Freight 360

How to Make $1M Per Year as a Freight Broker | Final Mile 90

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Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

  • Should I be using an official quote form when sending pricing to a customer?
  • Is it realistic to earn $1 million a year as a cradle-to-grave rep handling mostly LTL with 25% commission?
  • When managing LTL and FTL with FedEx and UPS, should I explore alternative shipping options beyond current contracts?

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Speaker 1:

Welcome back. Another edition of the Final Mile. We've got three questions that came into us this week from our audience. Actually, what's cool is I got to talk with one of the guys on the phone last week, so we'll get right into it. But first check out Freight360.net all of our other content. You'll find the Freight Broker Basics course if you're looking for educational option for yourself or your team. And check out the sponsors in the description box to help support our channel Quickscope, levity, bluebook and DAT.

Speaker 1:

All right, our first question Is there an official quote form that I should be sending a customer when I price a lane for them? So I talked to this guy on the phone and we had a good conversation. He was newer to the industry, just landed his first customer or two and customer's basically asking like, send me over your price on this lane, right? So he wanted to know is there a specific format? Is there a standardized quote form? How should I be communicating this back to my customer? And the answer to his question is no, there's not a standardized quote form. That being said, I always say to communicate with your customer in the way that they prefer to communicate, as long as it makes sense and it's good for you, right, like if all you're doing is verbal and there's nothing ever on paper. You leave yourself open for some, you know, some risky debate on what you guys agreed on.

Speaker 1:

But my answer to him was like email tends to be like the most common way that quoting is done. Right Customer has here's my lane, it's a drive van from here to here, picking up at this date and time, delivering this date and time any special requirements, et cetera. If you have that in writing and you reply right to that email and say hey, for that shipment below price is $2,000 or whatever it is, that is sufficient. That is extremely common. Depending on the customer, there might be an online quoting system where you can go bid on their spot freight on a portal that they've got.

Speaker 1:

Some TMSs have a quote that you can generate right from the TMS. Like McLeod um that I use and I've used others as well, you can generate a quote and email it over that way. I honestly just find that it it is very time efficient to just send a quick email, right Um, any thoughts on you know anything else? I think the big thing I want to. Caution is like verbal only is dangerous, and I've seen it before. We're like we didn't agree to that price and it's like I've got nothing to back it up Right.

Speaker 2:

Here's the thing I'll add Right Is, even if, like, there's no dispute over verbal, the problem is like you need to get everything in writing, like if you've ever heard the term CYA, cover your ass right Like one. Maybe they agreed and maybe there's no issue, but does that mean their accounting person that is in another building and another state and another city has verification that? They told you that over the phone? Probably not. So, even though there's no dispute, right, there are tons of issues you're creating downstream for the accounting department because you don't have it in writing. And one of the best things to do. Right, it's like anything I do over the phone, whether it's a rate or it's scheduling an appointment. If I talk to Nate over the phone, I go hey, nate, we good for eight o'clock tomorrow morning, drive in coming to pick up that load PO-1234?. Yep, great, hey, I'll show you a quick email to confirm. After. Thanks, I'm just going to send Nate an email and go hey, drive in 8 o'clock tomorrow, po-1234. Please confirm. All Nate has to do is email back Confirmed, confirmed, back, confirmed. Then this is the important part that everybody misses is when I get that email back, I download the email and upload it to my TMS so that my accounting person can attach it to the invoice. Well, in that case it was an appointment, right.

Speaker 2:

But into the rate scenario. If Nate tells me the rate over the phone, same thing. Hey, nate, I'll shoot you a quick email to confirm. Hey, nate, we're good on this. 2,300 bucks. Here's the pickup, here's the delivery, here's the times Nate goes, confirmed, because it prevents so much work for you later. One now my accounting department has verification to invoice, so when Nate's company goes to pay that bill they can see Nate approved it. So there's no back and forth and it saves my other team time.

Speaker 2:

The other thing is on an appointment scenario or even a rate scenario, right, like now, if my truck shows up at 745 and Nate got called away by his boss before he put it into his system for the appointment and there was an emergency and he just forgot. My truck shows up, the guy at the loading dock goes I don't see it on my computer, I'll work you in. Loads, my guy at one in the afternoon, my driver's asking me for detention for five or six hours and my customer goes dude, I'm not paying you detention, like in my system. There's no appointment here. Show me proof. And I go well.

