Freight 360

Rate Transparency & More Q&A | Final Mile 63

• Freight 360

Share episode

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


  • The current freight broker market
  • Rate transparency with carriers and brokers
  • Becoming a freight agent with no experience or customers
  • Carrier vetting solutions

Support Our Sponsors:
QuikSkope - Get a Free Trial: Click Here
Levity: Click Here
Bluebook Services: Click Here
DAT Freight & Analytics - Get 10% off your first year!
DAT Power - Brokers & Carriers: Click Here
DAT Express - Brokers: Click Here
Truckers Edge - Carriers: Click Here

Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here

Speaker 1:

Welcome back for another episode or edition of the Final Mile. This is the segment where we answer all of your questions, so continue to send them our way, whether it's a YouTube comment in our Facebook group, a direct email to us, info at Freight360.net or the contact form on our website, Freight360.net. And while you're there, check out all of our other content, including the Freight Broker Basics course for an educational option there. And please take a moment to check out the sponsors in the description box to help support this channel. That's Quickscope, Levity, Blue Book Services and DAT. All right, let's hop right in First question. Let's see how is the freight broker business doing for you as a broker or a carrier? Is it slow for you or has there been no change in your revenue? I love this question because a lot of times as brokers we operate very separated or segmented from the rest of our competitors in the industry and we get aggregate data from sources like DAT and freight waves and things like that that help us see what the market's doing overall. But oftentimes when I talk to even an agent within our company, they're like how are the rest of the agents doing? Or I'll talk to another brokerage owner or a brokerage someone who's in leadership at another brokerage. We just kind of ask like, hey, what have you guys been seeing? And it's one of the reasons I love the TIA event in DC about a week or two ago and getting to just talk to other folks and get their feedback. And, Ben, I'm curious what you're seeing. I mean, you're in a very different stage in the brokerage that you've helped launch this year. But I will tell you that with Pierce Worldwide we had in 2024, we've had two record months for the company this year alone. We had one last year that was the highest I've ever seen, profit wise, and we've had two this year that have both exceeded that record month from last year. So, and you get some slow months too.

Speaker 1:

What I will tell you is the like, as far as rates go and all that, it has felt fairly flat across the board for like a year, if not well over a year. So the growth has really come from a mix of prospecting new business and injecting new business through the acquisition of an agent. Right, you bring someone in who's already got a book of business. So, whether you're going to hire a W-2 that's got a book of business already or you're going to contract an agent who's got a book of business already, or if you're a small brokerage that's going to buy another brokerage. That's another way to obviously grow, but there is opportunity just to grow organically through a new customer.

Speaker 1:

So we're probably kind of like an oddball in that scenario where we've seen significant growth since the market's been soft and the good thing there is, if you can grow or even like even slowly grow or maintain during a down market, you're going to pay, it's going to pay dividends when the market is in its alternative state, which is a more of a tight capacity, increased rates, more demand to ship, things like that. So that's what we're seeing. But again, a lot of effort and a lot of hard work and time goes into being able to see and sustain that growth when the deck is legitimately stacked against you. So, man, what do you see? And I mean because you've, through coaching of clients, through helping launch a new brokerage this year, what have you seen overall?

Speaker 2:

helping launch a new brokerage this year. What have you seen? Overall, I get to see like a pretty wide spectrum of what others are doing, which is, to be honest, one of the main reasons why I wanted to start this with you years ago is because when you leave a large company and you can just pick up a phone to see or look in a system to see someone else's book and how they're doing, you don't have that as a small business owner or operating as like an agent, right? So one of the biggest benefits I get is exactly what you said visibility into what others are experiencing, right, the good and the bad. And I would say that, like the companies that are doing literally what we talk about in the show consistently prospecting, increasing prospecting efforts, number of calls, number of follow-ups, spending more time fostering relationships the sales cycle is longer, for sure, but they're absolutely growing. The ones that aren't working harder in the down market, they aren't. Like Steven just put up in his notes. Steven's up $90,000 in gross margin this year. He's down 3% in total margin. So his average margin went from probably 15% to 12%, but he added $90,000 in additional profit dollars to his book of business this year, doing the stuff we talk about. I've got one or two clients one that has grown 150% this year doing exactly what we talk about.

