How To Price RFP Freight When The Market Flips & More Q&A | Episode 337

SPEAKER_01 0:19

All right, welcome back for another episode 337 of Frey 360. We just wrapped up. It was a great one. If you're brand new, make sure to check out all of our other other content as well on the website. We we went through a slew of questions, follow all the way to the end. You'll get a lot of good discussion and analysis. We talked about the market rates going up. We talked about um how not to get burned out. We talked a bit about tracking a different technology that's out there. Um we got through a lot of good questions today. And I I I think uh our our last one about the burnout was was one of my favorites. But um what are your thoughts on that episode, Ben?

SPEAKER_00 0:58

Yeah, it was a really good episode. We covered a lot. Um, I think it's all relevant, and I think no matter where you're at in your career trajectory, whether you're new or experienced, I think a lot of that is gonna be relevant and helpful.

How We Source Listener Questions

Florida Weather And Seasonal Mood

SPEAKER_01 1:10

So absolutely. But uh we did pull these questions from a mix of our YouTube comments, our Facebook group, from Reddit. So definitely make sure if you guys have a question and we didn't answer it on today's episode, um, put it in the comments on YouTube or send us a message from our website, freight360.net. Um, we typically do a QA that comes out every Tuesday. This was a full, a full-length one since we get so many questions. But um, yeah, let's get into it here. All right, we got a full QA episode today. Got a lot of questions, a lot of comments. We're just gonna kind of uh pull them on the fly here um and and answer as many as we can in a in an episode here. Ben, what's uh what's going on? I'm actually in Florida now. So I don't know. I would say how's it going down there? But it is, dude, it is the weather's great. April. Welcome back again. I know I know it's so funny. I was talking to someone yesterday and I was like, man, every time I come to Florida, I literally ask myself, like, why do I live in New York? So um, but hey, it's uh it is good to visit, and I feel like if you know, probably living here, you probably more so miss the seasonality up north, right?

SPEAKER_00 2:22

I definitely do. I mean, I for sure miss the change because I always love the fall. Also, my birthday's in the fall, so like that was always a fun time of year as a kid, you know, pumpkin farms, Halloween, the um mine went blank, like hay rides and bonfires and houses. Oh, yeah. And I definitely miss skiing and playing in the snow, but I am reminded almost every day for the winter months why I definitely still would live here because like I dude, I get I go and ride my bike with Ava and my wife like almost every day, right? So, like rarely unless it's pouring down rain are we not outside to do something every day. And even when it rains, I got Ava super excited about it because like we do puddle rides. So even when now it pours down rain, we put on our raincoats and like go ride our bikes in the rain. And like nice definitely don't miss the seasonal depression of up north where it's just like dirty, slushy. And even if you can tolerate the cold, like you just can't go play in the mud. I mean, you're basically indoors.

SPEAKER_01 3:21

Yeah, there's definitely a uh there's definitely like the the gray skies come over, the sun goes down early, and um just like your mood gets like and yeah, I like just we got here the other day. Even like we had a we had a bad experience flying down, um, missed our connecting flight, got in late, and um didn't matter. Like, we're like, we're here, you know what I mean? Like once you once you get somewhere, it's like all right, here we are.

SPEAKER_00 3:53

The other thing I didn't really notice, because like I lived in Pittsburgh for 30 years, a little more than that, and it's like there I didn't notice until I moved away, but like they're equivalent with like overcast and gray skies because of where they are with the lake effect and the mountains right on the other side, with more, oh I think even more rainy days than Seattle, or for sure overcast. And I didn't notice it living there, but once I lived here for a while and went back, in fact, actually it was in Detroit. I went to a meeting, it was for brokerage. I went and saw a client up in Detroit with a guy at TQL, and just there's no green anywhere in the winter, right? Because like obviously the leaves fall, the grass is brown, the sky's gray, nothing but concrete. And I'm like, after even like the second day, I'm like, I just feel kind of sad. I'm like not like depressed or anything, just like kind of feel down. I'm like, as soon as I got off the plane and coming back and just seeing the green around, I'm like, yeah, I definitely discounted or didn't think as much about like how much more the bright skies and colors affect your moods, dude. Yeah, for sure.

SPEAKER_01 4:56

Well, on a uh sports mode here, uh Tiger Woods, dude. I just saw it's funny. I was looking through our Facebook group and somebody just posted like Tiger Woods and it's his ID. It's like a joke. I made a meme about it, but it's like his ID with his mugshot. But like, did you see he put out so obviously like the news was he flipped his car last week? I want to say Friday or something like that, like middle of the day, just like going out for a cruise, tries to swerve around, somebody flips his car. Um, DUI, but it's he's a zero-zero on the on the Elka sensor, and it's just the pills, dude, the pain meds and all that. You kind of feel for the guy because like you know he went through his injuries and all that stuff, but like he's uh he's a you know a legendary role model for an entire generation when it comes to like sports and athletics and all that stuff. And I did see yesterday, like he's gonna go seek treatment and all that, and just hoping hoping the best for the guy. You know what I mean?

