Broker Risks, Tech Choices, and Agent Recruiting | Final Mile 113

Speaker 1: 0:19

All right, welcome back. Another edition of the Final Mile. This is one of my favorite things to do is answer our listeners' questions. If you're brand new to us, make sure to check out all of our other content on YouTube and on our website at Freight360.net, including the Freight Broker Basics course If you're looking for some training for yourself or for maybe some new team members as you're growing, and make sure to check out the sponsors in the description box. That'll help support this channel.

Speaker 1: 0:49

Ben, our first question. This is funny because I pulled this one off of YouTube and you then sent it to me and were like hey, add this. And I was like I already did. So this is going to be a good discussion here. So for small brokers, does the risk still justify the reward in today's market?

Speaker 1: 1:06

In cases where a load is stolen through identity theft, liability often falls on the broker, since shippers blame our vetting process and the carrier may claim ignorance. But who should be held responsible in these scenarios? I literally had this conversation. Well, having this conversation with a customer, it's kind of gotten quiet because I might have brought this up in the past. But, like you know, we did everything right, we verified in our vetting software and we told the, we told the shipper, like we're sending in this truck, it's going to be this color and this MC, and blah, blah, blah, blah. And you know the carrier email got hacked. So they made that little loophole or that little. I guess they kind of breached that area.

Speaker 1: 1:58

But the shipper who had the information, we told him, like there's this risk, like don't load them until you know you, like we've created the BOL for you, right, we've done everything right. If this stuff doesn't match up with what I provided for, you do not load them. And the shipper loaded them anyway because they just whoever was on the dock clearly doesn't care enough and loaded the wrong truck. This stuff got stolen and they're like, well, you guys, you guys didn't vet them well enough and we're like the hell we didn't. We vetted them so well and gave you the correct information and said this is who we've approved. If they don't show up, do not load them. And they still loaded them. But what's your take here, ben? Because it is like it's a valid question, like if you're not a big fish and you can't absorb the blow of one big hit. It's discouraging for smaller brokers.

Speaker 2: 2:50

There's a lot of nuance to this right. The first is to really provide the protection that I think shippers expect. They need to be working with you to your point, meaning, like, if there's nobody at the loading dock verifying the information you're giving to them, like you can do everything in the world to vet the right driver and company but at the end of the day, like you're not physically there, the person physically there needs to do some base level things to actually protect that. Now, with some customers and that's why I want to answer this on YouTube like some shippers just aren't willing to and some aren't able to do that because their companies are too big and they can't get the SOPs to be adhered to by their loading docs or the people loading them consistently enough to do this 100% of the time. So like that is one question, but like maybe you are a broker that works with customers that you have really good relationships with and you talk to the loading docs and they can do that with you, so you have less risk.

Speaker 2: 3:48

Right, we talked about the tech packages and things and the operational things you can do that really mitigate a lot of these, but you're not going to get that to zero right. So, as a small broker, it also depends on like what kind of commodities you're shipping. You know they're not likely to steal a load of lumber as much as they are 300 grand worth of Adidas apparel that you've found Right. Yep tech package as well as your operational procedures for the people using this technology are all, I think, very important, Because if you're not doing those things, it's probably not worth being in the business because you're going to get robbed Right and then, like the last one is like you absolutely can't have insurance for this and our company does, and I've seen other clients that have gotten it and like it's worthwhile to have, but it also comes at a cost, right.

Speaker 1: 4:47

And then you have to ask yourself, if something bad happens, is it bad enough that I want to file a claim and make my rates go up? We kind of keep it for, like the nuclear incident, you know yeah.

Speaker 2: 4:58

And on top of that, right Like the last, is like a lot of how, or whether or not you answer this question. It's too risky or not risky and I should do it right, like, which side of that line you're on. Also, I think depends on, like the underrated human skill of communication, right, like, shippers are going to see things from their point of view. They are going to have years sometimes of experience and perceptions of what they expect from a broker and what they can do and what protections exist. And I will tell you, in the what 15 years I've been doing this, most of them are incorrect or just absolutely outright wrong, meaning like where they just, hey, I use a broker. So if anything gets stolen, like this is just on you, I'm like that's not true. And also, there's no contract in place. So, like that's for sure not true.

