Buying A Trucking Company Can Reset Your Credibility | Final Mile 139

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

• Changing factoring companies
• The impacts of selling an MC
• Rail rates vs. Van rates
• Default settings in your TMS

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Transcript

Verifying Factoring Company Changes

SPEAKER_00 0:19

All right. It's another edition of the final mile. We've got good listener QA today. Make sure to check out all the other content at freight360.net. You'll see a searchable library. So if you have a question you want answered about prospecting or claims or whatever, if you just type in that keyword, you'll probably find some content around that. Check out the sponsors in the description to help support the channel. I wanted to start off today. We actually, because we did an episode, our full-length episode last week on the super ego and the chameleon carriers, and we kind of broke down all that stuff. And I think it was towards the end we started talking about like potentially paying the wrong entity and all that. And we had one of our listeners, uh Emily, had uh reached out. She's with Top City Logistics out in the uh Kansas City area Chiefs fan. Um so shout out to Emily. We appreciate you sending this over. So she gave us a really good um, I'll just kind of hit on it real quick, an explanation of um on the payment side of things to kind of clarify um if a because I think Ben, your question was around or the discussion was around like if a factoring company changes, right?

SPEAKER_01 1:33

Yeah, my question to you was like, how do you set up your procedures, right? Because um, well, what she provided was what I was going through, is basically looking at the NOA's notice of assignments, notice of releases when a trucking company changes their factoring company. And the thing that I was curious at Pierce does is like we make sure that we're verifying the human through highway, for example, and they also pick their factoring company in there when they verify who they are. So even when I was getting these documents, I was emailing the back and going, okay, like I have this and this all looks above board, but I also want you to go and change it in this. So at least I know the dirt the person, right, whose email is still verified is the one I reached out to and said, Hey, I got this. This all looks correct. I also want you to go in there and change it on your end so that like I know it's above board, mostly because like I didn't want to spend the time to call the factoring companies and verify that like I got the documents from the correct and the emails were right and all of those things, but like I wanted a faster way to train an accountant to go through this step by step without explaining notices of assignment, notices of releases, and everything they needed to understand around the process.

SPEAKER_00 2:46

Yeah. So I'll just read and she comes from a accounting background. Um so she, you know, she's in that role. Here's what she said. I'll just kind of read it verbatim. Um she wrote Um, for any carriers who switch or claim to have switched factoring companies, brokers should be given a new date notice of assignment for a new factoring company and a dated letter of release from the old factoring company that they were formally under contract with. So under no circumstances does she pay a carrier's new factoring company without receiving the dated letter of release from the old factoring company stating that they have been formally released. Um, under a legal obligation to fulfill a contract or payment for remittance. So basically release from one and assignment from the other.

SPEAKER_01 3:35

But there is something that she also included, which is true, which is the part that I didn't want to explain to folks, is like sometimes if I'm the factoring company and you're the new one and you're buying out whatever Pierce Trucking's factoring, like sometimes you buy all of the older invoices from a previous date and they get sent to you. Sometimes there's a cutoff date where as of that point in time, you get the new payments and I get the payments up till then. So sometimes there's a date cutoff, and sometimes the new factoring company buys out all of the existing invoices and then emails all the invoices that are outstanding saying, like, hey, we now own these receivables, and then hopefully most of them come to the new one, and the old one then has to give them what they got that they shouldn't have got. So like sometimes there's like a clear line of NOA NOR, but it's based on like how that is negotiated between the two factoring companies, which is like a whole other gray area in which is a lot more work.

Buying A Carrier And MC Risks

SPEAKER_00 4:29

But I think the key thing there too is that it's dated, so you know the effective date of the uh the change. All right, let's get into our other questions here. Uh from our Facebook group, if I buy a trucking company, will brokers still work with me as a new owner? So this is interesting because we see like sale of MC numbers. Um the guy, this guy's question was a little bit more in depth. He asked like the scenario of like if I buy, like if I bought the entire operation um versus if I bought a portion of it and become a new uh new one of the many owners, how does that how does that work? Um now if you're just coming in as a new partial owner and the the rest of the entity hasn't changed, there's really no difference. But I'm curious because you've seen this when there's a full 100% transfer of ownership, what does that look like from I guess like the FMCSA side, from um credit rating side? Have you do you see any difference in like like if I let's say it's me and I got three trucks and I'm the owner and I sold it to you and I'm totally out of the picture now? We make you the new listed contact, the new your phone number, your email. What kind of impact does that have to the carrier as far as like what brokers will see when vetting out that carrier?