SPEAKER_00 5:51

Well, yeah, and the other thing that I was thinking of, I was exactly what you just said is that I was saying it's like um money doesn't make you immune to human issues and things that people go through, right? And I think people think that like money solves everything, like clearly not the case. The other person that came to my mind was um Prince and Tom Petty, because somebody was mentioning a couple of days ago, and like Prince was on a lot of pain meds, but it was because he had like horrible hip issues, because you know, just dancing and wearing, I think, high heels or whatever. And that was like a lot long time ago. I don't remember. Yeah, because somebody was talking about Tom Petty on the radio, and they were talking about Prince, and it was just like, yeah, it's super sad that you know, lost both of them early. And it's like, yeah, I mean, how many back surgeries? I mean, he almost had his leg amputated in the last accident. It was right before he won the masters, like 2018 or something.

SPEAKER_01 6:45

Yeah, yeah, yeah, yeah. Yep. So the meme, though, it was uh it shows Tiger Woods's uh mugshot on a California commercial driver's license, and it says Tiger Woods awarded the honorary California CDL. So uh interesting. Oh, that's actually from the Babylon B classic uh fake uh funny news website.

SPEAKER_00 7:10

So the one nice thing is funny too. Tiger Woods was simultaneously the best and worst, worst driver at the exact same time. Yeah.

unknown 7:17

Yeah.

Sponsor Message Ascend TMS

Pricing Contract Freight Through Volatility

SPEAKER_01 7:18

Exactly. Exactly. All right, well, let's get into some um some QA here. I will I'll go off the first one you pulled here. And this uh episode is brought to you by Ascend TMS. So if you're looking for a new TMS, definitely check out Ascend. It's a great option if you're a growing or new brokerage. Their target market is that small to medium sized brokerage. You can get 90 days absolutely free, no credit card needed. You have to have a referral code. We do have one. Just check it out in the show notes link. You'll get it there and uh give it a try. All right. First question How do you price contracted freight without getting crushed when the market flips? So it's funny. I was when you pulled this one up, I was thinking about you and I had a conversation. I want to say it was like, might have been like two years ago, and you were, I think you were working for an asset-based company at the time, and you were trying to price out like 12 months, 12 months worth of like either flatbed or so, I don't know, some kind of freight. And we were talking through like, well, what's the strategy for contracted freight as a brokerage? When you're like, well, we don't know what's gonna happen. We obviously know with a fuel surcharge, um, that's gonna stabilize fuel prices. But what about just general market, like the line haul rates as far as like if capacity gets tight, obviously we're gonna have to pay more to secure capacity. If the market's loose, you know, obviously it's gonna be cheaper. So that's where we're gonna make we're gonna make our money. And then you have to wonder like, well, if I'm pricing at 12 months out, and oftentimes when your bid comes, like you're starting at the tight part of the market. So you're like, am I gonna truly go like four, five, six months of losses or break-even just to hope that the market will then change and I'll make my money on the back end. So it's an interesting thing to think about.

SPEAKER_00 9:13

And I too, I think this set the stage, right? Like, I mean, if anyone doesn't know what the term paper rates are, like it's pretty important and really commonly known in the industry, which is for large shippers, a lot of the rates they get during the RFP, the thing to understand is say it's a huge company like Walmart or literally anybody, right? Like, they don't know how much they're gonna ship on any of those lanes. So all that RFP is, from the shipper's point of view, is a best guess based on last year and the orders they have at the time of RFP. So like they don't even know how many truckloads they're gonna ship on any given lane in the next quarter, probably a month from now, let alone 12 months. So there is uncertainty from the shipper side at the start. And I don't know that everyone really thinks about that or understands that. So it's like, hey, we're gonna guess. And then the brokers and carriers are like, oh, we're under this expectation to predict the future or to hold some cost based on I don't even know how much business I'm getting, because that's the give and take, right? There is a give and take in every relationship. That's why relationships are so important in our industry, is that like if a shipper promises a carrier, no broker involved, 10 loads a day, but then they only sell five truckloads of product, the trucking company, if they hired 10 drivers and bought 10 trucks, can't sue the shipper because they have a bunch of trucks and drivers that they don't have business for. There's no recourse if either side is wrong. So nobody's expecting perfect, even if your shipper and them they leverage brokers and cares to give them the best rates. Oh, we need you competitive. But at the end of the day, that creates an unintended consequence for the shippers, which is paper rates. And what that means is hey, I as a shipper argue with all my brokers and cares. I need lower rates, I need lower rates. I do a second round bid, say you guys are all too expensive, do a third round, push them as far as I can. And I go to my boss, great, I saved us a bunch of money on transportation this year. And then three months later, the market is completely different on some of those lanes. I don't care if you're a giant trucking company, a huge brokerage, or a small one of either category, most people just give the loads back, which tender rejection rejection, right? So it's commonly known for shippers where it's like you want to get the best price, but in any negotiation, if you overplay your hand, it ends up costing you more money in the long run. Because when you give those lanes back and that shipper expected to pay a dollar 85 a mile because you are the lowest of a hundred carriers and brokers, and then the rate jumps to three bucks a mile, they're now going to pay$340 a mile because they got to go to the spot market last minute, and they'll pay a premium over what it is when it does spike. So relationships are really important to understand. And like the other thing I want to say to like set the stage on that question is like you should ask a lot of questions. There are so many unknowns when you just look at a pickup to a delivery equipment type and expected load volume, right? Are they by appointment? Are they first come, first serve, right? Do they use a waterfall system in their TMS? Meaning, like, hey, they're gonna go to the cheapest carrier. And then if you don't take the load and you know deny it, it goes to the cheapest or the cheapest. That's very different than if they're gonna guarantee you loads. And if something goes wrong, they have fallback options because that will determine the strategy on what you want to do on any given lane, too.