Speaker 2:

I talked to Nate on the phone. They go well. I talked to Nate on the phone, they go well. Do you have it in writing? I go no, they go, sorry, not approved. Now I'm out of pocket to pay the carrier, which is the right thing to do, because I told them what I was communicated to me, but I have no ability to bill it. Right, like the most important thing to do is to cover your ass. In everything we do, we deal in communication. Everyone thinks we deal in shipping. Brokers don't ship anything. Drivers carry things from point A to point B. We deal in information and if I can't prove that information happened.

Speaker 1:

I've got no way to invoice for it or to charge when things don't go the way they're supposed to. The company I used to work for actually had a clause in our contract that if you didn't get a schedule of the rate in writing, that if you didn't get a schedule of the rate in writing like if you didn't have some kind of written proof of the rate and the customer doesn't pay it or, short, pays it Out of your pocket, yeah, the broker can then be held liable, depending on the situation.

Speaker 2:

And again, good or bad, lots of opinions about TQL. But the thing I think I learned there is and it was pro and con, we talked about this in the episode it like I used to get terribly frustrated with things I had to do and I'm like there's no sense to this. Why do I got to slow down to do this thing they're making me do? But when I realized why that's there, if you got to get 6,000 people to do things and to prevent theft and to make sure you can invoice properly, they have to be done a certain way, otherwise it's a mess. Like nothing works and as brokers we're always optimizing.

Speaker 2:

How do you get the next load? How do you get the next one moved? How do you talk to the next driver? How do you get this information? We rarely think about the other departments that support us that need this information verified to do their jobs. Nate and I talked about this yesterday. Right, like we figured out you fastest, you can invoice a load, maybe a minute, 40 seconds to a minute and a half, depending on like what system you used. But what takes so much time is anytime this information isn't there and proven like written communication via you know a rate Now that accounting person has to spend 45 minutes to work through to try to justify to get that invoice paid.

Speaker 1:

Yeah, it's funny we had this is slightly unrelated, but I was having a discussion last week with our carrier team about onboarding and you know processes and rules and whatnot. And we found like we're hearing like yeah, you know the amount of emails we go through just to onboard a carrier and I'm like well, like what's the reason for it? And it's poor communication, like literally. So the stat I think it was Monday or Tuesday this week my boss sends an email and he's like 200, it's like rough numbers, 250 emails to the carrier email address today, x amount of overrides requested, 40 carriers onboarded. And it was like so all this work, it was like literally, it was like over five emails per carrier that gets onboarded and zero emails are required to do that. It's like if someone has a question about it or they're not following it the right way and they are asking someone to do it for them or anyway, communication. Next question here I'm cradle to grave. Oh yeah, I actually responded to this guy this morning I said he said I'm cradle to graves.

Speaker 1:

Sales rep slash account manager at a brokerage. We're heavy on the LTL side with about 80, 20 split between that and FTL shipments have a lot of support with quoting and booking shipments. So a good portion of my focus is on sales and talking to current customers. I will occasionally get pulled away to do some customer service. I earn 25% commission on LTL, 15% commission for full truckload and a small base salary. My ultimate goal is to make a million dollars a year. Would this even be a possibility? I'm finding it harder and harder to believe it would be a possibility. Can you shed some insight? Have you ever seen those kinds of earnings Move?

Speaker 1:

that up for a second, he's 25% commission on LTL, 15% on full truck, gets a salary, wants to make a million dollars a year. He's got a team around him helping him out with most operations stuff. He's cradled a grave but he's got heavy support. Here's what I told him and then I'll, I'll, I'll take your, your feedback on it. So I said I asked, like you know what you know about his numbers, what are you doing monthly right now? I think the the way to be able to produce a million. Or to ask you a question if you talk to him, do you what he's making right now, where he is in relation to his goal? No, I I asked him. In my response I said what are your numbers right now? Um, so, it can be done and I've got folks on uh in our company that have earned a seven figure uh annual commission. I've had it happen. I had to have him last year. All right, um, it takes time and and it's like so.

Speaker 1:

I guess the difference between his situation and my company's is we're agent modeled, so 1099 contractors, our folks get a 70% commission. They're not getting a salary, they're not. They don't have an ops team that's doing all their stuff for them. They have to truly bootstrap their business right. Another method to making the million dollars is to build out a company, whether it's an agency with multiple sales reps on it or to have your own brokerage. I bet you have people that worked at TQL that probably hit the million dollar mark, but they probably had massive accounts and a massive support team and it probably took a long time to build that up. So it's possible. It is definitely possible to make a million? Probably not. It's probably the hardest is probably the business model that he's in right now, though.

