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.