SPEAKER_01 12:36

Yeah, I usually caution people, I feel like we talked about this recently, but when people talk about bids, I usually say, like, as a broker, I feel like we're not usually, I'll put it this way carriers are usually better placed for contracted rates for like an annual bid because they know what their costs are and they can they know ahead of time what they're gonna have available as far as trucks, capacity, et cetera. Right. And as brokers, we're little, we're just playing the field.

SPEAKER_00 13:06

Yeah, perfect example is like we our strength is in getting you a truck with very little time when you don't know you have a problem, right? A trucking company, even if they want to help you, if they don't have a truck near your facility when the other truck canceled, like they can't help you. We access all the available trucks last minute to get you the best fair price to meet your requirements. Like that's our advantage, right? As a trucking company, though, just like you said, for anyone out there, it's like, hey, if I got a load for my driver every Monday that picks up and runs from, you know, Boca Ratone, Florida, up halfway up the coast to, you know, Charlotte, North Carolina, delivers Wednesday, and I get three bucks a mile to go there because my customer wants good service, good equipment, good driver, great. I make most of my money there. I want to try to find an RFP for a North Carolina load that is gonna get me back to Florida. And if I can get them as close to three bucks, great. But like I'll probably price that at$2 a mile to be competitive so that I've got predictable freight. My driver always has the same money coming back because as long as I cover my cost and my profit, I take the risk off the table. And yeah, you could make more sometimes playing the market, but you could also lose more. So trucks are very much play in the predictable market because they have fixed predictable expenses. If we don't get a load, we're not still paying the truck and the driver and the insurance on an asset that has no freight for it. And if the market is less than my cost, I'm losing money even when I'm actually turning my wheels.

SPEAKER_01 14:32

Yep. So this is why I normally uh tell folks like if you're gonna do a bid as a broker, a lot of times like the shorter bids, like a quarterly or a monthly or something like that, is gonna give you a little bit more security as far as what the market's gonna do. Um, and then also like start small, right? Don't try and bid on if there's a thousand lanes, don't bid on a thousand lanes. I literally had somebody that bid everything and they went super thin on it and they were like, I'm getting awarded this. What do I do? And I looked at their pricing and I was like, you just literally undercaught everybody and do you not realize what direction the market's heading? And like they priced it off of this is like four or five months ago, and they priced it off of like the previous 12 months. And I was like, I was like, you're not, I'm like, you're not gonna be able to cover this, you're gonna take it at a loss, like it's not worth it. So a lot of times, like the the smaller, um, the lower volume lanes where you can um, you know, there there might be a shipment this week, there might not be, but you're basically not jumping all in right off the bat and potentially destroying a relationship. And the other thing I always recommend too is like have a conversation with your customer about like, hey, if there is a drastic change in the market, like do we have the ability to revisit pricing on a quarterly basis or something like that? I had somebody that was trying to get into a three-year bid, and I was like, three years. I was like, we don't even know what's gonna happen in six months, let alone crazy or three years from now. So just uh, you know, kind of be wise when it comes to those things. If you can get yourself into a bad situation where um you might get blacklisted from a large shipper and ruin your relationship forever. So learning spot markets. Right. Like you said, we we we really perform in the market where we can do last-minute things for a shipper, whereas a motor carrier can't just snap their fingers and reposition three trucks across the country.

SPEAKER_00 16:21

Most people also don't do this, but you could do the same as a broker as a trucking company does. If I have a shipping lane for Nate that goes from Buffalo, right, every Monday to wherever Charlotte, North Carolina. And I know that truck, when I talk to him every week, needs a backhaul to get back up to Buffalo. I will go prospect shippers, just like as if I was a carrier in Charlotte and go, I've got a guy literally delivering down to your area every Wednesday. I don't know if you guys have any northbound freight, but this guy would love to be able to get something predictable so he can get back and reposition himself for the end of the week to get home. If you guys have anything, let me know. Because if I can match those two loads up, I'm not just in theory, in practice, actually doing the same thing as a trucking company. I've got a driver, they're doing the same load, they need to go back, they don't want to play the spot market. I can now help the driver and help the shipper. That's what you should be doing because little by little you start to build more dedicated lanes, and that's how you grow your brokerage with less risk. Yeah.

