Part II: Is the Grass Really Greener?

July 1, 2015
ari logistics logo

THE SECOND INSTALLMENT OF A THREE PART SERIES ON WHAT FREIGHT BROKER AGENTS SHOULD CONSIDER WHEN LOOKING FOR A NEW HOME.

4. Credit

CreditThis one is pretty important and should actually be one of the first things you do. Because if the company you’re considering doesn’t have a good credit rating, then the rest really doesn’t matter now does it. Poor credit is the kiss of death in this industry. You need to be confident the company is financially stable. Actually, that’s a poor choice of words. The company needs to be financially STRONG. First thing: run a credit report (D&B) and then READ IT. All of it! Look for patterns, trends, red flags. Anything that would indicate fiscal stress. If something is out of place, ask the crunchy questions. Probe. Dig. Get solid answers. A former agent I know (actually it was me) went to work for a brokerage company who’s President reassured him they had “Great credit” and were well funded. Come to find out, 6 months later when they unexpectedly closed the doors, that wasn’t really the case (remember in Part 1 I told you I learned some things the hard way…there you go). Next, take a look from the carriers’ perspective and check the load boards to see what their credit rating shows. After all, when they’re scouring the boards looking for freight and they see two similar loads ask yourself: Are they more apt to call a broker with an “A” rating and an average days to pay of 14 or one with a “C” rating and 47 days to pay? Who would you call first? If you've ever had to cover the same load 4-5 times due to poor credit you’re working 4-5 times harder for the same amount of money. If this sounds familiar, let me give you one piece of advice: RUN. You have way too many options out there to be handcuffed by poor credit. It’s a sign of much deeper issues. Get out while you can. Don’t go down with the ship.

5. Account Ownership

I hear it all too often. An agent develops an account only to have it taken away from them and given to another (more tenured) agent because it’s now become a “National” or “Corporate” account. Or maybe, you have a relationship with a particular manufacturer but are unable to do business with them because another agent “owns” the account. Even though the traffic manager wants to give business to you. Sound familiar? Before you make a move, do two things: 1- Ask for a copy of their rules of engagement. Find out what the process is for determining account ownership. Especially for large manufacturers with multiple facilities. Can an account be taken away from you? How are seasonal customers handled? How long does an account have to be dormant before it becomes available to pursue? Find out the nitty gritty on account incumbency. 2 – Vet your customers. Make sure you’re able to maintain all of your existing customers before you make the jump. This is especially critical if you’re considering working for a mega-broker. In an over-saturated market where you’ll be competing against 300, 400 or even 1,000 or more other brokers/agents within the same company, the chances of you maintaining your existing account base, let alone expand it, is going to be extremely diminished. This business is tough enough as it is. The last thing you want to do is work in a cannibalistic environment that eats their young.

6. Commissions

(the one you’ve all been waiting for)

Let me start out by saying, yes, commission splits are important but they shouldn’t be the only reason to select a brokerage company to work with. Why? It’s kind of like buying that car (sound familiar). Would you buy a car just for the price without consideration the make, model, color, safety rating, fuel efficiency, whether it had leather seats, etc.? Never!  Price is just one variable (although an important one).  Think of the overall price of the car as a balloon.  No matter where you squeeze it, it still has the same amount of air in it.  Want a lower monthly payment – put more money down.  Want a lower interest rate: spread the payments over 60 months vs 48.  You get the point. Don’t be fooled by the smoke and mirrors.  Bottom line, one way or another the company has to get its money.  It’s the same in the freight brokerage world.  Read the fine print and be leery of fuzzy math.  Look for hidden fees, back charges, margins requirements, minimum fees.  Are you being charged for load boards, software, bad debt insurance, etc.  I even heard of one company who charges to set carriers up on direct deposit.  Are you kidding me?

Do they have a tiered commission plan?  Is there an escrow requirement? (A savvy business person will realize this is a good thing) Do they offer a monthly bonus incentive?   What about a sign-on bonus?  If they offer a sign-on bonus, be sure to look at the total compensation over a 5 year period and compare (fees included).  A sign-on bonus gives you more money up front but the deal may be heavily weighted to the company’s benefit long term with lower commission structure & back charges. Remember, one way or another, the company needs to make their money.  After all, they’re probably not operating as a 501-C3, right?  The key is to be cautious.  I’ve heard way too many stories about agents getting nickeled and dimed on the back end after they were enamored by artificially inflated commission splits.   Then they wonder why they aren’t getting the level of support they expected or the carriers aren’t being paid on time.  Can you say “cash flow”?

In the commission world, things aren’t always what they seem. At the expense of sounding cliché: If it sounds too good to be true…it probably is.

Conclusion: Do the math. Be realistic.

Contact Us

Required fields indicated with *

* Indicates required field
HOW CAN WE HELP?
TELL US HOW TO REACH YOU
TELL US ABOUT YOUR COMPANY

Categories:
Action Enterprise Logistics | Agent Blog | Environmental | Freight Broker Agents | Manufacturing | Oil & Gas | Other | Power Generation
View all Publications
I Agree

This website uses cookies to improve site performance, offer a better browsing experience and enable content sharing. By continuing to browse this website, you agree to the use of cookies. To learn more please review our Privacy Policy and Terms of Use.