How Freight Brokers Negotiate in a Down Market | Episode 241

Speaker 1: 0:19

Hey everybody, welcome back for another episode of Freight 360, episode 241. Today, if you're brand new, there's obviously 240 other full-length podcasts, along with all of our other short form content, blogs, downloadable content, etc. Make sure to go to Freight360.net and check all that content out. Along with the Freight Broker Basics course, that's your full-length educational piece that will walk you through everything from getting your brokerage started and having it succeed. Share this with your friends, leave us a comment, subscribe, do all that good stuff. We appreciate it All. Right, ben? What's going on, man? How are you today Doing well?

Speaker 2: 1:02

Got out into the pool this morning for a little morning swim start my day. It's no complaints.

Speaker 1: 1:08

We're in, like the nice area of weather anyway, oh, that's the best man I always love, like whenever I'd be I mean, I don't have a pool at my house, but like whenever I've like been on vacation in the past. Like I remember taking a trip to Jamaica like 10 years ago and I was a huge like distance runner at the time, so I'd get up really early and go for like a long run and then just go right to the pool and swim and like a morning swim as, like the sun's coming up is an awesome way to start your day For sure.

Speaker 2: 1:39

That's one of the reasons why I love riding my bike is because I can. I ride along A1A and just looking at the beach a little bit and just kind of looking out over the ocean, like as the sun's coming up, is like by far my favorite way to start the day.

Speaker 1: 1:52

No one's awake.

Speaker 2: 1:53

There's no cars on the road. You feel like you have the entire world to yourself. It's so peaceful.

Speaker 1: 1:59

Yep, exactly. And then back to the Jamaica thing. It was always funny, like if I would run a little bit later when the sun was like coming up, you just see all the trash on the side of the road. So jamaica is beautiful when it's dark. Uh no, I'm just kidding, but seriously it's pretty gross outside of the resort. So, um anyway, good stuff, sports. What do we got with our boy scotty scheffler?

Speaker 2: 2:20

there's a really pretty interesting article on shuffler. There was two things I saw in the past week. This one, um just talking about the crazy run he's had in the past 44 days. Um scotty shuffler has taken in more than 16 million dollars. I read elsewhere too that I think his caddy this year has now made more than um rory like that's how much he's won this fast. The other two, the other part of this article I thought was really interesting.

Speaker 2: 2:50

Right like before the master scheffler won the arnold palmer invitational on march 10th, which is a huge tournament with a lot of the world's best play there, he followed up that win with a win at the players championship the week after. The last player to win a tournament the week after winning a major was tiger woods in 06. Um, this one too, shuffler has finished par or better in 40 consecutive rounds at pga tour events. The current record is 52 set by tiger in 2000 and 2001, which is really nuts, and if anyone's ever I mean not everyone's obviously a golf fan, but if you look at the disparity between how much tiger won in that period too, he was winning like one in four or like one in three tournaments he was playing in, which is, yeah like astronomical. The other part of this too, which I really think is relevant even to just business and just person personality, personal improvement right is after his victory at the Masters, scheffler told journalists that golf was only the fourth most important thing in his life. The first he had said was God, then his wife, then his soon-to-be born child son, I think, is on the way and we're all more important to him than winning golf tournaments. And to me, why I really respect him and love watching him play is I think that's why he is so successful at golf is he doesn't put the self-induced pressure on himself of feeling the pressure of needing to win. I mean, when you hear him talk, it's very like well, unstressful, relaxed, and he really attributes it to his religion. Right, and I don't think this is, you know, an advertisement for religion. It's more that when you give up the need to try to control it to anything bigger than yourself, your practice, whatever that is right it takes the self-imposed stress off yourself which is really what gets in your way when you're trying to perform. It's the stress we put on ourselves to do better, to do more, to excel, whatever that is right, and he really just takes the approach of what we talk about on the show, right Even in sales practice, consecutively, right, like just doing this over and over and getting better and better at it and then trust in your ability when you go to perform Right, and that's literally all he does and he is just lighting the world on fire.

Speaker 2: 5:10

One last point I saw I saw an article yesterday too. Um, it was in golf digest. Um Romo, obviously from Texas, was quoted and he said he's probably played about 500 rounds of golf with Scotty Scheffler. And he said in all of those rounds you know, playing for fun with one of your buddies he has never seen Scotty Scheffler not break 70. And he's never seen him have a bad round, meaning just even in playing with his friends. Right, like he doesn't put all the stress on himself, doesn't get frustrated with bad shots, just practices, executes and that's it right, just keeping it simple.

Speaker 1: 5:47

And to me, romo dallas cowboys former quarterback, actually from san diego, california, true story, but yes, dallas cowboys quarterback. So that's, he's a good golfer too it's a very good watch yeah, did he do? Was he in the? Didn't he do one of the matches?

Speaker 2: 6:04

the match a few years ago yeah, I can't remember who else I think it might have been brady was in.

Speaker 1: 6:08

I don't remember but yeah, he was in one. I mean there's yeah, I've been a bunch of guys but he was very good, like a very good golfer.

Speaker 2: 6:13

It was interesting watching him play.

Speaker 1: 6:14

I remember watching it so let me ask you this do you ever, have you ever, followed formula one racing? So that was not a ton, but in and out yes, what's that?

Speaker 2: 6:24

I said, not like religiously, but in and out. I read the headlines and I've actually been to a formula one race and got to see it in person.

Speaker 1: 6:31

So oh nice, that's really cool. So I mean, I think the netflix series has kind of made it more popular. Um, but one of the things in formula one that kind of reminds me of what you were saying with scheffler is like um well, I guess what's different this year is the same, like so max verstappen has won like four out of five races this year. And people are saying like he's gonna make this sport boring and it's like I don't think so. I think it's.