Tracking Tools Costs And Fraud Risk

SPEAKER_01 17:17

Um, last thing I'll add in on the on the bid and contracted thing is use as much like of the data and intelligence as you have access to. So, like um, you're, you know, it's great to have like historical rates from debt, truck stop, sonar, whatever. Um, the predictive rates from DAT have been pretty impressive and their accuracy has been really remarkable. Um, but your internal TMS data from your company with your carriers is gonna go a long way. And I like what you said about like trying to prospect with that carrier in mind. Look at your, you know, if you've been in business for a while, or if you work for a larger company that has a a lot of data in your TMS, look at your carriers that you guys have a good working relationship with and kind of work alongside with them. Like, hey, I hey guys, like you guys have been working with us for a while as a carrier, we're looking to participate in so-and-so's bid. Um, are any of these lanes of interest to you, right? And then you can kind of do it in tandem with them where you know that if the carrier is gonna agree with a certain rate for that bid, um, you can then take that information and calculate it into your pricing to the customer. So um, all right, let's move on. I got a question from our Facebook group here about tracking. So, which which tracking software do you use? I'm trying to weigh my options on which one to get. So there's a wide spectrum now when it comes to tracking, how it's done, how often it's done, how accurate it is, how vulnerable it is. Ben, if you go back to like when you and I started, it was pretty much like, all right, there's macro point for cell phone tracking, right? Like that was the only one that I was aware of. Or like some of the larger fleets might have their own um attached to their trailers or their trucks, but it was like it was macro point, which is a Descartes product now. But uh you'll get it now. You've got for GPS tracking, you've got macro point, you have trucker tools, and then you've got ELD tracking. So you've got trucker tools, also has the telematics tracking, which can track an ELD device. You've got highway, which can track ELD data, you've got Quickscope, which can do like load level verification of their geofense location with the optical character recognition to read an image and C DMC number on the side of the truck. Um, you've got uh text locate, which is one where you can send a one-off text to get a driver's quick ping location on the fly. Um, you've got um different like uh TMS providers, sometimes they have their own proprietary tracking that you can send out. And I think there's kind of pros and cons to each. I mean, you could even you could even look at gen logs and say that like that's not live tracking, but it's gonna show historical location of where carriers have operated. So I think there's a lot that's out there now. And I think depending on the customer, the value of the load, a lot of different circumstances, you probably want to weigh your options there and make a decision on what is best, right? Like um on one end of the spectrum, it could be, hey, we're gonna use highway, for example, or uh, let's say trucker tools, ELD, telematics tracking to get like the the tracking tied into the power unit in real time. It's really hard to spoof. With that comes a lot of cost, right? On the other end of the spectrum, you might say, all right, we'll just do some manual check calls. Maybe we'll send out a link for um GPS tracking through a you know, macro point on the high value ones, or because the customer wants to have a shipper tracking link, something like that. But there's a whole lot of them out there. Um, what I would caution you on is understand the a couple things. So one, the vulnerability. Like I remember we had a GPS tracking link a few years back that, like, you know, you used to be able to just like forward the link. Azerbaijan, wasn't it? Yeah, yeah, like the guy was supposed to be in California and then all of a sudden it pings over in Azerbaijan in Europe, and then it pops back into the states, and we're like, oh, he just basically like this guy is not in the US. He got the link sent to him. He accidentally like uh turned the tracking on on his phone in Azerbaijan and then turned it off real quick, forwarded the link back over to a driver in California. And, you know, so there's vulnerabilities there. Even ELD stuff, like it's harder to hack and to to um, you know, simulate a location, but it's still like we're seeing more and more of you know, of those types of situations popping up. But um I think there's good you kind of gotta take a look at, you know, what's out there, what the cost is. And then the other side of it is like how often does it update? So like I remember early on with GPS tracking, you pay one price per load if it was like every four hours updated. And that was like per day. And then you pay another cost if it was like every 15 minutes or every hour or something like that. And you would determine which one to use based off of how um, you know, important that load was. So if it was like a high priority load, hey, we're gonna get as you know, every 15 minutes, every single day, the Whole time we'll pay, you know, whatever it costs, versus like, hey, it's a load of lumber. They just want daily updates. All right, cool. We'll do the cheaper option that gets you know general idea of where this rate's at. But fraud wasn't like a huge factor when you go back 10 years as much as it is today. So curious, like what you've seen different folks using out, you know, the I know I just mentioned a handful of them there, but any other um solutions or ideas that come to mind?

