Successful relationships with brokers start by making them your sales force – not your boss.
With CB and truck stop tales of bankruptcies, late payments or no payments at all, it’s no wonder many owner-operators are skeptical about using brokers. “There’s a broker out of Denver who’s refiled his authority 10 or 15 times,” says Bob Beavin, a Longmont, Colo., independent who uses brokers for about half his freight. “He just reopens under a different name.”
Many owner-operators also resent the role brokers play as middlemen, cutting into their already thin margins. “Seeing a broker that makes 10, 15, 20 percent of revenue without any investment is hard to swallow,” says David Owen, president of the National Association of Small Trucking Companies.
Another drawback: For the most part, brokers represent shippers, not truckers. “If brokers make up more than 50 percent of your business, you’re in trouble,” says Henry Albert, an independent who pulls a flatbed on the East Coast. “You’ve just handed your business over to someone else.”
“A trucking company that works exclusively with brokers has a life-span of nine months,” says David Dwinell, himself a broker and owner of Loadtraining.com, a broker training school based in Arizona. “A motor carrier cannot make it today without billing at least 50 percent of his miles retail.”
But using brokers is a way of life for many owner-operators. And in many cases, brokers’ bad reputation is undeserved. “Because of the actions of a few, they’ve been treated almost as second-class citizens,” Owen says.
Whether you use brokers for many of your loads or only for the occasional backhaul, the key is to understand that you’re in the driver’s seat, experts say. Know, too, that good brokers are out there. Finding them requires research and a firm knowledge of what you want out of the relationship. What do you have to offer in terms of service and capabilities? What do you expect in return? How much do you expect to get paid and on what terms? With these questions in mind, view each broker as an addition to your sales force – someone who’s out in the market representing your services to shippers and earning a commission for doing so.
“Some guys call me and have no idea what they want to do, especially some of the new guys,” says Dale Lenz, president of Streamline Logistics, based in Ames, Iowa. “I always tell them you’re not working for me. It’s not like you’re a company driver. You’re running your own business.”
Getting paid is owner-operators’ No. 1 concern when using brokers. “Run their credit before you do business with them – always,” says Beavin, who admits he’s had to make some “pretty threatening” phone calls to get the money brokers owed him. Now Beavin pays $25 per month to check brokers’ credit through Internet Truckstop, a load-matching service. “If they are less than 30 days payable with no outstanding invoices, that tells me there’re no complaints on them,” he says.
Most owner-operators don’t follow Beavin’s advice. In fact, nearly 60 percent of owner-operators don’t perform background checks before using a broker, according to the Overdrive Owner-Operator Market Behavior Report.
Resources available to check brokers’ credentials include the Gold Book of Transportation Brokers, published by First Advantage Transportation Services (formerly CompuNet Credit Services). Brokers earn their listing by demonstrating a proven history of on-time bill payment. Members of the National Association of Small Trucking Companies have access to NASTC’s Best Broker list of brokers with excellent credit ratings and a history of paying on time. You can also ask whether a broker is a member of the Transportation Intermediaries Association, which requires members to abide by a strict code of ethics.
It’s also a good idea to check references. By talking to other owner-operators who have used a broker, you’ll not only learn whether he pays in a timely manner, but also get a feel for how he conducts business. Ask about average time from pick-up to payment, collection problems and whether they would load with this broker again.
Armed with this information, you can choose wisely. After all, the current capacity crunch means your services are in high demand. “Brokers have been a whole lot quicker paying and a whole lot nicer to work with now that there’s a shortage of trucks,” NASTC’s Owen says. Nevertheless, be sure you discuss payment terms – and get them in writing – before you haul your first load for a broker. Standard payment terms are 30 days after receipt of bill of lading, but many brokers offer accelerated payment. For a 2 percent charge, owner-operators who use Streamline Logistics’ quick pay option, for example, get paid by Friday of the week Streamline receives the bill of lading.
Payment terms vary, so do your homework to find those whose practices suit you. “One thing we have written in our contract that a lot of brokers don’t is that you will get paid from us within 30 days, even if we don’t get paid,” Lenz says. “If my customer doesn’t pay me, that has nothing to do with the trucker’s job.”