Speaker 2: 6:56

It's kind of cool when you see somebody peak and they're very dominant, because then for them, for someone to beat them, brings everyone else huge right, yes, so and now you get the underdog story too right and you get both sides like you're gonna have groups of people that like watching the guy dominate and you're gonna see the other fans, I think, rally around the second or third competitors trying to encourage them to knock him down. Right, you get the underdog story and you get the heroine. I mean, I think it makes it more interesting.

Speaker 1: 7:24

So where did you go to an F1 race? Was it in Miami?

Speaker 2: 7:26

No, I went to the first one they had in the United States. They had it in Indianapolis at the Brickyard where they have the Indy 500. My buddy, my friends growing up were huge race fans and mechanics and we drove from Pittsburgh to Indy and watched it.

Speaker 2: 7:46

It was. It is-blowing to see it in person. Tv does not give it justice. I've never really gotten into watching motor racing on tv, even with, like my close friends growing up to watch it all the time, because you can't really get a feeling for the speed or the danger. Yeah, but when you were there, the two things that struck me most was I think our motel was like two miles away from the raceway, right.

Speaker 2: 8:04

I woke up at like four or five in the morning, like before the sun was up. It sounded like somebody was firing a shotgun. I remember I opened the door and I was like what is that? And my buddy's dad, rich, goes. He's like oh, that's the sound of them switching gears, like that's how loud that is, and it was like literally two miles away. And then when you get there in person, they're going literally over 200 miles an hour and then in like the length of a football field or less, they're dropping down to 20 miles an hour and driving through what looks like a residential area, which they call like the field, and it is just insane to watch a car you know 50 yards away go 200 miles an hour to 25 and then back to 200 miles an hour and like a block or two like it's. It's really pretty cool to see in person hey, one last thing on sports.

Speaker 1: 8:51

You remember we were talking about the psls a few weeks ago. Yes, so my, my, uh, mother-in-law finally went into like the, the buffalo bills, new stadium experience and um, these, they're like outdoor club seats is what they've got now. So there's, it's part of the section's covered. There are like radiant heating and a lot of the new stadiums gonna have that fifteen thousand dollars per psl per seat is what the price tag is on them.

Speaker 2: 9:18

So what are the financing terms? They?

Speaker 1: 9:21

require 20 down on the spot and then you can. If you want to, you can choose to pay it over three years monthly interest free, or I think they have like a an interest longer term option, so it just like it just happened.

Speaker 1: 9:39

Um, so I have no idea how they worked it out, but 15 grand man and and those are like, not the like, those aren't like your top club ones Like it's the seat they show, like where the seat's going to be. It's going to be like on the end zone, like you know, like basically at the one or two yard line instead of more towards the middle of the field where they're. You know, I've heard they were like 30,000 or 25,000. It's just crazy.

Speaker 2: 10:03

So I'm going to be curious to see how that plays out from a business perspective.

Speaker 1: 10:06

Yeah for sure. Hey, I did want to make an announcement. I know we had the guys from quick scope on a couple of weeks back, definitely super excited to have a long term partnership with them. They're now an official partner and affiliate and sponsor of the Freight 360 podcast. So you're going to start hearing their ad read during the show. So make sure you go over to quickscopecom and it's with a K, so it's Q-U-I-K-S-K-O-P Quickscope. There's a link in the episode show notes, the description box on YouTube and on our affiliates and sponsors page on the website.

Speaker 1: 10:46

But what's really cool about quick scope and I've used it we've got a lot of folks that have been using it and checking it out. They will give you a free trial of it if you want to try it out for a week, but essentially this is going to allow you to prevent fraud by withholding important information such as a pickup number from a driver until they have geo location verified, whatever, like basically taking a picture within a two mile radius of the pickup, and they can't doctor it. It's going to go through, um, like some sort of an ai. Yeah, vetting recognition, yeah, um, you know. So really good stuff there.

Speaker 1: 11:23

We'll snap a picture of the side of the truck and if it doesn't match up or if it looks like they just drew on a piece of paper or whatnot, it's gonna flag it and they won't get the the crucial information. So check them out at quickscopecom or click the link in the show notes if you want to get a uh, a free trial of it and check it out on a couple loads. So good stuff, man. Anything else before we get into it today, no, let's have at it a little bit of the news on the non-competes.

Speaker 2: 11:50

I don't know if you want to touch on that oh yeah, yeah, I forgot.

Speaker 1: 11:52

How can I miss that? Yeah, we'll head on the non-compete news real quick and then we actually we have a question about now go piece that we'll head on in. Uh, final mile come next tuesday. But yeah, so the big break of news, this happened yesterday, so today's Wednesday the 24th, this was Tuesday the 23rd.

Speaker 1: 12:09

I actually have a CBS News article that was released this morning that has kind of a more. Hey, everyone had time to digest it. Here's the big takeaways. But the FTC and we talked about this last year, it might have been more than a year ago when we first talked about this last year is, uh, it might even meant more than in more than a year ago we first talked about it they basically voted um three to two to like get rid of non-competes and it goes into effect um in about four months from now. But basically the takeaways are no new non-competes and any existing non-competes have until the deadline I think it's like September 1st or something like that or end of August, to basically restructure whatever employment terms to get rid of the non-competes. The caveat here is there are still non-competes allowed for certain jobs. So where is it here If your salary is.

Speaker 2: 13:03

I have the benchmark. It's $151,164. But here's the other kicker too right.

Speaker 1: 13:09

You have to be a decision-making position, right? Policymaker, yeah, so it says.