Speaker 2:

Right, Like adding salespeople, making sure they're trained, giving them the right tools and helping hold them accountable to making the calls and bring in the customers. Right, Like there's for sure growth out there, Like our brokerages is adding customers. We're doing those things. Again, if you're not going to be picking up the phone and prospecting just when it's hard, then like you're going to suffer even to a larger extent. And I think a really good way to look at this is how some of the large brokerages look at both markets and this is really like their overall strategy. In a tight market where rates are higher and it's harder to find a truck, that's where they're looking for more margin. So they have the whole company focus on like are we making what we should for the loads we move In a down market, like we've been in for two years?

Speaker 2:

They look at how do you acquire the most customer relationships and just more freight. Like not trying to make a lot of money on any one of them, but trying to just get more footholds in other customers, showing your service, building those relationships, because it's a circle, right Like, it is going to turn. It's turning slower than it normally does, but it will inevitably turn back to the way it did. And if you've got more customers working with you even if it's a couple loads a week or a month when that market shifts, you're going to be the first people they reach out to for help. Those are the opportunities for you to actually make some more money, because the work's harder and you're going to have to work harder. But those two things are always correlated.

Speaker 2:

Right Like, yeah, in a down market doesn't mean you can't grow. It just means it's harder and you have to work more. That's why the folks that succeed in a down market tend to succeed far more in the up markets. And some people can only survive in an up market and then literally can't survive at all in the down market. Right Like, you can't just look for the easier way out of it. Like, sometimes the answer is you have to work smarter and harder.

Speaker 1:

Yeah, mostly the answer. I don't think anybody thought we'd still be where we are heading into Q4 of 2024. Like it is, it is tough, but hey, we always say it Like, if you can be that I don't like to call it the better half, but if if you were to say hey and that I don't like to call it the better half, but if you were to say hey, here's the 50th percentile of brokers, be in that top percentile of you're doing the things that the average broker isn't doing. You're making more calls than the average broker. You're making more introductions to carriers than the average broker. Those are the things that will set you apart.

Speaker 2:

And they add up over time. Right Like, you don't have to beat yourself up and work 14 hours a day until you burn out. Right Like, make a couple more phone calls, have a couple more conversations every day. Right, spend a little more time asking a few more questions to both shippers and to your carriers. Ask your carriers where they would like to need more freight at, then turn around and try to find some more shippers that are in that area. Right Like, just spending a little more time and just I don't even want to say like working harder, just doing that extra few things every day over the course of a year. That is a lot more conversations. Right, make five more calls a day. That's an average of like an extra 1500 to 2000 a year.

Speaker 2:

Right Like, you got to be in it for the long haul. Like it's a marathon, it's not a sprint. Just beating yourself up and not sleeping to try to work 14 hours a day isn't sustainable either. Right, but you can do a little bit more every day and eventually you're going to start surpassing the competitors that aren't willing to do that. They want to hang it up at 4.30 or 4.55 or five o'clock. You stay till 5.30 every day that eventually starts adding up. Those are little investments in this company. You invest in time and effort and hopefully you get back money to be able to support yourself.

Speaker 1:

Yep, all right. Next question this is a comment from YouTube. This was regarding CFR 371.3C, that is your rate transparency regulation stating that brokers need to a carrier can request. What do you got?

Speaker 2:

Is POS literally the acronym after it, or did they put that in there?

Speaker 1:

they, no, they. They literally started the comment with pos like you.

Speaker 2:

Piece of shit that's literally okay because they even made it seem like it was part of 371.3c and I was like, yeah, pos is a pretty good acronym for that.