Speaker 2: 5:48

If you look at, like, the actual regulations in the transportation industry, right, like, so you also need to be able to have conversations fluidly back and forth with your customers to understand what you are liable for, what you aren't, what can be done, what can be done to prevent it and if something does get stolen, who and what happens at that stage. Right, which is a conversation nobody ever wants to have is hey, by the way, I'm your broker and I can't protect you a hundred percent. So, like let's talk about what would happen if you do get robbed with one of the loads you give me. It's like not an easy conversation to segue into. However, like these are important things to at least understand and to talk through with your customers, because I can tell you like I've been involved in so many of these that have gone in completely different directions, based on, like, what a shipper's expectation was of using a broker, and I can tell you most of them like weren't accurate.

Speaker 2: 6:43

And then, like I've been involved in ones where you bring the attorney and they're like, yeah, like they're not right at all, like this is not how this works, this is not how this is going to play out in court, and then it's weeks and months and they're not paying invoices and it creates tons of headaches, right? So, like, honestly, I do think the industry has gotten riskier recently and I would spend more time learning and understanding how you are protecting these things. And also, very importantly, like one of the most important things I think about is like everybody should really understand how you're going to get robbed, because it's a lot easier to protect yourself if you know where the likely paces are that you're vulnerable. Right, you're not going to plug every hole all the time, but at least just being aware of how someone's trying to rob you makes it a little less likely than that's going to happen, right.

Speaker 1: 7:29

Agreed man. It's kind of like I think back to what you said a few minutes back is like you've got to have. If you're not going to have, if you're not going to take the time, put the tools in place and the processes in place, you probably shouldn't be in this industry. It's kind of like if you don't want to spend the money to get your child the pads and the equipment they need to safely play travel ice hockey, probably shouldn't have them playing travel ice hockey. You know what I mean, so All right.

Speaker 1: 7:58

Next question I'm a new broker and looking for recommendations on commonly used software, mainly TMS platforms and accounting tools. I think I've decided on Shipper CRM for my CRM, but I'd love to hear your opinions and suggestions. Well, ben, you and I have both gone through TMS related things in the recent history, so the TMS and the accounting are going to go hand in hand, because the vast majority of TMSs require an external accounting system. Here's what I'll tell you. On the accounting side, we personally you and I use QuickBooks Online for Freight 360. That's my broker just moving to for our next TMS, no complaints.

Speaker 1: 8:40

I think the desktop version. I actually talked to QuickBooks yesterday. The desktop version is still around. It's kind of going obsolete, but that's more intended for like companies that have to track inventory, which we don't have to do on the brokerage side. So QuickBooks Online is great, yeah, what's the one from Oracle? No, great Plains is another. It's a different one NetSuite. Netsuite by Oracle is another really good accounting system. I have never used it. I've heard raving reviews. Now, the TMS totally depends on your size, your budget, what you're moving, size your budget, what you're moving. What I would encourage you to do is to totally understand your business and demo a lot of TMSs based on exactly what you're looking to do. A salesperson will tell you a lot of times, yeah, we could do that. And then an actual tech person inside will be like, no, it doesn't work that way. Right, like I've seen accounting hurdles, commission report, hurdles, um reporting just like all kinds of stuff.

Speaker 1: 9:54

So, um, depending on where you're at it's, you know it just depends, like do you want web-based or do you want, um, software-based? Another one is the pricing model. I've seen three different pricing, four different pricing models this year as looking for new TMSs. One is the you pay for the license up front and you have it forever, no upgrades, right? Mccloud's an example of a company like that. I've seen the price per person per month, like price per user per month. That's a pretty common one. A lot of companies have that. I've seen the price per load that runs through there and I've seen the price per based off of revenue, which I actually kind of like those models where you can basically, as you scale, um, you pay more based on your business growing, not like if, like. So there was a couple that I talked to that were priced per person per month and I was like, well, I'm like if one of my branches hires 10 new people and they know that they're hoping one or two stick after two months, I'm like, and they, let's say, hoping one or two stick after two months, I'm like, and let's say they never even touch the TMS or never move a load, I'm like we still got to pay for that Kind of like. We get penalized for trying to have a hiring class right, whereas if it's based off the load count or the revenue count, we only pay for it if the production comes through, and that's why I kind of like that flexibility of models like that.