Speaker 2: 13:13

The rule, however, does allow currently existing non-agreements for senior executives to remain in force. Senior executives are defined as workers earning more than 151 164 dollars annually who are also in a policy making position and I'm curious because I think that's salary. I don't think that includes bonuses and I don't think that includes, like any commissions or comp well, they didn't really say, though.

Speaker 1: 13:43

That's the whole thing. They just said it's correct those earning more than that right.

Speaker 2: 13:49

So I'm curious how that line will be drawn. Um, but the policy making position again, I, I think, really helps that, because I know, I know a lot of people in our industry that are sitting on the sidelines right now because of a non-compete, that we're making less than that, but certainly we're in no position to make any policy decisions whatsoever in any way.

Speaker 1: 14:10

So did you see that? Okay, so that 151K rule, that's the existing non-competes. And then it goes on to say still, the FTC is banning new non-competes for senior executives on the grounds that the agreements stifle competition and discourage employees from creating new businesses, potentially harming consumers.

Speaker 2: 14:28

So I think there's a lot of clarity that will need to come out of all this and the one thing that I read that I really agree with is this premise of there's a very different way that these are handled with the type of employer or employee that you are Meaning. If you are rank and file, meaning like one of the soldiers right, like most of the big brokerages, you're signing a non-compete just to have a job and if you don't sign it, you don't get the job. There is no middle ground to have your attorney redline this and go back and say would rather have this.

Speaker 1: 15:02

Because you hire the next guy, because you have no leverage.

Speaker 2: 15:04

None. But when you get to the executive levels right. One, they share different information and what I would consider more closely in the category of proprietary that they don't want outside that company is the one thing. And two, when you're that level of executive, I would negotiate my contract with an attorney. But I'm going to get a give and take because when you get to that level, they want you enough that they're going to be willing to go okay. Well, maybe we're going to make you still sign the non-compete, but I'll get stock options for signing it. Right, my attorney is going to negotiate something in return for me signing that non-compete, which has always been very common within executives up, higher up in companies, across all industries, and to me I think there's an argument that that should still or could still exist. But the rest makes very little sense.

Speaker 1: 15:54

Well, you also have, don't forget. Non-compete just means working for a competitor. There's also three main other clauses in an employment agreement, and we've had an episode on this before um, but non-solicit that's the one that people often confuse it with, which means you can't sure if the non-compete is gone. So let's say, well, let me use tql as an example. Right, let's say you have a non-compete, non-solicit confidentiality agreement and it works. Made for higher clause. I'll explain all four of them real quick. Non-compete means you can't go work for, for example, pierce or wide logistics, where I work, right Now that the non-compete is gone. Yes, now TQL, you can come work for Pierce or wide logistics. Or, you know, you can go work with Ben at visit to visit logistics. Non-solicit means you, which is still there, sure, you can leave. You can't take your customers though right, you can't take any customers or employees or whatever you guys are right confidentiality.

Speaker 2: 16:47

You can't share any trade secrets you can take your experience with you, but you cannot take any of your customers, like you said, or you cannot convince other co-workers to come work for you, right, yep other coworkers to come work for you, right?

Speaker 1: 17:00

Yep? Confidentiality you can't take trade secrets such as, like you know, pricing models, anything along those lines that could be under the broad term of confidential. And the last one is works made for hire, which would be if you created a product or maybe a process while you were there.

Speaker 2: 17:19

the works made for hire means anything that you've made or produced while you were employed there now belongs to them, which a lot of contracts will have as well, I've always felt there was an interesting debate somewhere in there and again, we're not going to do a whole episode on this, but it was just that, like I know, lots of the larger companies viewed their training of carrier sales as proprietary. Proprietary meaning like the way we've taught you to get a hold of, find and negotiate with the carriers is in some way proprietary right to me.

Speaker 2: 17:51

let's talk about that today and the main content but yeah, I feel like that was the most loosely loose argument for that, because I mean negotiation skills and those things are applicable in almost any other profession and I don't think anybody's doing anything different.

Speaker 1: 19:18

Really, it's just how much better they are not necessarily different approaches, but yeah, well, the big takeaway is all you big boxers who have who have had non-competes, if you were looking for a new home, reach out to us. We'll help you out nader myself, if you were looking for a new home.

Speaker 2: 19:31

reach out to us, We'll hook you up For sure, nate or myself, if you're looking for a new home and you want to go work as an agent.

Speaker 1: 19:36

Yep, all right, roger, that Good stuff. Let's get into the content. So we're going to talk about negotiating in the current down market and you want to talk both carry on customer side, but the whole, the whole process of it, right?

Speaker 1: 19:55

Like how would how it differ, how it's different in one market versus the other? Let me set the stage here. Okay, I had a um and shout out to one of my, one of my agents I won't say his name, but um, talk to him this week and he told me say, hey, one of the best episodes I've heard from you guys in the last year was the one that we did. It was on prospecting and whatnot, but it talked about specifically in this market, how it's not about just trying to get a load, it's about trying to build a relationship, figure out what they're dealing with and all that stuff. So it's important to start this off by taking an honest look at where we are in the current market. All right, and that is you know.

Speaker 1: 20:37

If you go back, anyone that started in the last roughly two years, all they've seen is this current market right now. 24 months, three, four years ago, like a lot of people did in the peak of the, the, the post-shutdown expansion of the boom of freight and the economy, it was a complete opposite, right, A lot of freight moving, shortage of trucks available, whereas now, based on a lot of different factors, there's less demand to ship freight and, um, an excess amount of trucks and that's changing. But basically, two different markets and they have two different outcomes. There's two different bits of leverage that each party has. Um, so I want to at least say you know, set the stage there that we're looking at the current, what we call a down market and there will be more down markets in your career if you stick with this long term. It just happens to be an exacerbated, longer version of one, but that's the set the stage down market scenario here and I want to add to that right.

