Who Pays When Freight Rates Rise | Final Mile 143

Welcome back for another final mile edition here. We've got some listener QA. If you are brand new, check out all the other content at freight360.net.

You'll find the Freight Broker Basics course in there as well if you're looking for an educational option. And check out the sponsors in the show notes to help support the channel. All right, Ben, let's get into it. Uh, some of these are lengthy, so I'll read them and then we'll break them down.

Uh, first one coming from our Facebook group. With higher rates these days, whether it be because of fuel prices and surcharge or because of fewer trucks being used, the question is are the shippers complaining or have they been paying the higher rates all along anyway, with brokers keeping what carriers haven't been getting? Or are they hurting by paying more for shipping because fuel prices will eventually drop at least a little? But I hope that rates continue to go up.

All right. This sounds like it might be from a newer carrier because we have seen market changes forever in freight, and I can guarantee you a shipper is not absorbing any volatility. When transportation costs go up, the end user is ultimately who's like it's us, the consumer, right? Like that's who's ultimately paying more for goods on the store shelves.

Um, there is definitely, and I'm curious your thought, because whenever I've seen changes, you usually see shippers react um like when the rates go down, they typically want to pay less for transportation. And they typically do because brokers are competing over getting their business. Um, and when rates go up, they push back. Like I think I told the story of publics telling us like take it at a loss or I'll find someone else who will.

And it's like, you know. Well, I mean, eventually, like when when they have to get products moved and rates are higher, um they're gonna pay it, but their customer, whoever's buying their stuff, is gonna pay more. And then whoever's selling that good in the stores is gonna sell it for more, and we as the consumer are going to pay more. So I that's my take on it.

Um, what do you I mean, which kind of your thoughts? I mean, well, there's a few things with this that are interesting. Um are shippers complaining or have they been paying higher rates all along anyway, with brokers keeping what carriers haven't been getting? So, like, there is clearly a misunderstanding as to how that works.

Um, if a shipper needs a truck, the reason uh they're not even paying me necessarily more than they would pay a carrier directly is because I found a truck that really needed a load and needed to go somewhere and didn't have any freight. And by getting and matching that shipper that needs a truck with a truck that doesn't have a load, the shipper pays a little bit more and the truck takes it a little less below market because that carrier didn't pay for a sales team to develop the relationship or invest in enough trucks that it made it make sense for that shipper to work directly with the carrier.

So for that, there is a difference in price, not somebody just taking something in the middle. It's matching up a need on both sides in a short period of time that we get paid for, not taking money a truck should have got and charging a shipper something they shouldn't have paid. But the second piece, like, yeah, as rates go up or supply and demand, everybody that's trying to pay less will fight and claw to pay less and will until eventually the people losing money stop and then they've got to pay more.

Like you can't fight the market. It takes a little bit long in time for those rates to go up all the way to the shipper. That's why you'll see the spot market increase, but there's a time of like 45 days or a quarter for contract rates to start going up. But if they stay up in the spot market long enough, eventually all of the shippers pay more money.

Like it's not brokers again, like Ken Adman explains this really well. Like, carriers are price takers, so are brokers. Like, we don't determine the market. We look at what carriers are willing to do the work for, and we don't determine that.

It's how many trucks are there. If four trucks are willing to do it for three grand and one guy wants four grand, we don't determine what that rate is. It's the other three willing to take the load for three grand that determines the rate. Yeah.

It's other carriers that determine where the market rate is, not brokers, not shippers. And when there's not enough carriers willing to go to work for that dollar amount, to your point, the shippers' loads do not move until the shipper is willing to pay what a carrier says they're willing to accept to do the work. Like, yeah, I had a one of my bosses early on, Mike, he for like the last 10 years, I've been following certain metrics and brokerage, and it's because of he told me he's like, this is important stuff to look at.

He said you should look at your average revenue per load, your average profit per load, and your average margin percentage. And as long as you have a large enough sample size, you know, thousands of loads per year that you're moving, and you can look at that, he goes, that'll help you understand if you're becoming more profitable, less profitable, et cetera. And what I have noticed is over the last dozen years or so that I've been in brokerage, our the margin percentage on average has stayed pretty stayed pretty steady.

So when rates go down and drivers are complaining, we're making less money per load. When rates go up and drivers are getting paid more and they're happy, we're also making more money with them. So we I've always seen it like we're kind of identically in this together with carries. Like we we like when we get to pay you more because we're charging our customer more and our margin at the end of the day is a higher dollar amount.

