Freight Agents: Consider These 10 Factors Before Finding Your Home

As a freight agent, you’ve worked your tail off for many years in the transportation brokerage industry.  You’ve watched your friends and relatives enjoy their nights and weekends, while you tirelessly worked the phones 60+ hours a week.  You have a loyal and stable customer following, that you’ve had to fight tooth and nail to keep at times.  You have an entrepreneurial spirit and want to run your own brokerage as an Agent for a reputable company, or you’re tired of being taken for granted and not getting the service you deserve from your current brokerage company.  If this sounds like you, then this was written for you.

There was a time when it was taboo for a freight broker to have an agent office model. However, these days it’s very trendy, and a successful agent has dozens if not hundreds of options on whose shingle they can hang outside their door.  This article encompasses what I feel a good, solid, professional Transportation Brokerage Agent should look for in the company they want to partner and entrust their livelihood with.

Ten things you should consider when deciding which Transportation Brokerage/3PL to partner with:

1. Culture.

Culture is everything.  How are you made to feel when you walk through the doors or when someone answers your call or email: warm and fuzzy, or cold and prickly?  The way you are made to feel is a direct reflection on how your customers and carriers will feel when they interact with your company.

2. Financial stability.

Don’t take for granted, and definitely don’t take the headhunter recruiter’s word for it, that your prospect company is financially sound.  Don’t be afraid to ask them to see the following. (You have every right to see this information):

• Income statement:  This gives you a snapshot of how efficiently the company is being run.  Are they in the black or the red?  Are they not only profitable, but delivering a healthy profit?
• Balance sheet:  If the income statement is a physical, then the balance sheet is a full-body CT scan.  How much debt and equity do they have?  Is it a healthy debt to equity ratio?  Are the owners re-investing the profit back into the company in retained earnings and reserves?  Or, are they pilfering all of the profit?
•  How much operating capital (cash) do they have?  It takes a lot of cash to float a multi-million dollar receivable, often for weeks at a time.  Banks are becoming increasingly vigilant in ensuring the institutions they loan to have the collateral and the viability to warrant a large line of credit.  Banks will pull financing – one day there, next day gone.
•  A current Dunn and Bradstreet report on their company:  this is the financial scorecard that people you do business with will be looking at.
•  How do they handle accounts receivable?  Do they keep their delinquencies at a manageable level?  Are their collectors well trained, professional, and courteous?  Or is their A/R strung out and poorly managed?

3. Additional services.

In order to stay competitive in today’s market, a broker agent must be able to offer his or her customer more than just domestic, spot market trucks that pick up at point A and deliver to point B.  You need to be educated to offer viable solutions for your customer’s logistics challenges, to include multiple modes of shipping.  Your competitors are offering solutions, so you need to be positioned to do so as well.  Services you should expect your prospect broker company to provide you and your customers:

• Domestic, Canadian, and Mexican truckload services
• Conventional LTL pricing with nationally recognized carriers,  both spot market and customer specific tariff pricing
• Wholesale door to door intermodal service
• Door-to-door international shipping service
• Logistics outsourcing / consulting and Software As A Service (SAAS) Transportation Management Systems (TMS), high-level logistics management solutions

4. Risk Averse / Risk Prone. 

Companies in the 3PL / transportation brokerage industry in this day and age must be able to balance their risk, especially since the definition of risk has changed drastically in the past few years.

• Risk averse companies tend to shy away from opportunities that may have some risk associated with them (difficult lanes and commodities or a customer with a less than perfect credit history).
• Risk prone companies throw caution to the wind every day and will do business with anyone, anywhere, anytime, regardless of the risk associated with them.

You should look for a company that finds the ‘sweet spot’, a healthy combination of risk averse and risk prone.  You can do this by asking them the right situational questions.

5. Reputation. 

This is a “very small,” large industry we work in.  Word travels fast with customers and carriers if a broker has shady practices.

• Look the prospect company up on the credit reporting sites with the major load posting services.  What is their average days to pay?  How are they ranked?
• Make sure they are a TIA (Transportation Intermediaries Association) member and check them out on the TIA’s watchdog service.

6. Claims, bad debt liability, account ownership, and binding contracts.

Who will assume the liability and what are your obligations if something goes wrong?

• If the broker approves the credit, do they accept the liability if a customer goes belly up and doesn’t pay their bill?  Or do they push the liability back on the agent?
• If a legitimate claim happens and it’s no fault of the agent, does the broker accept liability or do they push all the liability back on to the agent and the carrier?
• All too often I see agents that are locked into binding contracts with companies, that wrongly create non-competes / non-solicits against the agents’ customers.  Agents should steer clear of any contracts that bind them to a company for a determined amount of time or which may prevent an agent from working with their own customers.  The nature of a freight broker agent is that of an independent contractor and you should be free to move your business uninhibited with no obligations to any company.

7. Carrier compliance policies.

When it comes to litigation and tying liability for a carrier’s actions back to a broker or shipper, the game has changed significantly in recent years.  It is extremely important that the prospect company have stringent carrier compliance policies and the technology in place to ensure they have accurate information on each carrier at all times.  A sizeable broker’s carrier list can exceed 50,000 active carriers, so the workload and logistics of managing this database is immense, but critically important that it’s 100% accurate and up to date at all times.

8. Operating system.

A good, solid, and intelligent operating system will not only serve as an order entry system for you, but it will give you the tools you need to make intelligent business decisions, streamline your workflow, and improve efficiency in your office.

• Does their operating system protect your confidential customer information from other agents or offices within the company?
• Does their operating system give you the tools to analyze current lane analysis, historical carriers, pricing and allow multiple modes of shipping (truckload, LTL, intermodal, international, etc) ?

9. Commission rates.

Beware of the “snake oil” sales tactics of headhunter recruiters offering high commissions.  Many of these recruiters are commission-based and are very aggressive in their recruiting efforts.  If it’s too good to be true, it probably is.  Ask a lot of questions about their commission settlements; are there any hidden charges or fees?  What is their chargeback policy?  Ask to see all of this in writing, and make certain it’s part of your contract.  Spoken promises are impossible to uphold. A good rule to live by is if it’s not in writing, it never happened. Get it in ink!

10.  What’s the plan?

A well-managed and efficient company that is sustainable and has what it takes to survive the challenges of our industry, will know how to ride out the ebbs and flows of our complex economy, and will have a plan.  It should be a good plan that is forward thinking, looking out six months, a year, and five years.  Ask to see their plan, read it, and draw your own conclusions.

• Does it revolve around solving yesterday’s problems?
• Does it revolve around looking into the future, being innovative, and blazing the trail?

The transportation and logistics brokerage industry has been plagued for many years with people and organizations that run unscrupulous or unethical operations, but there are also solid and ethical companies in our industry.  This article was written to help the serious and professional transportation broker agent make the best decision on which company to align with and to call your home. Make sure you align with the right one; it could be one of the most important decisions of your life. Trinity Logistics has been in the transportation brokerage business since 1979, and a huge part of Trinity’s success has been due to a successful agent business model started in the late 1980’s. If you are interested in talking to Trinity about our agent service or simply would like an unbiased free sounding board – feel free to contact me.

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