Speaker 2: 21:41

So the predominant criteria, like or how you would determine which market you're in, is just exactly what you said it's the demand for trucks and the amount of trucks to meet that demand. Right? Those are the two things, right? So in a very tight market, it's very hard to find a truck. Right, that's the term we use in brokerage. It's a tight market. It's really hard to find trucks. Right?

Speaker 2: 22:03

That was your period of 2020 to 2022, give or take like the peak of the market, and in those markets, right, you see very different things that are important to shippers and again, it makes a lot of just logical sense. A shipper's only concern if they can't find a truck is to find a truck because they don't have a lot of choices to choose from. And they were in a position that, like they literally couldn't get their customers their sales, like whatever product. They were in a position that, like they literally couldn't get their customers their sales, like whatever product they sell widget washing machines, it didn't matter. They couldn't get enough trucks to pick up their freight, to deliver to their customers, to be able to literally make money for the company.

Speaker 1: 22:43

So when you're in that scenario as a consumer, think about when you would go to um. There was a period of time that you'd go to Lowe's or Home Depot and like it wouldn't have lumber on the shelves Right, exactly. And that wasn't just like supply chain disruptions elsewhere. It was like there was people were at home building stuff on their house because they happened to be at their house all day long. Now, because of the pandemic, they want to buy wood, so they go to the store. So there's an increase in the demand for wood, the price of lumber goes up, but there's not like magically more trucks overnight to start delivering all this wood, exactly, right.

Speaker 2: 23:18

So very quick peek right in the need. It happened almost literally overnight. People are literally not spending money outside going to concerts and restaurants, so they got money to fix up their house and they're sitting around their house looking at it going. It's fixed up, right. So like kind of a simple example, but this is really what happened on a global scale, right? So again in that type of market and again these happen all the time, like they usually happen about every 12 to 16 months. They cycle around in a circle, but the pandemic created this very long one that lasted longer for the obvious reason.

Speaker 2: 23:54

So you have two years, basically, where shippers are desperate to find trucks In that market. They'll work with anybody that can find them an option. So prior to the pandemic, a normal shipper, a medium-sized company, might have three or four brokers they work with and a few thousand carriers, or maybe even a few hundred carriers, and that's a pretty normal mix of brokers to carriers. Right During the pandemic, like they would work with any broker that called them because anyone might've been able to find them a truck they needed that the others couldn't find. So at that period, you would see shippers working with like 40, 50 brokers at one given time because just none of them could really get them enough trucks to move as much freight as they needed, right. So when you can't find anything right, rates go up because you're willing to pay for whatever you can get and also for us as freight brokers to sell into them and to negotiate. The most important thing was just getting a truck as soon as possible that met the requirements to move their load.

Speaker 1: 24:47

And you hope that truck doesn't like fall off because they get someone else's higher paying load 30 minutes later and we would have to spend more hours making phone calls and trying to find the trucks which.

Speaker 2: 24:57

So we needed to charge more, and the trucks were in higher demand so they could charge more. That inflated all these rates, right? So in these tight markets, what's important to a shipper is very different. What's important in that is not price at all. Price is like third or fourth on the list. What's first important is availability and the right types of equipment. Then maybe service and price is like fourth or fifth, because when you're not moving it like it's the only thing that matters.

Speaker 2: 25:28

It always reminds me of like you can talk about all the problems in the world, but if you don't have food, that becomes your only problem. Like if you can't eat. None of the other problems matter, right. Like if you can't get a truck, nothing else really matters right Now. Flip side the past 24 months we've been in the opposite market, which means there's plenty of trucks for most of the freight to be moved.

Speaker 2: 25:45

There are definitely tight areas here and there and that's changing a bit, but for the most part the shipper's preferences aren't no longer. I need a truck now and they're hard to find. What's now more important is price, because if I can choose from 25 or 30 different options and they're all fairly similar, price becomes important Because if they're all of generally the same quality, they're the same types of trucks, same types of carriers, good maintenance, good service, they got the right insurance insurance and they're communicating well, they show up on time. When you got 10 options that are all doing all of the other important things, all you got left to do is negotiate price down because why not? It's the last thing, so it becomes the most important.

Speaker 2: 26:25

That's the market we're in right now. We are not in a service market or I can't find a truck market. We're in a market where shippers are looking for better pricing, better relationships, better communication and a few other things we'll talk about here. But it's a very different side of the same market, right? And the other thing, too right is shippers have this still. I would call it, they call it like my might just blink.

Speaker 2: 26:53

It's the bias, recency bias where the most recent thing seems like to be the next thing. So shippers are still really pretty aware that rates aren't going to stay low forever, so they want relationships with good brokers when this does happen, because it's not an if, it's a when, and maybe it's in a couple months, maybe it's the end of this year, a when, and maybe it's in a couple months, maybe it's the end of this year. But, like, they want to work with good people. Still right, even though price is most important. So that's why relationships right from the shipper's point of view, are still absolutely one of the most important things, along with price right now, which is a very different market than the previous two years right Prior to this, to the two right 2020 to 2022.

Speaker 1: 27:32

And, again, this is something that is cyclical in nature. We saw the boom in 2018, followed by the recession in 2019. I'm saying recession as in freight recession, and we saw the same thing 2020 till 2022, and then late 2022 until now. So I want you to be focused or I shouldn't say focused. I want everyone to be cognizant of this, because it's going to change and it's going to continue to be cyclical in nature. What we don't know is what forces will cause these and, because of those forces, how long or drastic will it be. But these are great discussion points to be able to have with your customers, right? So, if you, I think, some of the best brokers that are out there like you said, ben, relationship is always an extremely important thing, especially right now. But a lot of the best brokers out there they do more than just bring capacity to their customers, right, they give them insights, they kind of educate them and, you know, inform them about some of the trends and what's going on in the industry and what's coming up down the road.