So it's like a win-win. And when rates are down because the carry the market was flooded with a lot of carriers that didn't need to be there, or you know, you know, manufacturing's down and rates are lower. Like our we're margin-based. We don't have a flat fee that we charge that, you know, we I don't know, man.

It's just like I think there's just a lot of misunderstanding from um people on both sides. So that's it. It's almost all misunderstanding. It's like, oh, well, I that's the money I could have got.

Well, define could have. Well, like if that shipper worked directly with me, then they would have paid me that. Okay, tell me what work or cost goes into you actually doing could have. Well, then I would have needed to pay for a sales team.

Then I would have needed a guy in the office to call all these shippers, but like I could have made that money. Okay. Well, that money you could have made, wouldn't that have gone to hire the person to do the thing we just did for you? Well, yeah.

So then no, right? Because one way or another, like if you're hiring somebody to go find you the work, or the person that already found the work is giving it to you, like you pay that cost one way or another. Whether it's somebody in your office at the trucking company pays, of which they do pay, or it's a small owner op that's paying a broker that did the work to match up freight that you couldn't have gotten because you only have one truck. Like large shippers do not work.

Like Craig pointed this out when the Supreme Court ruling is like he thought like small carriers are gonna get hurt by this because smaller brokerages won't have freight from larger shippers because of the liability. Well, that's where small carriers get freight from small brokerages that are working with the huge companies. Well, those huge companies aren't gonna work with a motor carrier that has two trucks because there's too much work to just pay tens of thousands of carriers individually for every load you run.

Like, that's why large companies with good freight are available to smaller carriers because there's brokers in the middle. Like it's not taking anything, it's literally providing something that would not be there otherwise. Exactly. All right, next question.

What is the next step when a broker doesn't respond for weeks? Phone calls and emails about an updated Raycon adding detention. Even if via text they said they would send the update, any response is better than none, even if it's to say that it was denied for some reason. Okay.

If a if a broker agreed to pay a carrier or something and the carrier um and then the broker doesn't pay it, I mean, I think the easy answer is like file on their bond. They're gonna have to respond to that. Um the good thing here is they did have some sort of recorded communication. They said via text they would get an update, didn't mention what the amount was.

Uh detention is kind of an interesting one though, because it's oftentimes determined by the shipper and the broker, like it's our job, I would say, like, to be very clear and up front about what the detention policy is for this shipper and that you don't determine the approval or denial of that policy. And that it's important on the carrier to have properly documented times if they want to be able to uh request detention. But if you had it approved or the broker said they were gonna pay you and they're now not responding, file on their bond.

They're gonna have to respond to that. That's that question says phone calls and emails about an updated rate con adding detention. Didn't respond asking for it. Even though via text they said they would send the update.

Oh, what is update? You need an update like did they approve the detention or not approve? But this is the thing you always joke that I have like some like proverb for is like a provo an ounce of prevention is worth a pound of cure. Like every time you book a load as a carrier, ask the broker, what is the detention policy for the shipper?

If it's not on the rate con, please send it in an email. How many hours free? And what does this shipper pay after this? And what is required for approval?

Do I need the shipper to sign the in-and-out time and a signature, one signature, my signature? What do you need? If you ask this at the time of booking and get it in writing when the broker still needs you, right? Before you've signed this, they'll give that to you.

So now when tension does occur and you send it and they go ghost on you, you can actually file on the bond because you have that in writing. They're never going to give it to you after the fact. You have to get these things in writing before the situation, not after. That's why these things are so important to standardize and to just do over and over because you can't fix these things after and you can't rewind the clock to go, oh, well, we'll just go back and resend that to me.

Yep. All right. Our last one here. This one's a bit long, but I will rattle through its feedback for a new broker.

He says, I've been brokering for five months. I'm with a startup. So we've got our hands completely full. And I'll be the first to say I've been pretty lucky on a few of these wins.

Looking for an honest gut check from people who've been in it longer. Uh, making 62 calls a day on average, 120 unique email addresses to specific logistics managers, freight handlers, and warehouse managers, 25 follow-up emails a day, two to four quotes per week to new customers. And so far, the book of business is 10 companies that I've moved freight for, mostly small shippers, one steady customer averaging 3,300 a week, gross margin for the last two months. Their consany is totally packed out, so shipments are paused, but shipper is still very communicative and feeding me quotes.

Just landed a major uh multi-regional company. Um, I ran one 4,400 load uh Alaska to Florida, same customer as Big Summer Project, quoted some international freight. Uh, no, I've got a ton to learn. Where should a five-month broker actually be at this point?

