Negotiating, Low Margin Freight, and Commissions | Final Mile 74

Speaker 1: 0:19

Welcome back for another Q&A session here on the final mile. Send your questions in. We'll answer them pending the amount of questions we get in the time we've got. So we got three today. If you're new, make sure to check out all the other content Freight 360 dot net, including Freight Broker Basics course for an educational option. It's a great training solution for small teams or newer brokerages. And check out the sponsors in the description box to help support this channel. You've got Quickscope, levity, blue Book Services and DAT, who are repping their shirt today. All right, first question we've got here is as a broker, how do you politely convey that the rate is non-negotiable? Ben, you want to take a stab at this and I'll give you my two cents. So well, I guess. Well, you set the tone here, paint the picture here and it's uh, you're talking to a carrier and they're trying. They're always like you know. Um, give me, give me 200 more, boss, and make it happen for you all. I got got's in it.

Speaker 2: 1:22

A thousand bucks. Customer won't go above this.

Speaker 1: 1:27

Can you make it work? Now, what if the carrier? Because the carrier knows typically you're going to have a margin in it. You know what's the? So I'm trying to think. I had a conversation the last time I had one where a dude was pushing back was probably like two months ago and it was paying above average as it was and still wanted more and more and more. Um. So I'm trying to think here, like, how do you? Is there something you can say outside of that's all I've got in it, you know? Or do you just move on to the next one?

Speaker 2: 1:58

or no, I mean, usually I explain the situation like I mean, if that is literally all I have in it, like I'll explain why I'll be like listen, like I'll, I've gone back to my customer. This is the most they're willing to move it for. If they can't move it for this, they're just going to push it until tomorrow, and like a lot of times that's the case, right. So, like I'll usually provide like a larger situational explanation, I guess, as to why, like I can go above it.

Speaker 1: 2:23

That's why I was going to add in too. I also go to the other side. It's like, why does the carrier want more money? And oftentimes you might find out that they have to deadhead and they're like, well, I've got to drive two hours, I'm going to need some extra money. It's like, well, hey, we're probably just not a good fit at this time. And I give some market analytics, like, hey, based on the market right now, this outbound is not as tight as that rate would be conducive for. So this is the rate I've got. I know if I go back to my customer asking for more, kind of to your point, they're not going to go any further up on it, because if I can't get this rate on it, they're going to go to my competition or probably find an alternative asset-based carrier directly. So it's just transparency, right. And that's, I think, in the current market now, versus what we saw three years ago, versus what you'll see in the future, when rates are in the markets are different. The conversation sounds different because you I mean we had this. I'm thinking back to like May, may 2021.

Speaker 1: 3:31

I was down at our trucking terminal and, man, so that's our, we've got a small brokerage operation there that it doesn't fall under my you know my purview of the company, but I was just, you know, I just kind of like talking to this guy that runs it and like, hey, what are you seeing? And he's like man, I can't wait till this market flips and these carriers are all pissed off because now they're not getting paid what they want. Because, like basically carriers, it felt like we were being gouged by them for a while. But the reality is it was just supply and demand, right, yeah, we needed them. There wasn't a lot of them available compared to what we needed. They got the rates they wanted. So it kind of goes both ways is the way I see it.

Speaker 2: 4:14

Yeah, and the other two things is one before I'm negotiating, I'm always asking hey, when and where is this guy going to be empty? So I know what his deadhead is. Because if he is coming from farther away, like I'll have a different conversation. Right, they're the only truck and they're that far away. Like, maybe conversation. Right, if they're the only truck and they're that far away, like, maybe I will go back and see if the customer will pay deadhead, if they tell me, hey, I'm going to be empty in the city.

Speaker 2: 4:29

And to your point, I'm like okay, well, like, why are you looking for more than what I got quoted from two or three other trucks yesterday? That's usually what I ask. Like, most of the time, what I'm presenting information back isn't like DAT or any rate system. I go this is what other carriers ran it for yesterday. Why are you looking for? Is there a reason? Like you need more than what everybody ran it for yesterday? Like, what's the situation here? Because that's what I'm really trying to get to is like you just want more.

Speaker 2: 4:58

To your point, like, is there a legitimate reason? Like, oh, it's by appointment. I'll be empty and have to wait six hours for that appointment. Okay, like that there a legitimate reason. Like, oh, it's by appointment, I'll be empty and have to wait six hours for that appointment. Okay, like that's a legitimate reason why you're asking for maybe a different rate. Okay, like, maybe I can see, maybe I can't right, but I'm usually comparing whatever they're asking to to what I just paid, right, like, what other carriers that are comparable or willing to run it for yesterday or this morning? Are you looking for a number that everyone else was willing to run it for?