Speaker 1:

We did a video on rate transparency and why that regulation is very it's. It's over 40 years old and it's outdated. It needs a revamp. So the comment was POS like piece of crap, right. Pos, so easy to propose when you're negotiating with all the data and time in the world while sitting pretty in the office. Meanwhile we, the motor carriers, owner operators, are negotiating in the blind. It doesn't take a rocket scientist to see that slowly but surely, these bastards are rigging the game to the point that it's unsurvivable to operate in the industry. I have so many questions so this wasn't necessarily a question. It was more of a comment on our video that I wanted to address. I'll be, I'll be nice and fair here and I appreciate any feedback from any of our listeners or audience, whether it's good or bad or indifferent, because it's engagement and it helps us get perspective on what people are seeing and thinking. And this is I will say that to give this audience member the benefit of the doubt he or she probably is misinformed on a variety of things here. So the CFR 371.3C the reason that brokers are lobbying to have a change to it is because we don't operate in the same environment that we used to.

Speaker 1:

When deregulation happened in 1980, brokers worked off of a commission from the motor carrier. So we would find a carrier freight. The carrier would pay us a commission off of whatever that freight rate was. So we needed transparency so we could both understand that, hey, this load was $1,000. We're getting a, let's say, 5% or 10% commission on it. We can calculate that commission and there's open books right. Very quickly.

Speaker 1:

After deregulation it became a two transaction environment where no longer was the carrier being paid directly and then paying us commission. We as brokers began invoicing customers directly and then had a second transaction of then paying the truck and the difference is our margin. So when you move to a transaction, a two transaction system, now having that rate, transparency becomes unnecessary and outdated and it's us opening our books up to our motor carriers who could potentially back solicit our customers. It's also in violation of a lot of our customers' contracts that state we can't be disclosing whatever their rate is to other folks in the industry. So we're sitting pretty in our office negotiating with all the data. We're the sales force for the majority of owner operators. That's just the reality. No one is stopping an owner operator from going to some business directly themselves.

Speaker 1:

They are more than happy or more than able to do that and they're welcome to do that. The reality is we become the source of freight for a lot of smaller trucking companies and owner-operators that otherwise don't have the time and ability to do this themselves. We're not gouging. If you look at the average freight broker margins that are reported for years and years and years, they haven't really changed. They tend to fall in that 15% area than they have since I've been in this industry. Some folks are higher, some are less. It just depends on a lot of different factors. But we're not rigging anything. And the unsurvivability it's like if you look at people are saying it's unsurvivable because rates are so low, which means profits are so low.

Speaker 1:

Capitalism does something by design that weeds out unhealthy businesses and it keeps everything fresh. And it might sound cynical, but that's just the way that things happen. It's free market. It's free market If a carrier is willing to take a load for a lesser amount. It then forces his or her competition to also do so. The same goes for us as brokers, taking freight for less than our competitors with a shipper. And ultimately, if it's supply and demand, if there's a lot of supply of truck capacity out there and the demand to ship on that capacity, it's less right. You're naturally going to have prices contract and we're in a margin-based business as brokers. So if we even just maintain our margin, we're still making less too, and carriers are making less because the rates are down.

Speaker 1:

No one complained about this in 2021, when rates were through the roof. Who paid the price was the end user the consumer because the shippers' prices went up, but I wanted to at least address that. I think that just a misinformed audience member. Motor carriers have the ability to get the same data that we have. We tend to spend the money to get data that they might not have, and we have customer relationships that they may not have. So appreciate the feedback and the comment. I think it's a misinformed statement, though.

Speaker 2:

Well, there's two things right. Carriers are not excluded from any of the rating tools. They have access to literally the same things we do and can see the exact same information we have and the same information we use to price things. So I feel like if you don't have an insight into where rates are, you absolutely could, and it's by choice that you don't, for whatever that reason is, because it's not like, it's not available.