Speaker 2:

Here's the way that I look at it. Right Is okay. I'll kind of simplify it in the way that I even look at it in my head, cause I was in that model right and the guys I was friends with and talked to that were making hell. Some were making like three to 5 million a year, take home right, with their books of business and their team. So at a large company there's usually a benchmark on what you need to do to get more staff Because, simply enough, you've got to be able to do more business right. So the hurdles are can I get enough customers to give me more business? That's the first one. The second one is how do I get more people to do more work with me on my team to be able to hit that number right? So a TQL. And again, like, these numbers probably are changed or different, but it was like 4k a week in GP. I could get one person 6k, I could get two people 8k, I could get three at 12k, I could get four at 15k, I think I could get five and I think when I hit 20k I was able to get six or seven. So, like I think the biggest I was able to get there was like I had a team of like eight or nine people. I was doing probably like 40K a week, give or take, right, so like, and I also I paid 25% of each of their salaries. Meaning like, if I brought on Nate and the company paid Nate 40 grand a year, I had to pay 25% of Nate's salary, right. So, to scale up, the biggest hurdle was getting enough customers and being able to have enough support to run their business.

Speaker 2:

Right Now, in the agent model, the thing that's different is you get more cash, so you're getting 70% instead of 25%, but that means now I've got more money to hire more people. And now the decisions you got to make is do I hire too fast or too slow? And it's a really hard question to answer because it's very difficult to determine how much business you get from every new customer. So I think the best way to do that is kind of like a blend, meaning like, okay, if I'm moving a hundred loads a week, okay, I need this amount of people. If I bring on a new customer and they tell me they're going to give me another hundred loads a week, it's probably not going to start out at a hundred, but I'm going to need to slowly staff my team up in order to do that right. So it's like a labor question and it's a sales question. I like Steven's comment.

Speaker 1:

He said sounds like you just have to hustle harder. Here's the other thing I'll add into is look, I'm like a metrics nerd and I analyze the data like unlike anyone else. Right, as far as I see it. Look at your profit per load. I literally have every one of our reps every month. I run through revenue per load, profit per load and their margin percentage. Right, the best way to get to a million dollars is to do it with the least amount of work. Right, the least amount of loads. When you find yourself getting into longer haul or certain niches high dollar value, for example that's when you're going to see bigger dollar amounts per load on there. So like, for example, I had a guy Same as a truck, right?

Speaker 2:

Yeah, like if you're driving longer without stopping, there's more money.

Speaker 1:

Yeah, I mean, look at a $2,000 or a 2,000 mile run versus a 300 mile run, right, Same as the work.

Speaker 1:

It's just going to have more profit dollars in there. But here's an example, really quick. I had a guy this is probably two years ago and he calls me and he's like I'm trying to figure out how much margin I should have on this load, and we're running through it. He's moving a $25 million valued piece of equipment on specialized equipment trailers that has escorts and permits, and he's got to coordinate all this stuff and he's like, if I take 15% on this, I'm going to make $15,000. And I'm like think about how much time and effort is going into this, though it's not. You're not taking two minutes to handle this like you're. You're babysitting the entire process for weeks to make this happen. That would be the equivalent of if you had just done 10 loads, or if you did 100 loads at $150 each load. That's the only difference is just look at the percentage. But those are ways to increase as well as aim to have freight. That's higher profit per load.

Speaker 2:

And I'll add this right. The way I try to price something is in two ways. What's the opportunity cost, which is Nate said. So if I got to spend six hours talking to carriers, looking at permits, looking at routes, making sure this is done, the insurance and vetting this process and babysitting it right, how many loads would I have run if I just moved lumber and what would I have made the opportunity cost? The second is what are my market comparables? If I'm quoting Steven as my customer and I got to assume Steven's talking to Nate or some other broker, what is Nate likely to charge him? And I do my best to try to figure out what is the market comparable and what I would make if I did something else. As simply as that right and get as close to the numbers you can. There's no perfect way to do that.

Speaker 1:

Absolutely Well. Good luck on the million dollar target there. Last question I'm managing both LTL and full truckload shipments with carriers like FedEx and UPS. Should I be looking for alternative shipping options outside of our current contracts or stick with what the company already uses? All right? So I took this guy's question and I tried to simplify it because it was a little bit longer, but basically there's a couple of things I took out of. This is the whole. Well, that's just the way we've always done it method.