Speaker 1: 5:26

Yeah, and I think back like so the the listener asks like, how do you politely convey it? And, um, the I talked to a guy that was we weren't even in the same ballpark, I think. He was like asking for it was like 800 or a thousand more than than, like, our target rate, and I I was just like, hey, we're not even in the same ballpark. I appreciate your interest, but we're not a good fit and I just moved on. You just move on because, depending on the lane you're typically going to know, yeah, I'll be able to cover this pretty easily, or I'm going to have to, you know, really stretch on this one.

Speaker 3: 6:04

So, so one of the things that one of the things that I use in my accounting department hates this with a passion is when someone asked me, like, if I post a rate for a thousand, they asked me to save 1300, right, I'll just tell them look, here's the deal. It's $1,064 and 23 cents. That's what I can give you, that's it. You can take it or leave it, and more often than not they'll take the odd number and then I've got to scratch it down really quick because I just pulled it out of my head. And then that's what? Because, for whatever reason, that odd number with cents just gives them a little more. They just feel more comfortable about it than just like $1,100 or whatever.

Speaker 1: 6:43

Yeah, we talked about this in the past, Ben. I remember you and I talking about the psychology behind the odd number. It makes them feel like they're getting like every last penny out of you, right.

Speaker 2: 6:53

So interesting and, to be honest, like that's the game, like they should be trying. That's what creates the free market. No-transcript. Does the shipment need moved? Bad enough to pay what the carrier is asking?

Speaker 1: 7:34

Yeah, and that's all about giving context to both your carriers and your customers on especially your customers Like here's the option we have, here's why this costs what it is. If you want to wait longer, we will. There's a likelihood that we'll be able to find someone who's not going to want extra money because they're not going to have to deadhead for two hours. Um, so yeah, good stuff. All right, we'll move on to the next question. Here we kind of uh, hit the nail on the head there.

Speaker 1: 8:02

Next question I've done a lot of business with my customer, meeting their needs by being the cheapest option and maintaining those rates all year. Would it make sense for me to approach them with an offer to lower rates even further in exchange for guaranteed high volume freight? Is that a realistic strategy? My goal is to control a majority of their freight, knowing that they currently work with two other freight brokers and carriers handling the same shipments as I do. All right, I've got a. I've got a couple of thoughts here there is, so I call this the high, high, high volume, low margin strategy, which means that, yeah, I'm going to get a lot of your freight and because I'm giving you a deal on it, so it makes sense for me to monetize it that way. The benefit a lot of your freight and because I'm giving you a deal on it, so it makes sense for me to monetize it that way. The benefit a lot of volume, it's familiar freight, it's one customer that has one way of operating consistency, right. The downside it's low margin. It could be a burden on my cash flow. It takes up a lot of my time.

Speaker 1: 9:02

So now you have the, you have, like your unknown factors of like how fast do they pay? How many headaches do they have? Can you get some dedicated carriers to make it easy for you? It depends. Now, when it comes to the listener said they've got two other providers and they want to get the majority. I don't think it's smart for a customer to put all their eggs into one basket and I don't know that the customer would agree to do this.

Speaker 1: 9:30

Even if your pricing is a little bit lower than where it is now and if you're already winning business at low rates now, why would you try to lower it even more? Just try to build a relationship and figure out lanes that are best for you. So my gut tells me no, I wouldn't go at this strategy. I try to diversify my book of business because it could be a burden. But if you've got a well-developed brokerage and this can be a low touch, low headache, predictable, you know dedicated carriers and their payments are, you know, commensurate with their lower margins like you know, they're paying quick enough that it's OK to have lower margins then OK, sure. But you know I was never a fan of chasing the low margin freight. I think that's a new broker's game. I think that's a broker into a new customer's game. I don't know what's your take on it, ben.

Speaker 2: 10:22

I think the first question I think is, if somebody asked me this is why is that your goal? Is your goal to do more loads in total as a broker? Okay, well, if that's your goal, like I would probably do the harder thing of trying to get more shippers is the first thing I would answer, right, the second thing is I mean this is pretty common Is it like when it's really hard to get shippers, you try to get more from what you have, which is reasonable, right? But to your point, like there's also a lot of risk. Even if you got all their freight and the market moves at all, you are going to lose a lot of money, that service is going to fall apart and you're going to lose all of it. So it is very risky.