Speaker 2:

The second thing is like I've always thought about this too is like if all of the motor carriers in the entire country all were able to bind themselves together in some way and say, listen, we are not going to accept any loads that are less than $2.10 a mile, because this is what it costs to manage our business, nothing would move unless everyone paid that at a minimum. The only reason anyone is able to pay lower than what all the motor carriers want is because, to your point, another motor carrier is willing to run cheaper, right, and I know that's a very simplification of a very complex system and how this works, but the reality is is it's probably the best way to explain it, though it really is pretty simple Like if there's 10 trucks in a city and all 10 of them aren't willing to move for less than 250 a mile, cargo will not move out of that city until either another truck comes in and is willing to do it for less or people pay what they're asking. It's supply and demand. If carriers keep taking rates that are lower and again, I know they don't all have choices I know it's far more complex in a practical scenario, but it also is kind of that simple.

Speaker 2:

If other carriers aren't underbidding you, that wouldn't drive the rates down. No matter what shippers want to do, shippers put bids out. That's how they do this. Rates fall because some other carriers are underbidding others and then the shippers go with the lower ones and then the ones that were higher don't get that, and then they do that over and over again. If everybody could theoretically hold that line, from the carrier perspective, even if you eliminate brokers in the middle, rates would have a floor, because shippers don't have a choice. They can't just wait indefinitely to move a load. Things have to go.

Speaker 1:

Yeah, we had Ken Adamo from DAT like just a straightforward, objective statement that large and mega carriers who made a lot of money in the post-COVID shutdown years retained a lot of those profits to sustain them when the inevitable market shift hit.

Speaker 1:

So now that rates are low. The carriers that are getting all the freight and maybe taking that at a loss are those carriers that manage their money wisely when they made a lot of money and they are willing to take it at a loss to, you know, to keep their trucks moving, to make whatever money they can make. And other carriers who are their competition, could be a smaller, could be an owner operator, could be a small fleet. They're not financially set to be able to operate in this market. Well, that's one of the things that comes with free market is that those who can manage a downtime are going to survive and those who aren't, naturally will dissolve when the tide goes out, if you want to put it that way. So this is what happens. A lot of people came in not knowing how to run a business and made a lot of money for a short amount of time in 2020 and 2021. And it doesn't last forever.

Speaker 2:

And it's also not specific to our industry. This happens in every industry in the entire country. In free market capitalism there's lots of very large companies that were making lots of money when interest rates were zero.

Speaker 1:

Didn't keep any cash on hand when everyone's selling houses.

Speaker 2:

Look at all of the commercial real estate market, right Like how many companies and developers bought big skyscrapers, spent a bunch of money to redevelop them and then interest rents were made up and now they can't cash for the properties and they're handing them back to the banks, like again. Like it is a little more complex in some ways. In some ways it's kind of fundamentally simple, right Like.

Speaker 1:

Exactly All right. Next question regarding getting started in the industry Everywhere I've applied, they need a book of business, no problem with that, but need any brokerage linked with to make contracts and onboard shippers. Perfectly fine as 1099 commission on revenue I provide. I'm very confused about this question. Am I reading this wrong? They need a book of business, which is fine, but need a brokerage linked with to make contracts and onboard shippers. Perfectly fine as 1099 commission on revenue I provide. Can you mention any companies giving chances to newbies? Okay, so I think the question is a lot of companies that want 1099 agents want. The reality is they want an experienced broker that has a book of business. So this person is basically saying OK, is there any companies out there giving a chance to newbies? That's the question I'm going to answer, at least because I don't know. Or they have a book of business that won't transfer, as Stephen might have mentioned in the notes here.

Speaker 1:

Yes, there's an opportunity. I will tell you this. I run an agent division for a mid-cap brokerage and we're very similar. We're going to want you to have experience. We're going to let you have a book of business, with a couple of exceptions to policy there, the majority of the companies like ours are going to operate the same way. That's the business model. Don't forget, there are 20,000, 30,000 licensed brokerages out there. Not all of them run the same model that my company does or another agent-based company does.