SPEAKER_00 22:47

No, most of the time what I'm evaluating for tracking is the integration um to the TLS. Good point. Is it supported and how does it function? Are the two questions I ask. The third is um what you said, how often is it updated? The one that I really want to understand, and it usually doesn't help me necessarily choose between, you know, either Descartes or Macro Point versus trucker tools, but it's like, how does my TMS update the statuses based on the location or the geofense? Most TMSs will grab that and say, like, hey, and it'll change the status in your TMS and say, like, driver's on site. So for like usability, it's very helpful. But I also want to ask, does the driver have the ability to manually check in on site even if he's not physically there? Some of them do, some of them don't. And it's not that you wouldn't choose it, but you want to know that because I've seen companies where they're like, I'm getting yelled at by my customer. All my drivers look like they're checked in, but every every day I'm getting emails and phone calls that my guys aren't there. I call the driver and he's not. And it's because the driver is going, I'm manually on site checking in the app, and it automatically updates your TMS like he's there. So you don't notify your customer that he's going to be an hour late, for example, or reschedule his appointment. That's one big bucket of issues I've seen, not understanding the integration. And the other bucket I've seen is like the ELD integrations can be very helpful and very good for fraud prevention, but not all of them also allow you to send a link. So it's like either you use it connected. And if you got another carrier that is ELD exempt, for example, or doesn't want that asset connected to their ELDs for whatever reason, because there's exceptions to just about everything. Um, you like don't have another option. Like you literally can't send another carrier a link to just like download it on their phone and use it.

Are Freight Rates Rising Or Choppy

SPEAKER_01 25:45

Yep. All right, let's move on to the next one. Uh, are freight rates actually improving or just bouncing around? All right. So I'm gonna give you actual data here on this one. Well, so I would first say define and improve. Yeah, yeah, yeah. That's okay, very true. Define and improve, right? We can go very objective here and just say like rates, if you were to go across the board, yes, rates are going up. But what does that really mean? Because there's there's more that goes into that than just are they going up? Because costs can also go up at the same time, right? So like when fuel goes up, technically rates go up if nothing else changes, right? But if you have fuel going up and overall line haul rates are going up as capacity is tighter, which is what we're seeing right now overall, then yes, it's going up exponentially for that reason. So like if you look at uh and not again, then you have equipment types and region and specific lanes that that will differ as well, but like national um drive-in, I'll look at just for example here, okay? So um with fuel, 252 a mile right now, all right. If I go back a few months, we're at 209, even further, 207, 205. So that's a like 20 to 25% increase, but that includes the cost of fuel. So you have to, if you break that out, it's gonna be a little bit different. Now, if you look at reefer versus van versus flatbed and the region that they're in, those are gonna differ as well. I would say overall, yes, we are definitely feeling the market going up in cost. And I think that comes down to a couple different factors. I think number one, we already mentioned fuel. Number two, you have carriers that have exited the market for one reason or another, and that's a whole nother discussion, whether it's enforcement or profitability or, you know, just name your reason. And Dean Proke had a great breakdown on this in a recent episode that we did, but that's another part of it. And then you've got seasonality. So, like we know that when produce season kicks off in Salinas Valley or in the southeast, it's gonna increase the demand for shipping and it's gonna send rates up um on the outbound shipments for that region. And on the flip side, it's gonna send rates down inbound to those areas because carriers want to get in there and will go for cheap because they can get high paying loads outbound. All right. Same thing happens when imports go up into like LA and Long Beach. You can get someone into Southern California for fairly cheap because they know they're gonna make their money on the outbound. Same thing goes when produce is coming up through the cross-border cities in Mexico to the United States, right? You can get someone in there fairly cheap because they're gonna make their money on the out, you know, the outbound from those cross-border areas up into the state. So I just outlined their different situations and literally opposite lanes that one will go down when the other goes up. So I would say overall, yes, the cost of transportation is going up. And that is good for carriers, that is good for brokers. The at the end of the day, the the end consumers who end up paying the price for that at the grocery store and at the retail place where you buy your goods. But I would say to totally generalize it, yes, things are going up. But we also just don't know what's going to happen with um demand, right? And a lot of that comes down to government regulation, the geopolitical environment around us, and you know, interest rates if they go down. People might be more um interested in buying a house or building a new house. Companies might want to spend more money to reinvest in building a new facility, things like that. But um, it is interesting because we spent like four years of like this kind of flatness in a the average broker's tenure is what, like two years or less, something like that. So a lot of people like they don't know this, they don't know a changing market. And I know the question was like, you know, is is the market going up or are prices going up? But like the reality is it just change, right? And you should, I think this is a good opportunity if you're new in brokerage, like take this and learn from it because things will change and they normally do change. They'll go up, they'll go down. They could flip in a week, literally, like produce season in Florida. Like when that when that harvest happens and they start loading trucks, like boom, it it flips real fast. But um, so are rates improving overall? That's my analysis on it. What would you add?

