If A Shipper Ignores Your Quote, Ask This | Final Mile 150

📩 What to do after quote silence

💰 How are freight brokerages valued?

👥 Is assistant commission sharing standard?

Support Our Sponsors:

Togo: Click Here

OperFi: Click Here

QuikSkope - Get a Free Trial: Click Here

DAT One - Brokers & Carriers: Click Here to get 10% off your first year!

DAT Outgo Factoring for Carriers: Click Here

AscendTMS: Click Here and use promo code RA-freight360! to get AscendTMS FREE for 90 days!

Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here

Transcript

QA Milestone And How We Source

SPEAKER_00 0:00

All right, we're back with another QA session here on the final mile. This is uh final mile number one hundred and fifty. We started doing this ironically on our 200th podcast episode. We started separating the QA out. Um, so we're up to 350 podcasts and now 150 QA. So a lot of questions have been answered. If you want three years. Yeah, man, that's a lot. If you want, I think we've missed like we might miss one or two weeks a year. And other than that, we're usually pretty good and on top of it. But uh at this point, if you have a question, you can probably go to our website, put it in the search bar, and you'll get it. Get it, you know, get the answer or the you know, the video on it. Um, but as the industry changes, we get new situations, new questions. So keep sending them our way. A lot of times we'll pull them from YouTube comments or from our Facebook group, or if someone just emails us. And every now and then we'll we'll snag one out of uh the freight broker subreddit. Um so wherever you're which by the way, we don't run that, but we we do we do sift through there and you know see what you guys are talking

SEO Shifts To AI Optimization

SPEAKER_00 1:06

about.

SPEAKER_01 1:06

So something super interesting related to the podcast that we just did, which we covered AI tools use cases. It reminded me of this when you talked about the library. When we originally created that and AI was becoming more prevalent, we really discussed gating the website to prevent any models from like scraping all the content we've created, like literally manually, right? The stuff we've written, because it's an enormous library at this point. The thing that I found interesting was recently, I think it was Adobe, but a company was talking about like how you need to really reconfigure marketing because people are finding what they want to buy, whatever that is, service, goods, whatever. They're asking AI models, they're not going to traditional websites, right? And where originally the fear was, hey, we need to drive traffic to our website, that gets you a better Google rating. However, we didn't do that. And I've noticed more recently, lots of customers have found us through Chat GPT or an AI model. Because, like, literally, when they send us like through our forms, we like, how did you hear about us? And I'm like, more and more, like they're asking models, and I'm assuming it's because of literally what you just said, why these models are directing them to us, because we probably have like the most content around education and transportation.

SPEAKER_00 2:26

Yeah, remember uh on the website, no, I'll keep it brief, but the big buzzword then was SEO, right? Search engine optimization, and now it's AIO. It's the um artificial intelligence optimization. So, how does your website stack up so that when someone's going to Chat GPT or to Gemini, that they're gonna be pulling data related to you and your company, et cetera? So pretty cool stuff.

SPEAKER_01 2:53

Hey, well, being hopeful and free has benefited us.

SPEAKER_00 2:57

Yep. So

Following Up After A Shipper Quote

SPEAKER_00 2:58

here's our uh a question we had um from a YouTube uh YouTube audience member. So they said, uh, I was able to do my first quote for a shipper, and then they didn't reply to my quote after I sent it. What do I do now? So the uh the uh wait aggressively for the phone to write. Right, the old ghosting from a uh a prospect when you know when it could be anything. It could be a question that they asked you or a quote that they, you know, asked you to submit for them, etc. Um, what's your take, Ben? I think there's a lot of context that would matter here. Um my whole I'm always kind of like reapproach it as you know, just out of a curiosity type of mentality instead of a hey, did you get my quote? Like more so like, you know, hey, did everything work out for you on that uh low? Did you guys end up getting it covered? Not like, hey, how did my rate look? But more so like just curious, like how did things work out? What's your what's your take on the the tactics on this one?