Speaker 1:

One of the things I recommend often is if you're new and you want to get into brokerage and you want to become an agent under somebody, we have a Facebook networking group with almost 100,000 folks in it from brokerage and carriers and all that good stuff. Almost every day there's a post in there of somebody saying I'm looking to work for somebody. Or there's a post in there of someone hey, I'm looking for 1099s, I'll train you. That's one way to network and the reality is you have to go old school network, find someone who's going to give you an opportunity and assure them or convince them why you're worth taking a risk on rolling the dice on. But yes, we don't have a company to tell you to go to, but I would tell you to go, get out there in front of people, be around the people that are running businesses that you want to go work for and introduce yourself and network. What do you mean? Do you have any other recommendation on it?

Speaker 2:

No, that's what I said. I responded to that comment and I also put a link to our Facebook group to the same. And the other thing is like there's a lot of ways that you can work through a situation. If you ask more questions, like whether it's as a broker or trying to get a position as a broker right, like I've helped agents get on with other agencies where, like they didn't have as much experience, they've gone through our course and like they had the hustle, like they were putting up numbers and really wanted to. So like I've helped connect them with some other people that had brokerages that had the same qualifications you're talking about. They want to book a business or experience.

Speaker 2:

And here's the reason that brokerage, if you come on as an agent, you cost them money until you move freight. So the reason they don't want to is like they're paying for your tools and user logins of a few hundred bucks or, you know, six, 700 bucks a month or whatever the number is per the brokerage. The reason they don't want to bring on somebody without a book of business is like they're literally paying you to go work for them at first. So they don't want to take that risk if they don't have some assurance you'll succeed. So in one of the scenarios I had an agent say listen, I'll pay my cost until I get a book of business. So I know I'm a risk to you because I cost money. Tell me what my logins are, tell me what you pay and how about I pay you.

Speaker 2:

And this was an individual that was going to start his own freight brokerage. So he had saved some capital and he was ready to do this. And I said listen, you're better off going the agent route. He's like well, nobody wants to take me. I'm like well, if you got the money saved, why don't you offset the specific risk? That is the hurdle. The specific risk isn't I don't want to work with anybody that doesn't bring a book of business. It's that I got to outlay money until you can succeed.

Speaker 2:

So if you pay that and are willing to pay them for it, a lot of times they might be like OK, well, if you're willing to do that, then I'll give you a shot for four or five months, six months or whatever that is, and then have at it. Right, because the other risk to that brokerage is like they don't want to be able to have to train you, show you what to do, because they're not built that way, they're not staffed that way. That's overhead, that's somebody else they would have to pay to help you learn that job. If that's what you're looking for, then you go to a W-2 model and you've got to go and give up your time and the ownership of your customers in order to get the training and the security. There are two paths. I just find that most of the people that want the agent, they want everything, but they're not willing to do some of the things that you have to do to get everything.

Speaker 1:

You want to take, take, take and not give, give, give. Yeah, I want 70%.

Speaker 2:

I don't know anything and I want you to train me Well, like that's a whole lot I want. What are you giving back to the other organization, whoever that is, to make it worth their while?

Speaker 1:

Yep, good answer. Lastly, what app or system can I use other than Carrier 411 to vet new carriers? I'll answer this one briefly. We've had this question or something similar before or something similar before. We prefer highway. I use highway.

Speaker 1:

Fmcsa has publicly available data to do some manual vetting, which then ties into a lot of the systems out there. But DAT Onboard also is another onboarding tool that will help you vet and onboard carriers. There's companies out there like Carrier Assure and RMIS, my Carrier Packets. These are alternatives to Carrier 411. Everyone does stuff a little bit different. Some are just vetting, some are just onboarding, some are both, and each platform tends to have its own little proprietary method or mean as to how it gathers and displays its data to its users. But yeah, there's a lot of options out there. Some larger companies have their own internal vetting criteria and or process that they utilize process that they utilize. But I would encourage you to demo as many of these as you can to figure out what is the best fit and solution for your brokerage wherever you are in your journey. So good questions, we appreciate them. That's a wrap, ben. Any final thoughts?

Speaker 2:

Whether you believe you can or believe you can't, you're right, and until next time go Bills.

People on this episode

Head Shot

Benjamin Kowalski

Co-host
Head Shot

Nate Cross

Co-host