SPEAKER_00 30:07

Or a few things, right? Like the first is it just kept coming to my mind a great book to read on markets, just open supply and demand. It's written mostly about stock markets, but it's very applicable to transportation. It's a book written in the 70s. Supply and demand? No, the book is called A Random Walk Down Wall Street. It was written in the 70s, but the whole book is about the fact that all open markets are unpredictable, and nobody knows what is going to happen tomorrow because you don't know what's going to happen in the news or in any industry between today and tomorrow. And the price tomorrow is made up of what has happened between today and tomorrow. Nobody's got a crystal ball, right? And the one example, right? You named a bunch of these, but just on the um Mid-American Truck Conference, we were talking about this before the air, like Secretary Duffy says, we're going to systematically roll back fraud, prosecute the fraud, and I think we're going to see spot rates go up. And if all those things are true, spot rates would go up, right? Because you have less fraud and less supply of trucks. If there's less supply of something, pushes the rates up, even though the costs don't change. And if you have more demand, meaning more things getting shipped, the costs don't change, but the rates go up. Those are the best scenarios for a trucking company because their costs, fuel, maintenance, driver pay, all stays the same, but they're less of them and more need. So those are the two things that push up rates without impacting costs, which is like a best canary, best case scenario, like the COVID peak for that year or two, right? Trucking companies were making a lot more money and the costs weren't really going up that much, which is that side of it. The other side is like you've said, you can have costs go up, which does two things. Even if just fuel goes up, it's more expensive to pay a truck to do work if you're a shipper. Now, for a broker, if that rate was$1,000 and I made 10%, I used to make$100. If it's$2,000 next week, my 10% is$200. I have twice the revenue for the same shipment and the same amount of work from the broker's perspective. Trucking company makes more, shipper pays more, right? But the other thing that you point out that's happened is as fuel goes up, companies that aren't really that profitable, their costs go up before the revenue does. So that also forces trucking companies out of business faster, which means there's less of supply, which drives up the need, which allows them to benefit again. So there's a lot of different variables to play into this, including, like you said, supply and demand. Because the other thing in the news was Iran bombed a bunch of um aluminum smelters, like the largest ones in the Middle East, and it drove up aluminum prices to a four-year high. Why is that relevant? You can't just build a new aluminum smelter tomorrow. So even if there are gonna be new ones, it will take time. There's a lag that will drive aluminum prices up. What does that also mean if you're shipping? Well, okay, my aluminum company is probably still gonna buy aluminum, but where are they gonna buy it from? That creates what you said, which is change in volatility. You might used to, Alco used to be my customer, used to ship aluminum ingots all of the time. Well, if they were bringing them in just as an example from the Middle East and to the port of New Jersey, and they can't next week or next month, they're buying it from somewhere else. Maybe it's Germany, maybe it's Asia. Now it's coming into Long Beach, for example, if it comes from Asia. So all of their RFPs, like we answered in the question before, and all their pricing and all their dedicated capacity going from the New Jersey area to their plants in Tennessee or up in the, you know, the Detroit area, all comes from the other side of the country. So guess what? RFP, throw it in the trash. Now they got to go to the spot market. That creates a need for brokers. We go get them trucks, we benefit, the carriers benefit because they're paying open market prices. And why I wanted to go through all of those things is like every one of them has a little bit of a different impact. And I think the takeaway is nobody can predict the future. It doesn't matter what you do, what your data is, because even the best predictive software in every industry, from the stock market to investment bankers, all the way down to what we do in transportation, even with the best computers, just only modeling the future based on information as of right now. So if anything happens between today and tomorrow, all those numbers and those predictive things also do change, which is why you need relationships. You have to set realistic expectations, which ties into the conversation question before, which is how do you work with a customer and an RFP? Understand what they're trying to achieve, talk a lot, ask a lot of questions, set realistic expectations, and start small because nobody knows what tomorrow's. Yeah.