SPEAKER_01 4:00

I don't remember if this is something from like coaching or from like TQL or like some other sales job, but we always just used to joke when people were just like not making phone calls, like, how's it going? And they'd be like, Oh, it's going good. Like, oh, well, like what what are you doing? Like, what do you mean? Are you just like aggressively waiting for the phone to ring? Like you're just sitting there like waiting for companies to call you and ask for business. Like, that's not sales. Like, yeah, sales is ordered to full contact. I always usually use it now, like full contact sport. Like, you have to go get it. Like, do not expect them to come to you. The whole job is you getting creative and finding ways to get back in front of them, right? That's the whole job. So, like you said, the best way to do that is to actually care. And the thing to care about is how did that go? Because when you ask, how did my rate look? That is self-interest, self-serving. And people don't like to be pestered with people asking for things. However, if you're calling them to see how things went, how's it going? How'd that load run? Did you guys run any issues? How are things going today? What do you what are you guys looking like tomorrow? Are you guys busy? How's your day going? Like, find a way to keep initiating the conversation. And the most effective way to do that is to actually like give a shit.

SPEAKER_00 5:19

Yeah, and to add on, like with this specific question, um, put yourself in the customer's shoes. And it it could have looked something like this, right? They had a hot shipment that had to go out because maybe their regular fell off, whether it was a carrier that's asset-based or a brokerage, whatever. So they're like, hey, let me just blast out an email to all the people that I've, you know, had contact with and just see what I can get back. So that maybe that became your first chance, right? They had your email saved or whatever, and they blasted out to 20 people. People sent back quotes. They took the, you know, in what their mind was the best option, it might have been, you know, the first one that came back that had a reasonable price or the best price that came back within a certain time window, and they got it booked and they were busy and they moved on with their day, right? It wasn't anything personal against you. It was just that from their perspective, being in their, you know, situation with work, it was an urgent situation. They had to get it covered, they got it done. You just didn't happen to be the one that did it. It could have been because of your rate, it could have been because you waited too long to respond, or it could have been just because they, you know, had a better rapport with somebody else that replied to them. So um, so yeah, not you know, the self-interested thing is gonna come off a lot of times as like all about you, naturally. Whereas if you approach it as like, hey, you know, I know that was a wild situation for you guys, like, hope it all worked out. How did it all pan out, right? You're not self-interested, you're interested in them in that conversation. So very good. Um job is solving problems.

SPEAKER_01 6:50

And another way of saying solving problems is helping people. So help. Ask questions. What can I help with? How'd it go? How are you doing? Right? Yep.

SPEAKER_00 7:00

Exactly. Um, all right. Our

Valuing A Freight Brokerage For Sale

SPEAKER_00 7:02

next question is about um valuing a brokerage for sale. So this one says selling a family-owned freight brokerage, how is it valued? Has anyone here bought or sold a freight brokerage? The owners are nearing retirement, and the next generation is not interested in taking over. So selling might be the best option. How are brokerage how are brokerages typically valued? Is it revenue, gross profit, EBITA, net income, or a combination? What is the buyer really purchasing? Is it the customer book of business, the entire operation, including employees, carry relationships, technology, billing processes, and SOPs? Um, well, it depends. I would say uh more times than not. What do you what do you got? Where did where did you find the question?

SPEAKER_01 7:46

I was just curious where it came from.

SPEAKER_00 7:47

This one was from uh Reddit.

SPEAKER_01 7:49

Okay.

SPEAKER_00 7:50

Yeah. They went into a little bit more detail on it. I just kind of gave a summary. Um, but uh I will I'll tell you this. The company that I used to work for has sold twice since I left there, like six or so years ago. But I've you know I stayed in touch with a lot of the folks there. So I've I've gone through, I've had in-depth conversations about how they you know went through the evaluation. Um, but every company is different. Like, usually you you're gonna want to buy the entire thing. Now, here's where there's a lot of differences is like what is truly proprietary to that company is is a big question. So, like, do you have your own technology, like your own proprietary TMS, or are you you know paying to subscribe to you know another TMS, like a commercial off-the-shelf TMS? That's a big part of it because proprietary tech will you know drastically boost um you know the valuation of a company if it's good technology. And then you have to look at like there's the hard assets, right? Like, is there is there a building? Is there office space? Is there land, right? Things like that. Um, now it sounds like this is a smaller family-owned business. Um so you would, you know, I would imagine you're what you're doing as the the owner who's probably the boss that wants to retire. Um if you're buying it, you're basically you're buying the ownership, but then you have to ask yourself, well, do I have to pay somebody to replace that person's job? Or am I now going to be that person's job? Or, you know, or is that person gonna still be employed, but the ownership just transfers? Like there's a lot of things that go into it. But I think if you boil it all down, what you and I have seen over the years when we've talked to people about mergers and acquisitions, it usually comes down to a multiple of the EBITDA, right? And that is, you know, I've seen it as high as I want to say like 10, 8 or 10x if they had their own proprietary tech. And then I've seen it even I've seen it down in like the four to five X. And it just a lot of it really just depends on what you're getting. So, like to answer this guy's question of like, what are you getting? Um usually you're getting, I mean, you would hope you're getting the entire operation that includes the book of business, the employees, the location space, et cetera. Um, what's your take on it? I mean, you've probably seen different scenarios of this compared to me.

