of a set of training wheels when you get started off, exactly Cool. Well, we had a question come in email this morning. Go ahead and read this one off. This is a good one.

Speaker 2: 18:51

So we haul frack sand in the oil and gas industry and it is common for operators to broker the load to a carrier and then that carrier to another carrier with their MC to haul the load under the original carrier's MC. Is there a legal way to do this? And then they provide an example US Wells owns Sandbox. Technically, us Silica brokers the loads to Sandbox. There are several companies that have contracts with Sandbox to haul the sand. Some of the carriers will contract with them, bring on a contractor and allow them to run their own authority with a sticker that says leased to and the carrier's name that holds the contract. The question is this sounds like double brokering. Could a co-brokerage agreement work in this scenario? So there's two questions. Let's address the first one.

Speaker 1: 19:46

Yeah, yeah so, um, if they're leasing, you can legally lease on. Totally, you could definitely do that. The way that it works is if, let's pretend, me and you are carriers, ben we, I have an MC, you have an MC, it's all good. But you have this great contract and I want to run some of those lanes so I can run certain freight myself under my MC. And then, if I want to take part in some of the business that you have that you're awarded, I can additionally lease on to you. But if I'm going to be leased on to you, it's going to be contracted. I'm going to have the correct placards on the side of my truck that state that I'm representing your company and your authority. The insurance needs to be taken care of, so typically your insurance would have me scheduled on it or, if I'm carrying my own insurance, you would then have to be listed as like additional insured. Basically, the correct way to do it which not a lot of people do would be for you to have me insured and me to have placards on the side of my truck that have me representing your company when I'm hauling for your company.

Speaker 1: 20:57

People get lazy. They don't actually do a contract, they just say you're leased on and they kind of, like you know, backdoor pay each other. That's illegal brokerage. You can't do that. So that's your first answer. Leased on, yes, you can do, if you do it properly. What's the next question?

Speaker 2: 21:17

A co-brokerage agreement in this situation. So you wouldn't need a co-brokerage between the carrier and the leased on driver Because, to your point, the way that is done is with a leased on agreement and the leased on driver operates under the main MC that has that contract's insurance. That's the important piece the agreement and the insurance is being covered. The co-brokerage would fall in, and I'm not really sure in the example exactly it wouldn't work.

Speaker 1: 21:46

Yeah, sandbox Broker to broker. This is carrier to carrier, correct, and the contract is awarded to a certain carrier. That's who's got to show up, because they were awarded the contract.

Speaker 2: 21:54

Yeah, but there's probably a co-brokerage between US Silica and maybe.

Speaker 1: 22:01

Sandbox. I don't understand fully what that part is Correct, but in the case of like, so leased on drivers I think this was like leased on drivers are great, right, it's the same kind of concept as co-brokering, where you're leveraging other options to help take care of your customer, right, you're leveraging other options to help take care of your customer, right. Same thing that a truck company does. They're taking advantage of an opportunity to use an additional driver for some of their business that they otherwise wouldn't be able to do for their customer. You just have to do it the right way. Leased on situations also got exposed, right. Carriers are showing up wrong MC on the side of their truck. Why does he have that MC inside of his truck? Oh, he's leased on. He probably didn't have his placards on. Is he actually leased on? Can we see the insurance? We see the contract, the agreement? Yeah, I don't know where. That is Okay, so he's not leased on. You rebrokered it without the authority to do so. It's illegal.

Speaker 2: 23:14

And here's why that's a big issue, Like it's really common.

Speaker 1: 23:17

Insurance is probably the biggest part of it. Yes, and it's really common.

Speaker 2: 23:22

Like I have a client, it all of it. It's really common. Like I have a client, it's a trucking company in California and he said it's really become very common with California carriers for one really simple reason Like the market is low on the pay rates and they're trying to do whatever they can to just keep up and stay in business, a lot of them. So basically they can save money right by bringing a lease on driver and not having to pay that insurance bill for that owner op. So they can actually make a little bit of margin on the loads by sending basically an uninsured motor carrier in to pick up the load for them. And that's why when you look on highway it says you know equipment seen, not listed on auto. Like it's literally saying at some point we've seen this truck operating or this VIN number under this MC and they're not listed on their insurance policy. Like this is exactly what this is saying.

Speaker 1: 24:18

Typically, that's exactly what it is. Yeah, right, the the. The alternative thing there is um, let's say, I'm a carrier and I lease you on and I add you to my insurance, but I haven't. My insurance certificate has not, my new one has not been obtained by a highway yet. In that case, you know, if, like, if I tell I'm trying to think of the best way to explain the use case with highway and like you're right, like 99% of the time that's what's happening.

Speaker 1: 24:48

But there is, like you know, there's the good guys that are doing things right that will have that flag on highway. You know, equipment not listed on scheduled autos policy, and it's like, hey, looks like you were, you had a truck inspected that's not listed on the certificate we've got here. Are these guys listed on there now? If so, can you please get that? Have your agent send that over to highway so it's listed? Um, because we're not showing it currently. Yeah, and that's like you know, that's the minority. One percent of the time, nine percent of the time, they don't have the truck insured because they're not actually not, because they're double procuring.

Speaker 2: 25:23

Same thing we were talking about earlier in relation to the auto hauling industry. That's how and why they're doing that. They're using another carrier doesn't have the insurance or as much insurance. They're cheaper. They get to keep some of the money. They don't think anyone's going to notice and just hope that there's not a claim.

Speaker 3: 25:41

Exactly.

Speaker 1: 25:42

Good questions.

Speaker 2: 25:45

Hopefully those answers help you guys out um final thoughts whether you believe you can or believe you can't, you're right and until next time go bills.