SPEAKER_01 5:48

If it happens in a like a one transaction like this, I give you money, you give me the entity, and we call the FMCSA and say, Ben just bought this from Nate. The clock goes back to zero and it is a new MC because all of the payment history is associated with the previous owner, it is no longer here. And what it makes sense, right? Because like all that history is we know Nate pays his bills on time. We don't know if Ben will. So, like, your history goes back to zero. We know Nate oversaw the maintenance and all these things very well. That's his scorecard. Ben is now the owner. We don't know his track record, starts the clock over. What happens in larger transactions is that like you want to sell me the company, so I give you money, you give me a smaller share in your operating agreement, then I own a portion of your company, then I give you more money, then I own the majority of your company, but you still own it. Then I send the operating agreement that's updated with me, the majority shareholder to the FMCSA, and it says, like, hey, Ben's been with me. Um, I decided to sell him the majority share. I'm still here. Can you change the contact? Then we change the contact. Then at a certain point in time later, I buy you out, and then you're no longer with the company. Which also makes sense, right? Because like you're still there during the transition. So you're still going to make sure that everything you have been doing is being done as I start to take over. And then as I take over more of it, I take over more responsibility and you transition out. So it's basically like just a slower period where it happens more in the agreement side and the responsibility side. And at a certain point, then you switch it, then I take owner, and then you kind of walk away. Like that's how it's done at like larger ones.

Competing When Rail Is Cheaper

SPEAKER_00 7:35

But yeah. So I mean, the the takeaway here is like when people are trying to buy and sell MCs for whatever reason, right? Understand that um depending on how you do it, it can impact you. Because I think sometimes people are like, Oh, I'll just buy this MC, it's been around for 10 years, it looks good, and I'll roll with it, and um, I'll have no issues with you know brokers loading my trucks and all that, and um not necessarily that cut and dry. So all right, next question. Um, with rail rates being cheaper than van rates, how can I compete with that when a customer is price sensitive? I actually had someone ask me this almost the same question like two weeks ago. She was like, she's like, hey, I'm you know, we're trying to get this customer's business, um, but you know, I'm losing all the bidding to another brokerage who's running it on rail. And I'm like, okay, well, if the customer is okay with their stuff going on rail, then you're probably not gonna win any of that business if you're trying to quote it for full truckload. Um rail is slower um and but oftentimes cheaper than truckload. And depending on like, here's what I would say is like have a conversation with a customer about like well, what's most important to you? Like, are you you understand how rail works and versus truckload, and like you're gonna get you're off you're basically um giving up speed and service to save money. And for some commodities, they're fine with that, but there's a lot of visibility that goes into it. Like there's there's a lot of risk that can go with rail. Um but I mean ultimately you can set up to get rail pricing yourself. I mean, there's there's co-brokerage opportunities in place. Um, getting rail pricing directly as a broker can be very, very difficult. And I haven't I've seen like a few brokerages that have have cracked the nut on that, but most um they just don't because they don't have the knowledge or experience or understand how how it works and all that stuff. But um I don't know. What are your what are your thoughts on this one?

SPEAKER_01 9:40

So previously you were definitely giving up time and service. Service was defined as like visibility, like tracking where is it along the way, and it usually was always slower. I looked at this last year and I was shocked at a lot of the transit times were exactly the same, and some actually faster than full truckload, but they're like high volume lanes, like think Southern California to Texas, where like there's a lot of Chicago, LA, probably a big one. Yeah, so some of them absolutely they have increased the speed to be able to capture more of that business. And like I was kind of shocked, but also like once I negotiated these and I made it work for like one lane for a customer, it their service lanes are far less. Meaning, like if the customer was doing this, whatever, from Houston to LA and now they need it to Memphis, no service. Now they need it to any other city, no service. So like it is faster, but there's far less lanes to be able to do this with. One of the clients I had brokers was like, Hey, I got a lot of containers coming into Houston, they got to go there. We went and looked at like loop and we went and looked at ship seat.

SPEAKER_00 11:08

But that when you real quick, when you say the containers are different, are you saying like the 53 versus the 40 foot both?

SPEAKER_01 11:15

So the sizes on trains in domestic in the United States are more aligned with like full truckloads. So like they're 53s. You don't see 53s going on an ocean liner. Right. And then what happens is if you bring it in from a ship into a port, it's in an ocean container, like a 40-footer. So if you want to put it on a train, even though there's rail service, it's gotta be draid in an ocean container, transloaded to the railroad's train container, and then taken to the rail, and then there, and you lose all of the time and you lose all the pricing. So, like, yes and no, you have to ask a lot of questions and you really have to understand the lanes. And if I'm trying to beat somebody out, like this guy is, I'm gonna ask my customer, like, yeah, service and time, they're like, Yeah, I don't care. And like, I care about cheap. My then question is like, well, how often do you change that lane? And how consistent is that customer? Because if that customer has multiple locations and most of the year you're doing it from here to there in train works rail, well, if at any point in time you need service to anywhere else, you now have no options and I'm your better option. So maybe some of the time it's them, but most of the time it's me. It's also the variability and volume that is going to come into play other than service and time. Interesting.