Speaker 1: 28:39

Think about the things that we tend to have access to on a daily basis that our shipper doesn't necessarily have access to right in front of them, right, we have all kinds of data right. We have all kinds of data right. We have all kinds of information put in front of us that gives us insightful information about the market capacity, which lanes are hot, tight, that are loose companies going out of business, like all that stuff right, entrance and exits on the market. This is information that you can go give with your speak to your customers about that. You know, maybe some of them are like super nerd, they nerd out on it and they already know. But the chances are they're focused on what's in front of them, which is, hey, I gotta get these, these loads moved and they're not thinking about, well, what's it? Because, like you said, recency bias, they're going to think, well, this is how it's been the last you know year. It's just going to keep being this way. Well, no, no, the reality is you guys should enjoy and take advantage of the rates that you're getting right now because of where fuel is at, because of where capacity is at and how it's so loose. But the reality is every month there are more and more carriers and freight brokerage entities leaving the market, as we can see the data from the FMCSA's registration information. So when there's an equilibrium that's hit with that supply and demand. And oh, by the way, if there's any external factors, like if interest rates are reduced, for example, if there's anything geopolitical that causes an economic boom like you know, for example, like large regional war tends to have that impact those things will exacerbate that, that shrinking capacity, which could then lead to a tight market overall on a macro level. Right, so enjoy the prices while they're lower now and how easy it is to find a truck now, because we have different kinds of headaches to deal with, probably in six months or in 12 months or, hopefully for sure, by an 18 months from now. Just get ahead of that conversation so that's not just all of a sudden one day.

Speaker 1: 30:39

Yeah, your rates are 10% higher today than they were last week. Why? Why is that? You quoted me $2 a mile and now you're telling me it's $2.20 a mile. Well, yeah, I mean, this is what's happened with the market overall, because of X, y and Z went out of business and this happened over here and blah, blah, blah. Right, so I think it's good to stay plugged into where the market is, so you have some kind of leverage when it comes to negotiating your rates upward when it's realistically time for your rates to go up.

Speaker 1: 31:10

And the same thing happens on the other side with carriers. When rates are down and carriers have been I mean, pardon my French, they've been bitching at us for the last two years that we're, we're underpaying them and we're stealing money off their, off their table, like. I saw a post on Facebook the other day that was like um it's companies like DAT and truck stop and all these rating tools out there that's causing um brokers to undercut prices on drivers. They're the ones posting the rates. If brokers would just ignore those prices on there and start paying more money, everyone would win. And it was like somebody replied was like this is literally the most uneducated post I've seen all day long.

Speaker 2: 31:45

And that's not how that works dat is not making up rates. Those are like reported rates like blaming the weather guy for the weather.

Speaker 1: 33:11

So I went on a rant there, but that was that's. That's my little um, my angle on get this have this conversation with your customers and with your carriers, because it's going to change. And carriers it's a great thing, right, they're going to make more money. Their truck note is going to say the same amount, but they're going to start getting paid more once rates go up. Shippers well sorry, you're going to have higher freight costs, but your stuff is still going to get moved. Brokers will win either way. I shouldn't say either way. The brokers win when the rates go up because we're a margin-based.

Speaker 2: 33:45

For sure, and a lot of them are struggling right now too and going out of business All the same, with the carriers, right, because again, too much overhead, their margins are getting thinner and they need to operate more prudently and to be paying attention to where their expenses are. So, again, tight markets, I think, also work out the companies that should have been operating more efficiently anyway. It's just part of why, you know, capitalism works is in down markets. The weak businesses get weeded out, just kind of like humanity right over thousands of years. Right, like the strong get better when a down market, because they're forced to do things and to work harder, some people, some companies don't make it and then the better ones end up surviving and then new entrants come in later. Right, it's just part of the whole cycle and yeah, absolutely right.

Speaker 1: 34:35

Like, uh, steven just put in uh in the notes uh, darwin has a natural selection. But that's not far off, right? I mean literally, you see it with um. Look on a bigger scale. Like look at tesla right now. Right, tesla is a company that what? Two, three, four or five years ago just like dominated because they were like the leader in evs.

Speaker 1: 34:56

Um, they laid off like 10 of their workforce recently, or at least they announced it. They've had to. They've gotten scrutiny for like all kinds of issues with their full self-driving not technically being full self-driving and they've had uh people complain that their, their stuff is too expensive, uh. But then there's reports that come out because the report says like they're like the cheapest vehicle to maintain long term and now they're announcing a a new, cheaper line of EVs in the future. You have to adjust. Even if you're one of the powerhouse leaders in business, scrapping 10% of your workforce is catastrophic. You're basically taking people out of their job. But that's what happens. You can't just decide like, oh yeah, I don't care what the market's saying, I'm just going gonna do whatever I want. It doesn't work that way.

Speaker 2: 35:41

You have to play by the rules of our economy, the environment, exactly, and again, like, the only constant is change, right, like it's, the only thing that you can be certain of is that things will be different in the future than they are now. How they'll be different, how much different, when nobody knows, right, so've got to be prepared and work towards it. So to go, I think we can talk through like some examples on like negotiating, like rates on both sides, and I'm going to go through an example that I was working on like literally last week, actually a couple of days ago, right, and the thing that I found that was what I expected, was exactly what I asked a bunch of other of my agents, and we're running to the same thing, right, like, if you look and I get this question, I'm like, well, how do you quote business right in this market? Let's just start there, right? So I'm going to use DAT as an example and I'm basically going to use three numbers. You got your bottom number on DAT and rate view, you have your median and you have your top rate. Okay, now those are the middle, like 50, there's still 25 below that percent that you're not going to see, and there's 25% of rates that are above the top that you're also not going to see. So be aware, this is not showing you the high and low of the entire market. These are where most of the transactions are happening, right, which means this is where you're most likely to see your business fall.

