Blancing Dual Authorities and More Q&A | Final Mile 69

Nate Cross: 0:19

Welcome back. It's another edition of the final mile, where we answer your questions every single week here, and today we've got a few good questions that came from a mix of our YouTube channel and our Facebook groups. If you guys are not on the Facebook group, check out the link in the show notes or description box. It should say join our Facebook group, click here, or a link for it if you're on YouTube. So a lot of good discussions in there. The first oh, actually, don't forget, make sure to check out all of our other content at Freight360.net, including the Freight Broker Basics course for a full length educational option and to support the channel. You can check out the sponsors in the description as well.

Nate Cross: 1:04

All right, our first question I'm having trouble getting my freight broker surety bond. What do I do? They went on to say a few things more about not having enough collateral or assets that they were being asked to provide. I want to clarify a couple of things here what the bond is, what its purpose is and the alternative option to the bond. So the surety bond is a product that a freight broker will purchase. It's usually purchased from an insurance provider and you're going to pay an annual premium and the requirement for a freight broker is to have a bond with a face value of $75,000. And, depending on your credit and the risk for the bond provider, they're going to charge you appropriately. The same way with insurance If you're a high-risk driver, your car insurance will be more expensive. If you drive less and you're a safe driver, it's cheaper. And the purpose of the bond is to make sure that if you don't pay a motor carrier with their owed, they can file on your bond, and the bond is a guarantee of payment, assuming that it was a legitimate payment claim. The alternative would be to have a freight broker trust fund, so you'd have $75,000 of actual assets in a trust that would be earmarked for that same purpose. So instead of paying someone every year maybe a few thousand dollars for this bond product, you'll just put the money aside yourself in a trust, and that would serve the same purpose.

Nate Cross: 2:36

All right, now different bond. There's a ton of bond providers out there. They're all going to have different requirements, different pricing, different experiences while working with them and renewal options. I'm not an expert in this, but I do know that we're advocates and members of the TIA. The TIA has their own bond program.

Nate Cross: 2:59

I would like to try and do an actual episode on the bond in the future and get their rep on Whoever it was last year I met her at one of the conferences, but obviously a reputable organization and they could talk it through. What I will tell you is like with any product or service you're going to spend money on, if you talk to the person that's marketing it and selling it to you. If you have an icky feeling after you talk with them probably not the company that you want to go with yeah, if you have a good experience and they're answering your questions and explaining everything to you, that's likely means you're heading in the right direction. So, um, for this guy's question having trouble getting your bond I would continue to look and there's a ton of providers out there. If you're not part of the TIA, join and get involved in the community discussions asking about bonds. You can get our in our Facebook group and ask questions about it. Hopefully that'll get you in the right direction. Any other thoughts on this one, ben?

Ben Kowalski: 3:57

I think you pretty much covered it.

Nate Cross: 3:58

Yep, all right, good deal. Onto the next one. Is it legal to start as a new freight broker and already have a carrier willing to go into business with you as a partner in your LLC? So this is interesting. I mean, the straight up answer is yes. There's no restriction that you can't have a carrier that's also involved in a brokerage. Um, you have many people that have a dual authority it's a broker and a carrier authority or they own two different companies, like the company that I work for, pierce. For why logistics? We're a brokerage. We also have a trucking company called warren pearson co.

Nate Cross: 4:35

Um, two different authorities under the same address, different addresses okay yep, same address, same ownership, they're co-managed, but the authorities are distinguished and separate for a variety of reasons that we've talked about separately. But the caution I will I will add in here, because when some, when someone asks a question like this, I usually ask myself why are they asking this? Like, where, where is this coming from? So if someone's like, well, is it legal? Something tells me that they're thinking something might be a gray area here and my first thought would be all right, are they trying to advertise themselves as a trucking company and then turn around and use the brokerage to rebroker the freight out, when that's not how they're supposed to be conducting business Double brokering, essentially. So that's not how they're supposed to be conducting business double brokering, essentially. So that's the caution I would give there. What is your thought on that? And also, I feel weird about going into. If I want to start a brokerage, I start a brokerage. Why do you need a trucking company to be a partner with you? On the LLC.

Ben Kowalski: 5:39

Maybe it needs the funds. Maybe the trucking company really has wanted to get into the business, has the resources but doesn't have the personnel, and this person just wanted to get into brokerage and their needs overlap.

Nate Cross: 5:53

I've looked into a few of these. I would almost just say it like oh, I'm just going to go into business with a partner. That partner happens to also own a trucking company.

Ben Kowalski: 6:03

That's the way I look at it.

Nate Cross: 6:04

First said this trucking company is a partner in my LLC.

Ben Kowalski: 6:08

I do feel that there is a benefit from a sales perspective, like if the ownership group owns assets and owns a brokerage right, I think there is an advantage to selling that right To your prospects. Like hey, yeah To your point, be very transparent that you are calling from the brokerage and the brokerage doesn't have assets. But I would for sure we've been there that like hey, like our ownership group owns a trucking company, we have this amount of assets and if the lanes match up, we can certainly prioritize your loads. If you work with our brokerage, with our trucks, we can make sure we can tell you exactly the equipment that we'll be using, the driver experience. We can give you that service, as well as the ability to find you a truck in a very short amount of time. If we don't have a truck there, you gives you a wider range of services, I think, and value to provide to the customer by being able to you know my mind went blank like presenting it that way.