SPEAKER_00 12:36

All right. Our last question, this one's interesting. Is uh what columns or fields do you set as defaults when you are viewing your load board or planning board as a broker? For example, the load number, customer name, hiccup page, et cetera. So, like basically, when you like your planning board, your my loads board, I mean, they you can call it whatever you want. It's essentially that it's that place in your TMS that you can see all of your current active loads, right? Um now I will say everyone, I've seen like tons of different preferences. Like one of the guys in our company, I looked at his board like I don't know, when he first changed it to his custom one, and I was like, this is like stressing me out. Like it didn't have any pricing on it. It was just like it was like the load number and then the customer, and then like the pickup and delivery. Didn't have like any pricing, margin. And I was just like, I like for me, I love to see I think I have like load number, um, status, so like available, covered, picked up in transit, whatever. And then I've got the pickup information. So I have like the the shipper name, city state, and then the pickup date and time, and then I'll do the delivery, like consony, name, city state, you know, time, um, pricing, carrier name, um driver name. Like I get like when I get into the operation side of things, I created mine where I I have like a lot of information, and that's a personal preference. Um, whereas some people just want like clean and easy. I know that's the load I need to look at, and if I need more information, I'll open into the load and take a look at it. But what I think what you'll find is that like some TMSs will create defaults based on the role. So like a salesperson doesn't need to see all the carrier details that a carrier salesperson does. Whereas like a carrier rep needs more carrier-focused operations information visible to them and less on the customer side. So they might not care what the customer's rate or the customer's name or whatever, they just need to know the operations stuff. And then you might have a uh uh sales team leader that they just want to see numbers, right? They want to get basic information. Here's the loads, here's the sales rep associated with it, here's the you know, profits on this load, margin percentage, et cetera. So I think it depends on the role, but I mean, do you have like a like a default one? Like if you put yourself in the cradle to grave mindset, like what are the I guess when you when you started, did you guys could you change it at TQL or is it was it just like defaulted a certain way? So like most of them are probably customizable.

SPEAKER_01 15:23

I don't think they were changeable, they were kind of like the basic stuff, but like as I've used so many different ones, and I've also done so many different types of business with different teams that like it really depends on what you need to see quickly because you can see everything once you click into it, right? It's what do you need to manage from an oversight and also like where your role is to your point. Like, if I'm a manager, I definitely want to see pricing, time, or things being picked up on time. I care far less about which carrier. If I'm tracking trace, I need to see the carrier. I need to be able to see, did I check call them? Have I tried to reach them? Is tracking live? Is it not? They don't necessarily need to see pricing, track, and trace. Carrier sales team for sure needs to see that who they booked, who's picking up, and who isn't. Like if you're managing a team, there's just different things you need. And then the type of freight, right? Like if I'm running flatbeds and I got 10 trucks I'm booking every day for this customer, like I need to see who's being booked and when, and when they're dispatched and when they've picked up, because I'm managing like the fallout risk between booking and when they show up, right? Yeah. If I'm doing drayage, I care about none of that because I care about are all of my containers assigned and dispatched? And did my track and trace team confirm the orders? Because when they get pulled out of a rail or a port is like over a 12 or 14 hour period, not a one hour appointment time. So it's like, really, what are the things that go wrong for this customer and this type of business? Those are the things I want to see on my top board, right? Like the thing is my biggest risk categories.

SPEAKER_00 16:57

I'm gonna read you off. Here's how I have mindset. And this is in more of like a um a leadership role. So I have mine, I'll like left to right. I have like the team, the load number, the user on that team, the status, customer, customer charge, carrier rate, margin, margin percentage, commodity, carrier name, equipment type. So like flatbed, drayage, van, etc., pickup time, pickup city and state, delivery time, delivery city and state. And that all fits on one screen, and I've got extra room on there. But like an operations user at the lowest level doesn't care what team it's on because they know what team they're on. They don't need to know the user because it's them. Um, and there's probably some other stuff that they might not care about in there.

SPEAKER_01 17:42

Here's a suggestion that I would want to see if I'm you or from like the oversight. One of the big cash flow issues between ownership or management and the people running the freight is I always have pod if I can see it on my main board, because I'm constantly going back to last week and looking at every load that doesn't have a pod. So then I know who hasn't actually closed their load up to get paid on it.

SPEAKER_00 18:10

Oh, I also have yeah, I have mine, I have mine set that if they're on the board, they have not, there's no pod and no invoice yet.

SPEAKER_01 18:18

Okay, correct.

SPEAKER_00 18:19

So like that is again they fall off as soon as we get that done and they their invoice, they fall off. So that's it.

SPEAKER_01 18:24

And that's important for every other TMS because not all of them are set up that way. I have one client, it isn't, one that is, and their biggest issue is like, we don't know why we're not getting paid. And I'm like, okay, sort your load board. Now go add the column for POD. And it's like, we have hundreds of loads this month that were delivered more than six days ago that don't have PODs. I'm like, there's your money. Yeah. It's like, okay, now you got to go, who's responsible for collecting them? And then you find, like, oh, they all emailed to request it once, nobody responded, and then everybody just forgot. So, like, track and trace and operations is really good at booking, getting them picked up, getting them delivered. But after that, there's usually another load with an issue that they rarely go back to yesterday or the day before and follow up to get the paperwork so that the company actually gets paid.

Final Thoughts And Sign Off

SPEAKER_00 19:08

Yep. Good questions. Keep sending them our way, and we'll continue to answer them. Final thoughts, Ben. Whether you believe you can or believe you can't, you're right. And until next time, go Bills.