And what would you be doing differently if you're me? I think that's pretty good. 3,300 a week and profit for the last two months. What were the metrics at TQL that you had to hit by your uh by your like end of training?

Oh, end of training? Like your it's your T12, but like you have basically three or four months of training and covering freight. Then you go into what they call like the pit, which is basically just cold-calling sales. You cover no freight.

Then you have to like work your way out of it by one, getting a customer to, and then I'd say probably over like four to six months, like the bars, like after a month or two, you need to be able to like move like $1,200 to $2,400 a month in freight. By like probably month four to six, it's probably like three or four grand a month. Um, but like right around probably six to eight months, like the goal is really to get to 4K a week as fast as possible. But most folks don't get there in probably until eight to twelve months.

Yeah. I again, like it's kind of hard to remember exactly what it was with the training and then like the benchmarks, but like, yeah, like that's very impressive for five bonds. Yeah, I mean, I think the call metrics are there. So he's he's basically got um, you know, you got a good, one good solid customer.

All right. And at the five bond mark, I think that's great. That's not the solution long term because you need to have a balanced, diversified book of business in case, you know, you lose them. Or in this case, he said like their shipments are paused at the moment.

So like that 3300 average is not happening currently, um, but it's gonna pick back up. So I would say keep doing what you're doing. The uh call volume is great because it, I mean, if you're still able to dial 60 cold calls a day while managing um that book of business, I mean, he's doing somewhere in the neighborhood of like 12 to 15k a month in profit. I usually like I think that's a great benchmark to call somebody successful broker.

Like I got a lot of agents that come in and you know when they get to that like 10 to 15k a month mark and they're getting their their cut, they're making pretty good money. And um, you know, you're not wondering if they have to have another job to pay their bills. Uh, but I would keep doing it. The the email follow-ups, I mean, I to each their own on that.

Um, I think just keep making the dials and um the international part, they kind of like list out a lot of different you kind of like in a lot of different areas. And I would just focus on one and get really good at that one thing. Because if you're trying to do international and then Alaska and this one company and then a multi-regional major company, um, kind of all over the place. So I would, I mean, I'd recommend that's the only kind of tweak I would do is like stick with what's working and you know, grow that.

Um, but I think this is a pretty good place to be for a new broker. And I want to point out something I disagree with. Just landed a major multi-regional company, started with one store, but they want all their freight through me. They got attracted to our system over lunch.

Honestly, a lucky fit. What I skipped that part of it, but yeah. Is you're calling that luck. That's not luck.

That is where your effort met your opportunity, which is another one of my favorite cliches or whatever. It's like when effort meets opportunity, that is the definition of luck. But like you don't get lucky without the effort. So you put in the work, that is the statistics, right?

Like, that's why we say like you make thousands of calls to get one good customer. It's not lucky that you found that one. You went through thousands of rejection to find the one, right? Like, that is not luck because if you keep doing this over and over again, you will keep getting lucky.

Yeah. Meaning, like, it is repeatable statistically. If you keep doing this over and over, that's why Nate and I always say is like, like, we don't know anybody that's actually put the effort and time in and actually not been successful. Like, you will, it'll feel like luck because you're like, I had no idea this was the one that was gonna be a big win, that this customer was gonna like me, that this is a fit for their freight, that they really just we hit it off as people and how we negotiate back and forth.

That's why you got to go through so many no's to get that yes. It isn't luck and it's not random. And if I mean five months, 62 calls a day, that's just shy of 1500 total phone calls. Like that is that when we talk about that, like the first 500 to a thousand calls, like it's to get better at the craft of you know, selling.

Um, and then you know, I think you were saying like you your first your first customer, it was over a thousand calls, right? Yeah, it was like I think I ran the numbers. I want to say it was like 2100, 2200, give or take, something like that. Yeah.

That's good. Keep learning. You know, this is is an industry where you know, a lot changes and there's a lot to learn. I found like when I when I hired a guy to help me out, um, it I kind of set the expectation with them that like it's gonna take six months before you're like at a basic level of proficiency with understanding this industry.

And I said it's probably gonna take you 18 to 24 months to be good at it. And it really did. It did. It truly, because there's all this scenarios and situations that like just take time before they pop up and you you learn about them.

So, but good questions. Uh keep sending them our way, and uh, we'll keep giving you guys our answers and our feedback. Final thoughts, Ben. Whether you believe you can or believe you can't, you're right.

And until next time, go Bills.