Speaker 2: 10:58

Even if you could achieve it, what I would actually do if I wanted to grab a larger portion of that shipper's freight is I would solve both problems at the same time, both of what you pointed out, which is, find one lane, find a carrier that is willing to run that every week and then go to the carrier and say, hey, if I can get you this load every Tuesday, do you think I can come down a little bit on your rate Because I'm going to offer the same thing to my customer.

Speaker 2: 11:22

To try to get you more, I wouldn't change my margin. Be like, hey, if you can knock 50 bucks off this load, I'm going to go to my customer and see if a $50 discount gets us this load every week Because it mitigates my risk of the carrier market going up and down, because if I have a dedicated truck my rates don't change and, two, my workload gets easier. Same load goes to the same carrier every week. Now I can go back to the shipper and that makes sense for me operationally, profitably and risk-wise. And then I would go lane by lane trying to line up dedicated carriers and seeing what we can do to benefit both. The carrier would benefit if that makes sense for them to do it. Maybe that lane is really good, maybe they're willing to run it 50 bucks less, so they get the same load every week. They know when they're in, when it takes to unload, and the shipper then can benefit from it. You benefit from more volume but the same margins. It's a win for all three people. That's probably how I approach it.

Speaker 1: 12:13

Yeah, yeah, I agree that's a good point is trying to get the committed carrier. The real danger here and I dealt with this with a bid recently is that if you go for an annual bid right now and you're trying to be really aggressive on price you're making, and if your only way to adjust that rate is by a fuel surcharge, you're putting yourself in a really, really vulnerable situation, because just about everybody expects rates to at least go up a little bit over the next 12 months. Right, but more so, come up a fair amount. Right, it could be and I'm just spitballing it could be 20 cents a mile on average across the board. It could be 50 cents a mile, could be 10 cents a mile, right, no one expects rates to go down.

Speaker 1: 13:04

I don't know of anybody that does, at least, at least on average. So if you're going to lock yourself in at the low price for an entire year, it's a dangerous place to be right now. So, but customers are loving bids right now. I did a couple of this week with folks that were more on the mini bid side. You know, six weeks, three months, something like that. But yeah, all right. Final question I'm an owner. This this one actually came from Reddit. I saw it and I was like this no one asked us specifically, but it's a really good discussion, so shout out to whoever runs the Reddit freight broker page.

Speaker 1: 13:43

I'm an owner of an independent freight agency. My partner and I both came from TQL previously and we are finally at the point of wanting to bring in other brokers, preferably with established books. We currently are in the position to pay 50% commission on both full truckload and LTL. We have two part-time brokers who aren't super huge and are still growing their books. Is 50% enticing enough to brokers with bigger books? What are other agents paying or getting paid?

Speaker 1: 14:13

All right, I'll try to answer it very simply and say I can too. No, my answer. My answer was going to be yes, um, depending on what you're going to do for them. So, and here, and here's why I say this because I literally know people that pay 30, 35 percent to a subagent because they're going to offer them operational support or sales support or some kind of mentorship, or this person that they're going to bring on literally has no idea what an agency can make on their own Right. So, like a great example and I'm not endorsing this by any means, but I know of people that have been a 70 percent agent or a 65 percent agent or whatever, and they will go and hire one of their old buddies who's literally under a non-compete Don Solicit and say, hey, I'll bring you over, who's literally under a non-compete Don Solis, and say, hey, I'll bring you over, I'll pay you this lesser amount and we'll get you in here and we'll kind of shield you from the agreement for a little while. I've seen that, not endorsing it, but it's realistic and it happens.

Speaker 1: 15:20

It just depends on what you're offering and what your value is. Because if you're going to get paid 70%, which I think is like the industry top average for a really, really good agent, that company is going to expect top notch business out of you, right? So 50 percent, something that they wouldn't otherwise get, which could be helping them book their loads, which could be after hours or weekend support for them so they can actually have some time off. It could be helping them grow their book of business or mentorship or whatever that might be. But if I'm these guys and we came from TQL and we've got a couple of guys with established books that are growing, my goal is not going to be to go out there and get a bunch of other established brokers and try to pay them less than they're worth.