SPEAKER_01 10:28

Um I'm doing this right now too. Okay. Like we were talking about in the episode, like I'm literally doing pitch decks for a brokerage, valuations, and working with like a certified financial, chartered financial analyst, right? Like so I'm going through this exercise and did it last week, working on these right now. So revenue, everyone wants to know it's your top line number, but you don't typically see companies valued or sold based on that number. And the reason is because gross profit is so very different, right? Like you could have one broker.

SPEAKER_00 10:57

That's really what the your revenue number should be looked at.

SPEAKER_01 11:00

That's why people call it profit revenue, right? Right. Like gross profit is way more relevant. You still need it because like you want to know how much top line is going through the business because funding the receivables is a is an important part of this, right? Like if you got 10 million in top line, right? Like you need to know like how much is the company paying either to factor or how much cash on hand do they need to actually float between waiting for your customer and paying your carriers. Like that's a big expense in some cases. So you need the number, but you don't typically see brokerages valued off it. You do see them valued off EBITDA. And for anyone like that's just earnings before interest, tax, depreciation, and amortization. Those are the three things that are like non-cash write-offs typically. Like interest actually is an expense. And I always argue like it kind of should be in there. Either way, like that's your bottom line. And you and I kind of see like a well-run brokerage, about five percent is hitting the bottom from the top, right? And then I've seen recently like four to seven multiples of bottom line, right? Recent transactions in the past month or two with proprietary tech, low single digits to mid-single digits, but it very much matters on what that tech is. Is it good? Is it transferable, like, or is maybe an off-the-shelf better than the one you guys built yourself? Like, maybe you don't get that multiple. Just because you have it and had it for a long time doesn't mean it's super valuable. The other things that really matter, too, that you hit on is like the the real risk in buying a brokerage is the stickiness of the customer relationship with the actual person they work with. So if I buy a Nate's brokerage and all of your employees and brokers like don't want to work for me for whatever reason, it's a pretty good likelihood, like the book of business doesn't transfer. The same way you and I have dealt with this when you transfer an agent from one company to the next, like a lot of times most of the customers transfer. A lot of times they don't all transfer for one reason or another. So like there's a big transfer risk because the contracts don't usually hold the customers to the company you're buying. It's the relationship of the person. So you really want to understand that. Like, if you got 10 brokers or if it's a family-owned company and there's three or four, are their customers gonna go to the new owner? And then the risk is you'll usually see like they're called like walkbacks, but basically, like, hey, if I buy your company nate, I'm gonna give you a dollar amount now, but I'm gonna give you a certain dollar amount next year and the year after because you're gonna stay with the business and basically spend a little less time next year and a little less time the third year, and then you're out. So I can be introduced to your customers. Your customers still work with you, they get to know me, and you like slowly work your way out, and that reduces that risk a lot. But like you said, like there are so many different things that you kind of consider that like you would need to get into the weeds in a few of these things.

SPEAKER_00 13:59

Yeah, customer concentration is a big one, though. Here's something I would say too is if if you're in that situation, um, you have to ask yourself, like owning a company and running a company are two different tasks, right? They're two different hats to wear. And do you want to be an owner? Um because it might seem like, oh, it could be this huge financial opportunity for me. And then you when you kind of like look under the hood, you realize all the different additional things that go into being an owner in in addition to just um you know running the business. So that's things to think about. So um all right, our last question.