Nate Cross: 7:11

I agree and I want to add on that and that's something that we do with Pierce is like where our trucking terminal is, and I've been there a handful of times we have a ton of dock space that is able to be used as storage as well.

Nate Cross: 7:24

So not even just having a trucking company, but also optional or the option for storage space.

Nate Cross: 7:29

So, and it's in florida and, as we know, florida is very cyclical and it's, uh, the nature of its freight rates based on um produce season. So if you have a customer that wants to get a bunch of their goods shipped into Florida and they can do it in the cheaper season and save money, and you can get cold storage to hold that product for, like you know, let's say, it's got a six month shelf life or whatever it is, and the example of, like a beverage product or something like that, that's a huge value add. You're representing yourself as a brokerage, but oh, by the way, we also have the ability, with our trucking company and our physical location, to provide additional services. It's gonna run through our brokerage and then go through to the trucking side, but it's a great way to present it, as I'm not just a broker and I'm not trying to sell you directly as an asset company, because that's not always the best fit to use one of our trucks, but here's something that I have access to in addition to the rest of the market.

Ben Kowalski: 8:25

I think it's a great way to pitch it what Steven pointed out, and I ran into this twice in the past week. Once I was on LinkedIn, yesterday too, but it was as a trucking company. Can the trucking company take the loads they are not moving and then give them to the broker and the brokerage? They just started to move their access freight Right and that is unlicensed brokerage.

Ben Kowalski: 8:49

Now if the business is coming from the shipper and is contracted with the motor carrier. The motor carrier cannot just give access loads to the brokerage to move.

Nate Cross: 8:59

Yeah, you're thinking the trucking company here has overcommitted what they can provide and they've won some bids, or they're trying to get freight that way and the reality is they're just going to re-broker it. Yeah, you can't, do not do that.

Ben Kowalski: 9:13

Right, if that's what they're getting at here for sure. And those agreements everyone I've ever read anyway specifically state that that agreement is between the shipper and that motor carrier and that motor carrier is why they're awarding those rates on those lanes.

Ben Kowalski: 9:29

Right, and if you think about it just from like again, first principles point of view we're talking about this in the podcast right is why would a shipper want that? Ok, well, because the shipper then can at least verify the assets of that trucking company. How new are the trucks? How experienced are the drivers? Every tractor has exactly the PP&E we need. They all have the exact same securing requirements for all of our loads. We know all the drivers that work for this trucking company have experience moving this freight.

Ben Kowalski: 9:55

Okay, because of all those things, we're willing to pay you above market to move our freight. Why? Because we know you're going to commit to it. We know we don't have any of those other risks, or at least they're mitigated and they're smaller. So we'll pay you above market in a lot of those. And then what happens is the trucking company is like well, I'm getting 250 a mile on our freight. Why don't I just open a brokerage, stop sending my trucks and pay $1.90 a freight to grab a truck off a load board? I make $0.60 a mile and all I got to do is pay a guy to be on the phone. That is the thing you can't do. For that reason, you're basically doing bait and switch with your customer. Hey, I'm selling you our trucks and our drivers and our service.

Nate Cross: 10:45

Oh, by the way, I'm going to send in some random truck that we just pulled off DAT so we can make an extra 500 bucks on this load. Yep, precisely All right. Our third and final question. He said I have a question for reefer freight brokers. To be specific, I see on the load boards that you guys tally up fuel cost, which is good. But the question is do you tally up the fuel cost from point a to point b and skip the reefer fuel, or do you add the reefer fuel as part of the total cost? All right, it's a lot in here. Um, my first feedback here is I have never seen a load post on the load boards they're not.

Ben Kowalski: 11:13

They all broke out the fuel on it. There's just, they're all right. Yeah, it's all right on the load boards.

Nate Cross: 11:18

Yeah, now I will say, regardless of the context of a load board question, when you're talking about a rate to a carrier, do you include, like, would you do line haul fuel surcharge and then a reefer fuel cost in as well? You could, I wouldn't. I always find it. I find the cleanest I've ever found. It is like if it's just all in one right, one rate to the customer, one rate to the carrier, it includes everything that could be fuel, that could be reefer fuel, that could be permits, if it's, if it's going to need permits to certain states, that could be escort vehicles, whatever the total cost is, I would give that to your customer. And and everyone has kind of a different mentality on this perhaps but, like with project freight, I don't even like to itemize it because then you might get scrutinized by your customer, like, oh, why is your insurance more? Like your insurance is more expensive than the other guy, but your line haul is cheaper than the other guy, but your this is more. You know it's like no, no, no, no, All in, here's my rate. It's all encompassing. I find that the cleanest way to do it. It's not like you have to do it that way. That's just my personal preference, but I would say you can definitely discuss the, the fuel to an extent. So, like reefer, let's say you're shipping ice cream and you're shipping ice cream in Arizona or through Arizona in the summer versus shipping ice cream, and then you know the through Montana in the wintertime, right? Well, the cost of the refuel is going to be drastically different. So you could have the conversation of hey, I got this padded up about an extra $100 because I understand the amount of fuel you're going to be using in excess of the normal, based on the location, the time of year. Right, I wouldn't tell someone, hey, I'm actually cutting your rate by $100 because you're going to use less fuel than than normal. Um, but if you know you can make a point of emphasis that you've added it. You know you've, you've considered that and you've um included that additional amount into your rate to the carrier.