Sometimes not paying promptly is not the broker’s fault. Too often, owner-operators fail to turn in their bills of lading in a timely manner, says Jeff Hart, president of J&M Hart Logistics in Belmont, Ohio. Neatness is appreciated, too. “Sometimes I get paperwork in that looks like a dog chewed on it,” Hart says. “That could cost me at least a week getting my money and the trucker getting his money.”
Another key to successfully using brokers is to build a strong business relationship with them. “I would develop a core group of brokers, just like they develop a core group of carriers,” Owen says. “Most successful trucking companies do that.”
If you know you’ll need loads out of a particular area, Owen recommends meeting the broker face to face. “It takes the relationship to another level,” he says.
As with any good relationship, build trust. For example, if you don’t have enough tarp, chains, straps, blocking or bracing, be up-front about it. “If you show up without proper equipment, I can’t load you,” Hart says.
Reputable brokers also won’t load you if they know you can’t deliver the freight without breaking the rules. Hart tells of owner-operators who call from Baltimore claiming they can be in Texas the next day. “From experience I know different and won’t dispatch them,” says Hart, who drove for 16 years. “We do not mislead them in any way. And we appreciate not being misled back.”
Before you accept a load, make sure you understand exactly what you’re committing to. “You may see a favorable origin or destination and take it without knowing what it entails,” says Mark Derks, manager of carrier marketing at CH Robinson, which works with 35,000 carriers nationwide. For example, a load may require multiple drops, a hazmat endorsement or driver load and unload. If you’re not prepared for that, pass it by.
Once you’ve accepted a load, make sure the broker or customer knows you’ve departed and then when you arrive. If you have a problem or breakdown, make sure you tell your broker. “Communication needs to be very, very high,” Derks says.
As an independent business owner, you can also determine your rates. “An owner-operator needs to know what his costs are and what kind of rates he needs and what he can afford to haul for,” Lenz says.
“The minimum I’ll haul for is $1.40 per mile, and that’s got to be a short run,” says Beavin, who hauls dry freight. “I’ve hauled as high as $2.50 per mile, but that’s usually when I can put together a less-than-truckload load.”
When determining rates, it’s important to deal from a position of strength, Albert says. For example, “As soon as you bring up the word ‘backhaul,’ your negotiating goes down from there,” he says. “I give just as good service both ways.”
Rates are another area where up-front communication – and getting things in writing – are key. Some brokers quote rates “to the truck.” Others quote gross rates but then take a brokerage fee off the top. To avoid surprises, make sure you understand each broker’s policy before you haul your first load.
Finding the right brokers to do business with and developing lasting relationships with them takes effort, but there’s never been a better time to start. “I see a switch in power happening as we become more and more in demand,” Albert says. “Before, there were more trucks than freight. Now there’s more freight than trucks.” For rates to keep increasing, brokers would have to represent trucking companies, not shippers, Albert says. “But it hasn’t happened yet.”
WANTED: LEGITIMATE BROKERS
To get their authority, brokers must currently register with the Federal Motor Carrier Safety Administration and post a $10,000 surety bond to be used in the event a broker fails to pay.
The recently passed federal highway bill, however, contains provisions that would allow the agency to drop the registration and bond requirements. Unclear at this time is whether the requirements terminate automatically, whether the industry will have the chance to express its opinion first, or even whether the agency plans to abolish the requirements at all. In the meantime, you can still check brokers’ status through FMCSA at this site or (202) 385-2412. You will also find a broker’s bond company name and phone number on the site. Call it to verify the bond is active before hauling any load.
A petition filed in 2004 before the U.S. Department of Transportation by the Owner-Operator Independent Drivers Association would raise the bond from $10,000 to between $300,000 and $500,000 so that more funds would be available to motor carriers in the event a broker fails to pay. FMCSA has not yet agreed to open a rulemaking on the petition.
BEFORE ACCEPTING YOUR FIRST LOAD