Speaker 2: 36:59

That's the whole point of the tool is to give you an idea of what happened yesterday so that you can get an idea of what you think you'll pay today when your customer asks you. Right, it's not telling me what to pay, it's just telling me what everyone did up until this point, right? Yep, so high median and low, right. So what I've noticed is every shipper we're talking to in new business so we'll call them prospects, right, we're having conversations, we've engaged in a relationship, we've talked to them a handful of times. They're sending us some lanes to bid and we're able to start participating Not necessarily moving any loads yet, but we're real close to that line, right?

Speaker 2: 37:34

So this is what we're seeing on all of them is that all of them, their expectation is to pay below median or at it or very close to it. Right, it's a pipe dream, exactly. So now think about it like for a brokerage or anybody new out there the likelihood of what you're going to pay for that truck. The number I use is that median because it's the most likely number I'm going to pay. Maybe I get a truck that really needs that lane and it's a better fit. Maybe they'll take it for a little less. But the reality is like I'm going to probably pay pretty close to that because that's what everybody's been paying pretty close to right. So say, in this market maybe we're going to quote you know eight or nine.

Speaker 1: 38:13

Let me ask you this how far back are you looking? Typically just like, just for, like the listeners at pure education right, because when you're on, when you're on a rating until you typically can see, you know month, historically, months back. You can see the current, like there are the recent week. What are you trying to look at?

Speaker 2: 38:28

I look at the two lines I there's usually like a seven day or a three day average. That shows me where it's been very recently and I look at the trend line and where it stopped for the last month and I look to see how close those two are together.

Speaker 1: 38:41

Yeah, that's important and the reason why I wanted to bring that up is you have, like your, your big, like annual fluctuation in rates and that's going to typically depend on, like the region that that lane entails and also fuel. It tends to be like your big, big factors. But when you can scale it or zoom into like a recent month or a week or three days in some of these lanes you're seeing like real world as close to live as possible. This is how the market's been acting.

Speaker 2: 39:11

So the next, exactly. So the next thing I'm looking at is I will usually put that lane into searching for other loads to see what other brokers are offering for that lane right now and again. It'll give me some idea of what they think they can try to pay.

Speaker 1: 39:29

It doesn't mean that's what they will pay, but it gives me an idea.

Speaker 2: 39:33

And then sometimes I'll look at posted trucks to see how many trucks are in that area, because if there's only a couple, I know I'm going to probably pay on the high end. If there's a lot of trucks for that particular lane, I'm probably going to pay close to the average, right. So again, we'll quote for like a new customer, like sub, where we would want to be, and pretty close to like breakeven, like maybe eight or 9% off of the median is about where we'll quote for a new customer, cause we know we've got to be cheaper at first to be able to even start working with them and to build some of this trust, and also from their point of view, right, like they don't know me at all. So it's far more risky for them to give me a load than the people they've been working with all year. So they need some savings to offset the risk of me not doing what I say I'm going to do. Right, it's still just my word. So there's real economic reason why you're going to be a little cheaper for even your first month or your first few loads. So again gives you an idea of what we're quoting to, a prospect to get in the door.

Speaker 2: 40:34

The other interesting thing is I've gone and asked all my clients and all my agents that I work with hey, all the customers that you onboarded like three and four months ago, from like January and December, what were your average margins then and where were you quoting? And where are you quoting now? Right, like four months later, and it's almost every single one sees the exact same thing and it's what you would guess, right, as trust increases, so is their willingness to pay you a little premium to get good service and to pay you for your work, because now they trust you the same as the other people. So what I'm seeing is, after about three months of working with their customers, they went from making, you know, seven or 8% above median is where they were able to charge, maybe even a little lower right, real close to median in some cases, where three months later they're making 12% above median, like not a lot of money, but I mean they're making 150, 200 bucks on a load, enough to cover 50, 60 bucks in expenses.

Speaker 2: 41:31

The time to find the truck and that's still a fair rate to the shipper and the carrier is getting the bulk of it right, like they're only literally making the money to match the truck up with the shipper, which is what should happen. So you see the margins increase over time, as trust does. But it also gives you a good idea of like where you would expect to quote, I think new prospects. Because the other thing that I think no one really thinks about is when we're talking with a shipper, we're assuming we're competing against other brokers. But that's not true right From the shipper's point of view. When I put my bid in and Steven puts in his bid and say he's working for the asset side, steven doesn't have to add a margin to his trucks, so he can be cheaper than me and will be he's going to beat me and should be His profit.

Speaker 1: 42:20

Yeah, exactly.

Speaker 2: 42:21

So again, like that's why, if you've got a shipper and you're trying to ask them to work with you and your brokerage and you want to do business with them, they're looking at this going like, well, I pay my carriers directly cheaper than you're asking, and my other brokers I might pay what you're asking, but I know them and trust them and I don't really need you that much right now. So you've got to either convince me why I should want to work with you by building a relationship and trust, talking to me, getting to know me, helping me understand why you think you should be working with me, all those things. Then you get to that point right which?

Speaker 1: 42:57

is. Let me have something in here. Right, because they're. There's two. Okay, when you we just talked about quick scope earlier. Right, like you know, newer product, great product, but they've got to prove themselves. How do they do that? Well, they offer a free trial. Right, because so they're.