Speaker 1: 11:24

But you see, you have to look at pricing model. You have to look at what can it integrate with? Does it integrate in and out of your accounting system? Does it have integrations with load boards? Does it have integrations with your carrier vetting, with rating tools, with tracking? There's a lot of good ones out there. There's a lot of really good web-based ones. I there's a lot of really good web-based ones. I'm not going to give like an overall recommendation on one. I mean I'll tell you that, like, if you look at our website, we've recommended Rose, rocket and Ascend to a lot of newer brokers. I think they're a great flexible option for folks that are fairly new. What's your thoughts here?

Speaker 2: 11:59

Need more information, just like you said. Right, if you really want to dig into this and reach out, like we can do, like a short coaching agreement or something, because, like you would want a lot of details, like even what you just said, like I could think of three examples that could push you to either side or the other, right, okay, if I'm a brokerage and I'm hiring a bunch of agents and seeing if they want to work out, I want to be price per load. If I'm a small brokerage that does a ton of drayage, I don't need a lot of people and I don't want to get price per load volume, because I want per user, because one person can do a lot more work than if they're doing spot freight in the van world. Right, yeah, so like how and what you're moving really is going to tell you which pricing models to your advantage. But like the biggest thing is what you touch on is like you really got to think about what you need to do with this. Like you and I looked at one recently and it's like, okay, this one is not built for a lot of agents and a lot of commission structures. There are other ones that are built really well for that, but I've aren't really good with integrations to load boards and accounting software and factoring software Right. So you, you do kind of really need to know a little bit more about what section of the industry you're in and how you're structured. I think, to pick the right one, I think it's really important to ask a lot of questions and if you're new and you're just like one or two people starting your company, like to go with freemium, go with like Ascend or Rose Rockets freemium version. It'll be enough to get you started. Then you'll know what you like about it and what you don't.

Speaker 2: 13:26

Your next one will be a much better decision. The first one you pick, you almost kind of don't know what you don't know, so you just got to use something. And then, once you use it enough, you go boy, it'd be nice if it had this. And this is kind of a headache and I really wish it did this. And you and I have done this dude over the years.

Speaker 2: 13:41

Like there's some that I've demoed and like this is fantastic and then four months into it I'm like this is dog shit and I'm like I can't believe I didn't look further into this and this is terrible, but like it's hard to be able to see all those things in a demo, like you really got to use something for, like, honestly, like a couple of weeks probably to really see what, and sometimes a couple of months because, like your first couple of weeks and a couple of months are very different than when you're six months in and you're like, wait a minute, I'd like to see which of my customers are the most profitable, which are the least profitable, which of my customers am I taking losses on? Then you go to the reporting side, which you haven't looked at, and you're like, wait a minute, it doesn't do any of this. They're like, oh well, build your own custom report. And then it's like, okay, what? And it's like I don't know.

Speaker 2: 14:42

We could literally talk for an hour on this, on things, expectations versus reality, versus what you need versus what are nice to have, and are they capable or are they out of the box able to do this? Are they integrated with the other things you're purchasing? Integration, to me, is a really big one, because that's where you need to hire more people. When one system doesn't talk to another at all, you basically need to put a human being there or throw more hours at that solution. That, to me, is one of the things I look at, probably the most, I guess.

Speaker 1: 14:55

Agreed, agreed, all right. Our last question here we recently started a freight brokerage and I'm looking for advice on where to find professional, reliable broker agents. I'd looking for advice on where to find professional, reliable broker agents. I'd also like feedback on how to structure their pay. What's the current standard compensation for agents and what works best to help business grow?

Speaker 2: 15:13

What's this question? Scream to you every time you hear it.

Speaker 1: 15:16

Oh my God. Well, what it screams to me is I want someone else to grow my business for me instead of me growing it myself. But as a guy that has literally I mean, I literally manage an agent based company and I've had this conversation with numerous people in the past and I've helped people through bringing on their first agent just as like a friendly courtesy and what I find interesting. So I'll answer their questions and then I'll, then I'll give you my, I'll give my honest take here. Ok, how do you structure, pay for an agent or no? Where do you find them? Well, you got to find, you got to go where, where they're hanging out. So, if someone's looking for a new job, they probably have a resume that's up on Indeed or ZipRecruiter. If they're, you said, professional and reliable, they probably have a LinkedIn. Right, we have recruiters at Pierce that like, constantly are looking for folks that are open to opportunities and kind of talking about the agent model with Pierce and that's where they're hanging out. They're hanging out on LinkedIn, they're hanging out on Indeed, ziprecruiter. You got to be where the agents, the prospective agents, are. Literally, if you could go on a load board and find a phone number if they're posting loads. They got freight. They're a broker. You can find them that way, I guess.