Freight Agent Life Pay And Rules

SPEAKER_01 34:41

Good answer. All right. Next question here. What's the reality of being a freight agent versus expectations? Um, so if you're not familiar, an agent is not a licensed broker. They're also not an employee of a brokerage, they're a 1099 independent contractor. So it's a it's definitely a growing trend in the business model of brokerage. But when you're an agent, um typically what you'll see is um, like I said, independent contractor, you don't you're not employed by that company, but you're also not the licensed um brokerage from the FMCSA. You're a essentially like a uh a representative or you're falling under their umbrella. So you're typically straight commission. And what I would say is every company is a little bit different. If you're considering the agent model as a broker, here's the things I would encourage you to ask is number one, um, what is the pay structure? So is it you know 60% of the gross profit? Is it 70%? Are there requirements to get paid a certain level? Like you might see, hey, um, you got to do X amount and gross profit per month to get paid this, or you you need to have a certain margin of percentage each month to get paid this. How often do you get paid? When do you get paid as far as the load? Is it when it's invoiced? Is it when the customer has paid the invoice? Is it some up front, some after it's collected? Um, are there any costs associated? So do you have to pay for your own load boards? I talked to a guy a couple weeks ago that he's an agent for another company and he has to have his own load boards that he had to buy himself. It wasn't that he had to pay the brokerage for them to get it for him. He had to literally go to DAT and truck stop, get his own um account set up, and pay for it on his own card every single month. So um, do they charge you a support fee? Do they um provide you with a phone line in system or do you have to have your own? Is there an expectation on you visiting their office or what your numbers are gonna be your first three months? So those are just questions that I would ask because the expectations, like this question goes back to, are gonna be different depending on which company that you're with. So like we have agents at Pierce, and I usually spend a lot of time setting expectations up front to determine if we're gonna fit or not, right? Because if you have the conversations up front, there's no gray area or I didn't know that was the thing, you know, two months down the road. So um I've talked to people where they're they're they tell me they're an agent, but they're definitely being treated like an employee. Like this one guy, he's expected to go into the office at his company every single day for you know, whatever it's eight to five or whatever the hours are, um, but he's being paid as a 1099, which tells me that well, yeah, the IRS is not gonna like that at all. Because when you're 1099, you have a you actually have to pay the other half of the employment tax. So, like if I'm a W-2 and I get taxed out of my paycheck, well, my employer's also getting they're having to pay the other half of my employment taxes. Whereas when you're self-employed, 1099, you pay both sides of that. So a lot of times companies will try and 1099 somebody because it they it's gonna save them money because they don't have to pay taxes on it. Um, but yeah, I would I would just ask those questions. Also, like, you know, what happens if a customer doesn't pay? Is there a chargeback on commission? Am I responsible for any of the bad debt? Um, what happens if there's a claim? Um what happens if I screw up? Like kind of what are the uh what are the acceptable and unacceptable things that I can do and how can I represent myself? Do I have to call myself, you know, an agent of XYZ brokerage, or can I use my own LLC and brand it myself? There's just, and there's there's there are some like hard no's when it comes to being an agent, like we talked about the 1099 thing, like the IRS. Like it's very clear, like you can't treat them like an employee but pay them 1099. Um, but as far as like who pays for what, how do you pay them, when do you pay them, those are really all negotiable between the agent and the brokerage that's going to contract them. So um your thoughts on that. You've been a W-2, you've been in leadership at a company, you've been an agent, you've kind of done all of it. I'm curious any anything else that we didn't hit on there.

SPEAKER_00 40:02

The one thing that I think is helpful to understand that is probably the most commonly misunderstood aspect in the entire industry from shippers, brokers across it, how insurance works. And multiple ways as an agent. What happens if a load's stolen? Is there um, and my mind just blanked, what's that policy called? It is uh, there's a name for it. The insurance companies that have the fraud um or theft insurance. You and I just looked at it. I talked to your guy about it.

SPEAKER_01 40:33

You can get all risk policies that will cover theft at all risk.

SPEAKER_00 40:37

There's also a dishonest axe is a dishonest axe by some that you can also have, but like it's so mis, it's so commonly like misunderstood and even sold to agents. Like, I've literally come in and coached agencies where they're I'm talking to their salespeople, they're like, I'm listening to them pitch shippers, they're like, Yeah, we're covered up to$500,000. We got a contingent cargo policy. And I'm like, after the call, I'm like, like that insurance policy does not protect you. And here's why that matters as an agent, right? Because one, if a load is stolen, or just say there's a claim and say you moved$300,000 of cargo with a shipper and you explicitly told them you are insured for$500,000. There's a claim for$300. You booked a carrier for$100,000 in cargo. And say the carrier's cargo actually pays$100,000 of that claim, right? You're still off$200,000. So if I'm getting paid my commissions every week before my customer pays the bill, my customer's gonna be like, I am just withholding$200,000 until you figure this out. And then as an agent, all of a sudden, I might be making five grand a week or something. And all of a sudden, my brokerage that I'm an agent under just starts clawing back my commission or withholding other commissions until the claim's fixed. And I've been in these where like the agent's like, Ben, I don't understand. They told me I have a half a million in coverage. I booked a truck, the truck covered a hundred, my customer doesn't want to pay the rest, and the brokerage is withholding my commissions. How are they able to do that? And then the brokerage is like, well, this isn't our issue, this is your issue. And like, to be honest, the brokerage misled the agent. The agent didn't understand how they were being misled. But at the end of the day, the agent got the short end of the stick and like they either have to go find a new home or just not get paid until they pay back this huge nut, which they didn't actually do anything wrong and they weren't negligent because they were explicitly told you're covered to this amount and you're not. And if you're responsible for, like you said, accounts receivable or claims and you're gonna claw back my commission when something goes wrong, I need to know what protection you provide me as an agent for when things go wrong and know what coverage I have because that's coming out of my commission. I'm a 70% split. That 30% is going to the insurance. What how does that insurance actually help me when, where, and why?

Success Versus Burnout In Brokerage

SPEAKER_01 43:02

Right. Yeah. Yep. Just ask questions. Definitely take your time, do your diligence. Um, let's get one last line here. I like this one. What actually separates successful brokers from the ones that are burning out? This is like a timeless question. Like it really never gets old because burn out.

SPEAKER_00 43:20

That's an interesting way they phrased it.