Speaker 1: 43:15

They're going to basically operate at a slight loss for a little bit to gain your trust, right? Not saying you have to take a loss as a freight broker on your, on your business, with your customers, but don't expect to be making fat margins on a brand new customer, right, like, hey, I am going to and be transparent about it. Like I am going to basically work for free for the next week on your loads because I want a chance to be at the table when it comes to quoting your freight in the future. Right, keep in mind that these are not realistic rates. Right, they're going to be higher, but I'm basically working for free because I want you to see firsthand and experience the level of service that I can truly provide you. And if you can't actually deliver that service, well, that sucks.

Speaker 1: 43:58

It's not going to do it, but that is one way. Another way if it's a very price sensitive customer, there are creative ways to find cost savings and some of this stuff gets well. It definitely gets way more advanced, right. But you could look at stuff like drop trailer programs for like trailer pool. You could look at consolidation of certain shipments, rerouting some of their routing guide to try and drop mileage. If they've got partials, you could look to move them on a hotshot instead of, or partial instead of a full dedicated truck. I mean, there's all kinds of ways, but the reality is, when you start to introduce those ideas and solutions, even if they're like no, that's that we're not going to go that route, like you're adding value by showing that, like you're thinking outside the you know the box that everybody else seems to be trapped inside of.

Speaker 2: 44:54

I'll give you a couple of easy ones. And this hit me too. Over the weekend I was talking to the client about this is it's really understanding what's important to your customer, right Is the most important part of this whole process. And asking questions. And what happened was we were at a restaurant for breakfast my daughter, my wife and I on Sunday, and I asked for like the smallest cup of milk they had, because my daughter's four and again it's more of like wanting to make sure it doesn't get spilled, as opposed to like her holding a large cup. And the waitress brought me over like a normal size cup filled with milk, right. And she says and I said, oh, I'm sorry, like do you have something smaller? And she looks at me and goes oh, don't worry, it's the same price as the small one, right?

Speaker 1: 45:40

and but you don't care, right, it's, that wasn't. That wasn't what you wanted, that was when it hit me and that situation before.

Speaker 2: 45:46

Yeah exactly and I thought and I was like I kind of smiled and I was like it's okay and like we dealt with it because I didn't I don't think they had any other cup, but the point was like the lesson in my takeaway, like I made a note Cause I'm like this is assuming, instead of asking what is important to me, the customer, right, what was important to me is like I can give a shit about the cost, like I would have paid more money for the cup that wasn't going to spill. That made me less nervous and had to pay attention less. Right, the price wasn't as important as my specific need. They assumed I cared about price, because that's what most people said, and then there was a disconnect because that was an opportunity for them to make more money if they wanted to. But you see, like the willingness and just the need was never understood to your point, right, like, and it's just so from the shipper's point of view. Right, what you were just saying is you want to really start to understand what is important to them. And I'll give you a real example of how you can be cheaper without having to do even anything complicated and sometimes asking questions. So this happened last week working with a shipper and they were like yes, this lane has been really difficult and we're trying to keep prices down on it. I'm like, okay, where are you looking to be? And then we start to ask them more questions and get to know them a little better. They open up a little bit.

Speaker 2: 47:03

And I asked him. I said hey, are there any specific days of the week that this load keeps going, that this load is going out? And they're like well, what do you mean? I'm like well, do you always ship it on like a Monday or Tuesday, wednesday Does? Does it vary? How does this load actually fall within a weekly basis? Now, most of the weeks it goes on a Monday, tuesday, but the third week of every month sometimes it goes on a Wednesday or Thursday. And they said let me ask you something. Do you see a discrepancy in what you're paying on the third week, on the Wednesday or Thursday? And they said I think maybe we did. And then they looked and they were paying more on that day of the week and what it was was there was where that lane was was a very like not populated area and there were lots of trucks there Mondays and Tuesdays, but on Wednesdays and Thursdays there were very few trucks, so the rates went up.

Speaker 2: 47:52

And just by asking that question I was able to kind of look, and I happen to know that lane and I knew that we had harder covering that load on a Thursday than on Monday and Tuesday. And I was like, yeah, I've kind of seen that where it seems like there's just a lot less trucks there and we pay a premium on Thursdays every week. Let me ask you, I mean, are you able to plan a little ahead to make that third week, make that load go out on Monday, tuesday, like your first two weeks of the month? And they went, yeah, I think if we move some things around. And I talked to the other guy in the warehouse like we could probably make that work, and I was like, well, hey, great, like if you can do that, that likely solves that problem.

Speaker 2: 48:26

You were telling me they didn't give me the load, I didn't move that load and I didn't physically solve it, but by me asking the questions I was able to show them, just like you said, there are ways that they can just do some little things that help them get better operations. My trust in that relationship went through the roof. I don't need to get a load in that call and I need to get that load. I needed to get them to understand, whether it's me running a trial load, one or two, improving it, or just through a conversation, that I can add value in ways other than just getting you a truck for a load. That's really how you find the need and can find that service even in that price context.

Speaker 1: 49:04

Yeah, and I kind of go back to what we were saying earlier. It's not that a traffic manager, to kind of generalize them all. It's not that they're ignorant, but they have different things that they're focused on and it's not trying to analyze why one week costs more than another week. They just, overall they're probably given their left and right limits of hey, here's what we are paying on average try to get it covered for this and if it's higher, the third week of the month, and they don't know why, they're going to start giving pushback to a broker without having another context. But by you asking that question, you helped them identify something that they otherwise would have had no idea about.

Speaker 2: 49:44

Right, that's pretty cool. And here's the other side too, and I know we're kind of wrapping up so I don't want to go deep into this. But this is also true on the carrier side, Right, and I'll give you another example. So another shipper we're working with, early on maybe we've moved a load with. They're like, hey, we've got 10 loads a day that are going to be starting in like three weeks, then we'll be at 15 loads a day, but right now we've only got three or four loads a day. And again they want to pay, you know, median rate or below.