Paying For An Assistant On W-2

SPEAKER_00 14:41

This came from our Facebook group, and I think it did at least. When hiring an assistant at a W-2 brokerage, I'm curious for anyone out there who has hired an assistant um in a W-2 model. My account has grown big enough where I need full-time help. In order to hire one, I would need to give up 2% commission to the company to help cover the salary of an assistant, plus an additional 1% to the assistant. So a total of 3% out of my commissions. Is that standard at a W-2 brokerage when hiring an assistant?

SPEAKER_01 15:13

Do you think he started with like what his commission is to begin with by any chance?

SPEAKER_00 15:18

No, but my so I've dealt with, you know, with the I probably have talked to 5,000 different W-2 brokers over the years from various companies and gotten a pretty good take on how commission works and getting an assistant and all that. And this is a unique one that I've seen because a lot of times, instead of giving up a percentage of your commission, they just give you goals you have to hit before you're eligible to get an assistant and then receive commission yourself. Um, so basically, you wouldn't receive commission or an assistant at dollar number one. You might have to wait until you're doing, let's say, you know, 4K a week or 5k a week and brokerage profit, gross profit, before you're eligible for the company to pay for another seat to help support your operation. Um I have heard of some situations where they do, they do want a percentage. But when I see like QL does this, they take they take a percentage out.

SPEAKER_01 16:18

Yeah, the way mine worked, again, this is a very long time ago. I don't know if it's still this way, but like a decade ago, you had so I needed what you said. I needed a 12-week average of I don't remember if it was four or six, like six grand, meaning like total past three months, you take all the profit you made, divide it by 12. What is that number? And if it was, I think six grand, you got your first assistant. And I had because my commission was 25%. So I had to cover 25% of my assistant's salary out of my commission. So they were making four grand a month, one grand came out of my commission to that assistant.

SPEAKER_00 16:59

And I'm even just looking at these numbers, like when that's super low. I was gonna say it's a very low amount. Um, three percent because if you're two of them, and I'm gonna go sell more. Yeah. Oh yeah. Because think about it, like if you're W-2, right? If you're making 20% commission, um, and then you can let's say you can double, right? We'll keep the the there's a you know, there's a multiple factor that comes into effect when you've got help that it's not always a one-for-one, like adding one person doubles your business. It could be more than that, but like to be able to just double your business and give up three percent, like I'm doing that all day long. Uh correct.

SPEAKER_01 17:43

But it's not scalable. I feel like that's backwards the way it's structured. Because here's the example that my brain went to is I'm like, okay, like that was my first one, but I had a total of I think 15 people on my team at one, might maybe 15 or 20, right? I'm like, okay, well, even at like 10 assistants that I had, I'm like, um, I would have given up 30% of my commission. I'm like, so the better you do, the percentage-wise becomes like untenable at a certain point. Do you know what I mean?

SPEAKER_00 18:13

Yeah. I'm wondering if this is th I I was reading this as like if he's making 20%, he's now making 17%.

unknown 18:23

Right.

SPEAKER_01 18:23

Which eventually, if you just keep adding people, then you're not going to be able to do nothing. Then you're run out of commission.

SPEAKER_00 18:27

Yeah.

SPEAKER_01 18:27

Right. That's why I'm like, it's not scalable. Eventually, you if you're doing really well and growing, you just like earn less money, which to me is the opposite of what you want to happen for that employee.

SPEAKER_00 18:37

Yeah. I think um a good way to do it is have just requirements of you've got to be at certain level of business, and you know, based on the brokerage and the cost, you can figure out like what is it gonna cost us to put another body in a seat, and your profits need to at a minimum hit that benchmark, but probably significantly higher. Because they don't want to just come in at a break-even. They want it to be a you know, they've got it's gotta pay for your the hire has to pay for itself and then additional for company profits and overhead. So yeah, that's an interesting question. I'm curious um if you guys want to leave us a comment or send us a message, a message on what the requirements are or how it works at your company, um, let us know. That's a that's an interesting one.

Final Thought And Sign-Off

SPEAKER_00 19:24

So um good stuff. Final thoughts, Ben.

SPEAKER_01 19:27

Whether you believe you can or believe you can't, you're right. And until next time, go bells.