Speaker 1: 16:14

Why don't you just take your expertise and like grow, grow a little office right, hire someone that you think is a stud at communication and building rapport. Think about, like you're you know, those bartenders that just make you feel, or like those waiters at a restaurant, make you feel like, yeah, it feels good to be here and talk to this person and just show them freight, have them come sit with you for a week or two weeks or, you know some, a couple of days and be like, hey, you want to make some serious money, all right, I'll teach you some of the freight side and the sales side and then we'll put you to work Right and you could pay somebody obviously 50 percent or much less. Doing it that way, that's how I would do it, that's how I've seen people do it. But yeah, 50 percent, just straight. Commission, you're not going to get an experienced agent to agree to that amount when they're being offered 60, 65, 70 elsewhere. We agree on that part Agreed.

Speaker 2: 17:13

I mean I was being facetious and I think, like recruiting is sales and what we were talking about in the podcast, sales 101, ask questions, find a need. Once you find the need, then you can provide the right solution for it. Right have been agents that are, you know, cradle to grave, getting 70%, like they might not have been able to stack away enough cash to hire an assistant. They might be doing and working 12, 14 hour days. It might be a person that just had a family and like their life is changing or where they want to be and how much time they can allocate to this. They don't want to be answering the phone 24, seven. Right, Person like that is getting 70. If you can provide operational support, 50% makes sense, right, Maybe they get their life back. Maybe you're able to provide the operational support that they don't have the cashflow to be able to do. Maybe I mean it could be you named like half a dozen.

Speaker 2: 18:07

There's so many different reasons why this can make sense, Like I've seen go at some, go at 40 for that reason. I've seen some go at 35%, where agents are like listen, I don't want to cover my loads anymore, I don't want to do my track and trace and my checkups. I just want to deal with my customers, hand the loads over. I worked with somebody last month that has an agreement where, like the agency, if you will, also quotes their freight. So like I don't even want to deal with this, Like I just want to kick the loads over.

Speaker 2: 18:33

You tell me what you want me to quote. You can run them, you book them, you invoice it. I'll just go hunt. That is a different percentage, right. And like I think it really again starts with understanding who you're talking to, where they are, what they're looking for and maybe what they aren't happy about in their current situation. Because your point, like I've heard I don't speak to nearly the amount of agents you have, but it's like no-transcript grave agent making 70, give them 50. And I'm like, well, that's a little harder, but you find one. Again to your point that is, having any number of issues or pains that need resolved. Like now, all of a sudden, you can move that commission because you're providing other services.

Speaker 1: 19:41

For sure. And the last thing I'll say here is they asked what are other agents paying or getting paid? Literally, all you have to do is like just Google, like freight agent, or go to like a job board, like go to Indeed or ZipRecruiter and just look for, like freight agent jobs, apply, talk to a recruiter as if you were interested and find out, like literally. When I built out an agent program, that was a pivotal step was to like know your competition, like literally. If you don't know what's out there, you have no idea what you're up against.

Speaker 2: 20:15

So best, advice, best advice so far right, Find out what everyone else is doing. Just go out and test, ask lots of questions, see what else is out there. It'll give you a good understanding.

Speaker 1: 20:27

For sure. I literally know a dude who he gets paid 70% at a company and he has a guy that works for him that gets he pays him 65%, so he makes a five percent override and all he does is like help him out when the dude takes time off and that's like their agreement and that works. He's like, yeah, I don't want to work seven days a week, 365. Like I'm gonna work, you know, I'm gonna take, I'm gonna go on vacation with my wife and my kids and like do this and like, yeah, I know that I'm covered by either you or someone else on the team, so I'll take 5% less for that.

Speaker 2: 20:57

So, and I think again, like the way I try to answer any of these when I run into these situations is like all the percentages is just the ability to negotiate what you're getting and what you're paying for.

Speaker 1: 21:09

Right.

Speaker 2: 21:09

Like it's just the incentive, right. And like I mean I saw that recently with another company I was working with, where I was like, look, these guys are like hey, I want you to help with this, I'll give you 5% of everything. Like normally you wouldn't see an incentive like that, but in that scenario it worked for both people right. Because they're like hey, if I got a bail to go run to do something in the middle of the day, I need to know you're here all the time. So I'll give just a way to negotiate the gray area between what somebody is providing and what somebody needs, I think, and there is no standard 100%.

Speaker 1: 21:44

All right, great questions. Keep sending them our way and we'll continue to answer them.

Speaker 2: 21:46

Any final thoughts, whether you believe you can or believe you can't. You're right no-transcript.