SPEAKER_01 43:22

Yeah. Um, well, I mean, I I hear it a lot. Like, you can go through the freight broker subreddit at any given point, and like someone's bitching about something. Whether the market's hot, the market sucks, it doesn't matter. Like, someone's having a bad day somewhere, and it could come down to like their boss that's just pressuring them. You got to do higher numbers. It could be a carrier that's messing with them on uh a hostage load. I mean, it could be all kinds of stuff. But what I usually tell people is like you always have to be aiming for self-improvement and having a next target for what you're trying to get to. Whether that is a profit number, whether that is I want to get to a point where I'm doing less of this and more of this. Um, it could be someone that's like, I've been in the trenches for too long, dealing with crazy, you know, volatile market shifting rates and carriers trying to steal my freight. And I want to be more into a management role where I'm coaching people on how they can grow their book of business and deal with these issues. So I think the the ones that are successful, like they just kind of always have a plan of what can I do better and how can I grow. And I know that's a very generalized way to put it, but if you start off as a one-person operation, you get your own authority, or you're just, you know, an agent for a company and you never have a goal to grow or add to your team or adjust your book of business, you probably will get to a point of burnout because you're doing the same thing every day without trying to improve the way that you think and the way that you do business. I think the ones that succeed are usually like, I'm gonna do all the hard work and learn all the all the things in selling and covering freight and negotiation and all that, so that I can get to a point where I'm leading a team who's doing this. And it usually starts it starts off with hiring. We talked about hiring dispatchers last week, but like take the menial tasks off your plate so that you can focus on what you're really good at, which is building relationships, right? And if you can continue to do that over and over and over, what that looks like shifts. So it might be focusing more on sales, and then that relationship shifts more to being maybe a sales manager where you're dealing with customers at a high level, but you have account executives that are day-to-day with them, and you have operations folks who are dealing with all the carriers. Um, but if you can even just build a small team around you, and this could be over a five to 10 year period of time, it will continue to change what you're doing and what you're focusing on. And I think that keeps people agile and it keeps them thinking and on their toes. Whereas if you do the same thing every single day, I think you do get to a point of burnout. And um, I don't know. I'm curious if you have, I mean, you've coached people for numbers of years. Have you have you seen anybody that just kind of does the same thing all the time and gets the same results and still gets frustrated over it?

SPEAKER_00 46:04

No, because and here's the thing too like the thing that I remember most, like there's like high emotional points that you remember, right? Like, I'll never forget during like 2017 at the ELD crunch when I was moving. Oh, yeah, like more loads than I've ever moved, open checkbook, and I was doing them all for mares. Like it was crazy. Like I was getting spreadsheets of just if you can move any of this, move it, tell us what it costs. We're okay because it's so expensive where it's sitting, right? I'll never forget. I don't know if you remember Bruce, but he's been on the show. He used to, he used to manage the military account at TKO with me. But like I'll never forget calling him in the peak of that going, Bruce, I don't think I'm ever gonna have to prospect again. I'm like, there's thousands and thousands of loads on these spreadsheets. I don't know if they're ever gonna get moved. I think I'm gonna be able to work through this for years, right? That was probably in the spring, as of August, it was over and it was back to zero. Rates went back to normal and I had to re-prospect, right? And the thing is like my takeaway, the other example that really drove this point into my memory is people think corporations like grow and last forever doing the same thing. It's whether it's a person as a broker or a huge multinational corporation, like if you just Google or go to an LLM and look up what percentage of Fortune 500 companies don't exist over like five or 10 years, a massive number or percentage of the biggest companies in the world disappear every handful of years. Yep. So like everything is temporary. And to your point, if you want a sustainable career, to me, it is simple. It is like you focus on growth, you need to focus on delegation and you grow in step functions. You hustle, work really hard to grow your book, then slow down, continue to prospect, right? So you're continuing that pipeline to keep the feeder going, and you delegate the things off your plate, you reduce some of your profit, but you also reduce your workload and your sanity goes up, and then you prospect harder, bring more in and rinse and repeat. That's every company grows from one person to anything. And to me, if you are constantly learning, you also don't get burned out because you're leaning on curiosity. And curiosity is just novel things, new and interesting things. If you don't want to keep learning, growing, like to me, no matter what you're doing, it's either going to shrink or you're gonna have to find something else.

Final Thoughts And Send Questions

SPEAKER_01 48:29

It doesn't matter what your discussion is over a long enough period of time. To just put a bow on that one, like you have to continuously educate yourself, stay up to speed with the changing trends, the changing threats that are out there, the changing technology and capabilities. I mean, if you look at if you're to, you know, let's say the last 15 years was a deck of cards and you were to pull three random cards out and it was a given month and a given year, um, you'd have three totally different markets with different threats, different capabilities. I mean, when AI started getting introduced, that was that was a whole nother game changer. When fraud became a big thing, a whole nother game changer. ELD is, like you mentioned, a huge game changer. And then you have generational change too with with the workforce. Like, what is most important to these people? Is it work-life balance? Is it earning potential? Is it flexibility? I mean, there's there's all kinds of things. So I would say definitely just be uh adaptable and understand that things are gonna always change. So good questions. Keep sending them our way, and we will continue to answer them. If there's one that we missed that you guys really wanted answered, put it in the comments or send us a message. But final thoughts, Ben.

SPEAKER_00 49:34

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

SPEAKER_01 49:38

And until next time, go bills.