Speaker 1: 16:43

Now how do you structure their pay? The common way is a commission split. You do them 1099. You'll see some companies pay usually a range of like 60% to 70% to their agents. And you got to look at what are we paying for? What are are we paying for? What are we not paying for? Like we, we pay 70%, we don't charge our agents for anything, but we also just we only want top notch people we don't want. You know we're not. We're not throwing wet pasta at the wall and seeing what sticks. So my honest opinion is to have a to really, really, really build out a good agent based company. There's a lot that goes into the recipe. Number one your company should already be a successful brokerage, because you should already have yes.

Speaker 2: 17:29

My answer to this question is no. Get the business off the ground so you know how it should run, where your risks are, before you decide to bring on an agent, because an agent has less oversight and more risk to that business. And if you're just starting out and you're going to start bringing on agents like you don't know what you don't know, which means your expectations how you're going to set this up are going to create so much liability and risk to the business you just started that it's not worth it.

Speaker 1: 17:58

Yeah, yeah, I mean. The reality is, like any successful agent based company today likely started as a successful brokerage before it pivoted to the agent model. Okay, because before you pivot to the agent model, you have to have the understanding of what works with customers, what works with carrier compliance. How does your accounting team handle-? Day terms receivables Everything right, loss claims.

Speaker 2: 18:27

You have to know how the entire business runs before.

Speaker 1: 18:30

You're like all right, let's pivot and grow it this other way. The next thing is the best companies, the best agent-based companies that do the best job at bringing in new agents, have very skilled recruiting focus. Right An agent recruiter, Like I have two of them Sales their sole job.

Speaker 1: 18:48

These are guys that, like, have had very successful sales careers and they're just out there like networking, networking. They're selling the model and the business concept to someone. You're not out there trying to offer someone a salary. You're asking them. You're offering them an opportunity, yeah, but you're asking them to change their entire career to go straight commission. That's a hard sell. So, um, you need a really skilled person that can do that.

Speaker 1: 19:22

And the last part is you have to like knowing how to run and manage an agent based organization is very difficult because it can be done. I mean, clearly, there's a lot of really really great companies out there that do it. And, and the company I worked for in the past, like we, we grew it agent based. We grew it from like 60 or 40 million to like 200 million by the time I left there. And I've taken the company I'm at now from zero to, while the agent division zero to you, the agent division zero to way higher a pretty good number right In a matter of five or six years. So it takes a lot of work to manage and train and you have to turn over certain agents when things aren't working. You have to retrain them. You know there's it's a whole nother level, because you're not their boss, they're not an employee, it's a contractor and it's a 1099 relationship, right, it's a partnership.

Speaker 2: 20:31

You have no oversight, no legal ability to oversight, but yet they're representing the business you own and have to pay for their mistakes. So you can't really tell them what to do. But if they do something wrong you got to pay for it. Right, that's the risk and I would say that, like even just W-2 working in an office versus W-2 brokerage remote has a lot more risk to it when you can't see when people are showing up what they're doing all day. Are they doing the things you train them on? Are they following the systems? Because everyone goes like, oh, just put in software that makes people do this Like you and I talked about this like this morning.

Speaker 2: 21:07

No software I've ever seen is foolproof to the point where people can't end around it and do it some other way. That creates risk to your business and you kind of need to understand those. Otherwise, like there are so many things that can go wrong in an agent program or with one agent, if you don't understand the business, you're bringing them into customers paying their bills, claims, theft, um, misrepresenting your business. I mean those are just like two or three large ones.

Speaker 1: 21:36

Yeah, too many times man, I cause, I think, a fraud agents. You know times, man, because then you get fraud agents, you know, you get people that have a good intention and screw up, and then you get people who come in with bad intentions. And they successfully execute on their bad intentions. That's my dog market. All right, good questions, Keep them coming. Final thoughts Ben.

Speaker 2: 21:54

Whether you believe you can or believe you can't, you're right.

Speaker 1: 21:58

And until next time go Bills.