Nate Cross: 13:18

That's my personal take on it. Um, I think steven wrote in the notes here. He's done it both ways. In regards to reefer fuel, I think it just depends. Ben, do you have any take on how you would do it? I just like to keep it clean. I mean, I get the fuel surcharge if the customer does that, but I've never seen a customer have a reefer fuel rate Correct?

Ben Kowalski: 13:39

I've never seen that either. Now, two things. One, why is there a fuel surcharge in the first place? It's because over a long enough period of time the price of fuel changes. So over six months or a year, the cost of fuel is going to change throughout that year, but a shipper wants at least to be able to predict their shipping cost for as long as possible. So a shipper goes I'll give you the load every week, all year. You tell me how much you need. You know your costs as a trucking company, what it costs to run to pay your driver, all of your expenses. Figure out what you need to make on every load for the line haul and then we'll benchmark the fuel based on the national average where it goes up and down. And that is supposed to allow a trucking company and a shipper to provide a rate for a long enough time to benefit, both because the variable is the thing nobody knows into the future and they don't want to keep rebidding freight just because fuel changes. That's the premise as to why it exists. So why it doesn't exist in the spot market is because I'm contracting you for one load. Fuel is not going to change drastically, usually in one to four days enough to change what you would pay or charge for it. Also, what determines the rate in the spot market?

Ben Kowalski: 14:50

Contrary to most carriers' belief, is that brokers just don't decide what somebody is going to pay or not pay, or take or accept. You have a lot of people with a lot of work, a lot of shipments that they put in the market and they go. Here's all the shipments I have today. Who wants them? They put out a number that they think will work. Guess what? That is not the number that it actually gets run for. It's only the number that somebody agrees to provide the work for, which is supply and demand in the free market. So it has far less to do with fuel. It has far more to do with how many loads are available in that city that day, how many trucks want that load in that city that day going that direction, and what are they willing to take them for. Because that's what determines the spot rate.

Ben Kowalski: 15:34

And the thing that I always find comical is like oh well, you know, if brokers didn't take these rates, then carriers wouldn't have to. No, at the end of the day, brokers don't perform the work If every carrier in the country just decided to band together today in a union or whatever and said we will not take one load for less than $2 across the board. Guess what? There would be a floor on freight and not one load in the country would move unless somebody paid $2 a mile. And it doesn't matter what anybody else says or does. If freight doesn't move they will eventually pay more money. But if another carrier is willing to come along and be like yeah, oh, you guys want two bucks a mile, but I'll do it for a buck 90. Guess where the business goes to the guy at a buck 90. It is not the brokers in the middle and it's not even the shippers. It's what a carrier is willing to take the work for amongst the other carriers that provide the same service that day in that market.

Nate Cross: 16:23

For sure. Now I I got to add in a caveat here. I learned something new. Steven just put in the show notes here Cause he he does some, some refrigerated products and he said I have a couple of dedicated carriers that I do that for on contracted lanes. He said $3. And so for example, $3 and 20 and a half cents to $ dollars and 72.4 cents would pay seven cents per mile in reefer fuel. So he does have a situation where the customer will not just account for standard fuel surcharge but also a little bit extra to account for the reefer unit in there. So interesting, never had. I've never come across that one. I learned something new. So I guess to amend my answer I would say you know, whatever your customer is doing, you can, you can account for it that way.

Nate Cross: 17:19

I would still recommend if you can pay a carrier an all unclean rate in the spot market, great. If it's contracted, like Steven's comment here, then yeah, you're probably going to be dealing with a contracted surcharge schedule. So oftentimes, though, if we get contracted business from a customer, we're still covering it in the spot market, and that's just a reality of of what happens a lot of times. So, but good, good stuff. Any other thoughts, ben, on that one?

Ben Kowalski: 17:49

Just that. I ran the math on that and I'm like it's 7 cents per mile. If you ran coast to coast it's still only like $140. So I mean, you're not talking about a large number in fuel either.

Nate Cross: 18:04

Would you do like 3000 miles?

Ben Kowalski: 18:06

I did like 2,500. I think it was like 170 bucks.

Nate Cross: 18:09

Yeah, you're right, it's not. You're not really moving the needle that much On a load that could be paying $7,000 or $6,000, right, $5,000. You're talking about 150, 200 bucks. So all right, good stuff, good discussion, great questions. Keep sending them our way and we'll keep answering them the best that we can. Final thoughts Whether you believe you can or believe you can't, you're right, no-transcript.