Speaker 1:

I always encourage people to try and think of other options for things. So, for example, if I'm always let's say, my customer has like four, five pallets, right, six pallets, something like that and my company says, yeah, we've got a contract with XPO for LTL and with Forward Air, whatever whoever the carriers are well, why not look at a partial or maybe a dedicated box truck or whatever the case might be? Remember, our job as brokers is to give our customers access to the market, not tell them exactly how they have to accommodate the actual shipment. So I would fully encourage you to look into that. For example, I got a guy who we're going to work through this year to onboard a handful of LTL carriers directly, because the pricing that we're getting through our existing providers doesn't make him competitive in certain lanes and certain regions to his competition.

Speaker 1:

And we know that if we can go to an LTL carrier direct and say, hey, here's the business we have, could we look at customer-specific pricing on it? You find the right account rep that's willing to sit down and work with you on that, it can get you in a better situation. So I'm all for finding new ways to get the job done and thinking outside the box versus just sticking with. Well, that's the way we've always done it, or no? We don't do that kind of freight. There's opportunity out there. If you don't try to think outside of the mindset that you've always been in, what do you have on that one?

Speaker 2:

This is the way the whole economy and capitalism functions is there's always a better way. There's always a better way to get it either faster or cheaper, or both or some blend of the two. Right? But if you're only looking at two options, that means you're allowing those two options to not compete against the entire market. So if I'm looking at full truckload, they're roughly probably two, three million MCs, probably a million MCs that run a good portion of the freight. I guarantee you you are losing money or not getting the savings you could by diversifying. Now that comes with a cost, right? Because if you're working with a lot more vendors than one or two, okay, you got more checks to cover, you got more companies to talk to and you might need more staff. So you've got to figure out a way to balance those things as you look there. But I absolutely encourage everybody to be looking first like that's your job. Your job is to improve things, like in any company, in any situation, anywhere, right, Whether it's FTL or LTL. To, Nate's point is a great example. Great, we have a co-brokerage with whatever global transit handles all our LTL. Why? Because we only move 5% LTL. Well, now we've got a huge customer that is a big portion of our business.

Speaker 2:

The first thing I'm doing is calling these carriers directly and going hey, if I give you all this business, what do you give me pricing? Call their competitor. If, hey, if I give you all this business, what do you give me pricing? Call their competitor. If I give you all that business, what are you doing? To our last question right, that's the opportunity cost and that's the competitive market. If you aren't looking at those things, you don't know what they are. Maybe they are cheaper, Maybe they're cheaper but poor service. Maybe they're better service but more expensive. But you don't know unless you ask. Right? And the only thing and the only mistake I think you can make in business is not asking the damn question. Like, pick up the phone, figure it out, spend some time, vet those options and then weigh the options, even if they're not better than what you have. I guarantee you, the person you work for, that you report to, is going to appreciate the fact that you took the initiative to go and run down these things and bring them that information.

Speaker 1:

Last thing I'll add and then we'll wrap up. It goes beyond. Like the LTL question here had a guy this is like years ago we were talking, we were just talking shop and they had a customer referred to them by another customer of theirs and they so they shipped produce and they had a referral for something that wasn't produce. And the guy's like no, we don't, you know we're, we're just a produce freight brokers, we don't do anything else. And it's like what? So yeah, but, but again, if you're new and that's what you're told you, you don't know what you don't know.

Speaker 2:

And I'm not like it's no slate against whoever said that, right. But I had this conversation with somebody we were hiring, yesterday actually, and he's like well, what are your thoughts on, like, doing warehousing or doing these things? I'm like, listen, at the end of the day, it's all business. I'm like I don't give a shit what it is, if we can make money on it. Figure out a way to do it work. I don't care what it is. Go on a plane, go on a boat, go on a truck, go on a canal, go on a barge, go into a warehouse. Sit there, sit on a truck, it doesn't make any difference. If there's an opportunity, spend the time to figure it out and find a way to capitalize on it, because that's value somebody's asking you for. Like you spend all of your time as a business owner or as a sales rep or as a broker or wherever you are trying to get more of this when it's literally laying itself at your doorstep and you walk away from it. Like, to me that is.

Speaker 1:

In the words of Stephen Rui just have to hustle harder. Final thoughts, ben.

Speaker 2:

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

Speaker 1:

And until next time go Bills.

People on this episode

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Benjamin Kowalski

Co-host
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Nate Cross

Co-host