Speaker 2: 50:13

So what we're doing is asking them more questions to understand the pickups, the deliveries, the actual time it takes to load, to unload when they have the loads, to really understand as much as we can. Because then we go to the carrier side and the same thing is true. Everybody always wants to argue that the carriers and the brokers all just argue the rate side of things, right, but the reality is is the reason, economically, that everybody argues the rate is because money is the only thing that catches, everything else Meaning like for a driver To argue for $200 or to wait for three hours to load. Most drivers would rather not get the $200 to load within an hour. It's more important to have your wheels moving in under an hour than to wait three or four hours and get the extra $200.

Speaker 1: 50:59

Yeah or to chase something 100 miles away. The best way to make money as a driver is to be driving and getting paid to drive. Big money as a driver is to be driving and getting paid to drive. Two terrible ways to lose money as a truck driver is to sit there not moving when you should be moving, or to drive or, even worse, to burn fuel driving empty somewhere else.

Speaker 2: 51:18

And then a little bit Not getting paid to do it so yep so, but when you think about it, there's very little trust with a carrier you've only talked to once, that just called you once and that you might not have worked with. So they don't believe you at all. You might have a shipper that actually can load them in under an hour and the receiver gets them unloaded in under an hour and it's very close and this lane really works for them and the load's lighter than normal and it's a fast load and unload right. So you have the criteria that would make it valuable to a carrier. The reason they won't give you a discount is they don't believe you. They don't believe that shit at all. They think you're lying, you're going to send them there, they're going to wait forever and then they end up with the short end of the stick, not getting paid for either or Right. So when you're able to talk more with your carriers, use them more, build relationships with them, and you can get them to see you can help them in ways outside of just paying more for every situation, like both of you can win. And it also goes back to volume, right.

Speaker 2: 52:13

So, like we were calling a lot of carriers, this lane was LA to Washington, right, and we found a bunch of carriers in Washington running the other side of the lane that were using spot loads to get back every week. Their rates were varied. Sometimes the shippers stunk. They sat there forever. It didn't work well. Now sometimes they're making $1,700 or $1,800 to get back, and then sometimes they're making $1,200 to get back and a whole bunch of headaches.

Speaker 2: 52:39

So when we were talking, we're like, hey look, if we can give you five loads a day heading back up, can you meet our shippers rate of like $1,600? So it's a little less than their peak but a lot more than their lowest and they can rely on that every week. The timing, the predictability and working with the same places, which are all very valuable. But you need to be able to have enough conversations and to be able to actually build a relationship with a carrier to be able to use the other things outside of money, because without trust, money is the only thing they trust. Pay me more. I don't believe anything. You're saying right, yep, and I think it's a really good lesson for both sides of brokerage to realize there are lots of things that are important to your shipper and to your carriers and there are lots of ways to be able to make situations work outside of just paying more and paying less.

Speaker 1: 53:23

I want to. I want to wrap up with a, a challenge, right, as a takeaway and actual actionable item. Okay, the next and this is gonna be for both the shipper and the carrier side the next time that you talk to a customer and you get pushed back on price, I want you to try something that we said on this call, whether that be to have a conversation that you've never had about the market and where it's at, and ask some questions to uncover more information. Or maybe try to ask questions to try to uncover an alternative option, or ask a question to find out priorities that you wouldn't have known otherwise. Right, just see what that does to your conversation with your prospects.

Speaker 1: 54:04

That it wasn't doing before, and the other other side is with carriers. Right, that it wasn't doing before. And the other side is with carriers. Right, if you have a carrier that's giving you pushback on price or whatnot, ask some other questions, right, you wanna what's important to that carrier, right? Is it where they're trying to get to? Is it when they're trying to get there? Is it just price Cause they don't really care? Those things all matter, and I know we didn't really get into that part of it today, but those are huge takeaways that if you, if you're not doing that now, I challenge you, try it the next time you're on a call with those folks.

Speaker 2: 54:41

Correct, and I and I. The only thing I want to add is right, you're going to find groups of every category, Some carriers that are perfectly happy playing the risk game of trying to find the highest paying load every single day. Once they're empty, and hey, they can go with that business model. You will find some that really value predictability and want to run a more stable business. Those are usually the fits that I'm trying to find to work with right and again, you'll find everybody in between. But when you ask more questions and you start to understand them, like, you just end up doing better business because there's lots of ways for everybody to win. But if nobody trusts each other and nobody knows each other, then the only thing left is rate and that's all everybody bitches and argues about. Right, and that's why relationships are by far the most important aspect of the business, for sure.

Speaker 1: 55:29

Well, that's a good discussion Way to dig in on both sides there. Customer privacy is really the driving factor right now. But cool man, what else we got coming up? We got a Blue Book episode in a couple of weeks. Yep and talk some more produce season stuff. Now that's officially produce season kicked off earlier this month.

Speaker 2: 55:54

I'm really excited about that too.

Speaker 1: 55:56

We're going to be in the logistics lounge in a couple months Got to meet with Pedro right Yesterday, Meet that, meet those guys.

Speaker 2: 56:05

But yeah, I'm pretty excited. The DAT carrier course should be out soon and I'm going to be anxious to kind of see how that plays out, something Nate and I've been working on for probably years now.

Speaker 1: 56:17

and that's wrapped and that's going to be a long slow burn. Very long slow burn.

Speaker 2: 56:21

We're really excited to be able to get it out there, so that's going to be really cool too, definitely.

Speaker 1: 56:26

Good stuff man.

Speaker 2: 56:26

Final thoughts whether you believe you can or believe you can't you're right, and until next time, go bills.