Home > Forum > 50% Cut And Here Is Why

50% cut and here is why

Jun 01, 2016 at 03:48 PM CST
+ 1 - 2
I have had a shipper trying to get us to do a lane for them for quite some time now. There is just one or two little problems with the deal.

Problems:

Shipper needs to ship two loads per day.
Loads load each night and will not be ready until 02:00 am in the morning.
Receiver would like to have loads by no later then 10:00 the next morning.
Loads pay $1800.00 for 364 miles
Shipper sometimes likes to take 120 days to pay
It would take three trucks and four trailers to service the account.
(Currently there are about 7 brokers all dealing with this customer and selling the loads for about $900.00 per load)

Ok i can overcome most of the objections and problems with the exception of the 120 days to pay. I will have carried around $306,000 in notes by the time the first ones start paying. This is why the brokers are sharing the loads and taking a 50% cut from the deal, their exposure with this customer is very great just as mine would be. I felt like sharing this so that many out there could see why sometimes you are paid only 50% of the deal, because the other person is indeed taking on the risk associated with paying you long before they even get paid.

So whats my answer to the problem. I told the shipper I would cover the loads for $2200.00 each under their current payment stucture, or I would give them a discount for paying us in advance for our services. I explained that what was currently going on was costing them more money in the long run. I explained that their receiver (of which I have talked to as well), is currently shopping for a new source and they are going to loose the very customer that is feeding them. They responded back that some of their customers took 120 days to pay them. I explained that I understood that but this customer was paying them within two days of receipt of the product, so why are they punishing the good paying customer. I let the shipper know that I have already located another source for the receiver and that they are more than happy to accomadate my terms in order to get the receivers business. I will know which way this is going to go after DOT week is over, we were not willing to go to contract before that time.

Now here is where the brokers should have alredy fixed the problem, but the ones dealing with these customers really don't care about fixing the customers problems at all. They can all rotate the loads around among themselves and make 50% profit, limit their risk, reap the reward, and keep on doing it all over again. Is this really a winning situation for all parties? Looks like the only ones winning are the dishonoable brokers that a gleaning both the shipper and the trucker. Now this shipper can possibly keep going on the way they have been going, but in the end we will get the lane with or without them. I would prefer it to be with them as they are a small company like mine, and they are just at that point of expanding but not knowing how to manange the expansion.

Now I read, and listen to the ads that you 3PLs and brokerages put out there. You claim to be able to help your customers reduce their risk and overhead. Are you really reducing their risk when this is how your side of the industry functions on a day to day basis? The way I see it you are increasing their risk to loose the very customer that the shipper is trying to sell their widgets too. There are many in our industry that seem to like to pass all the risk on down the line but fail to pass the reward of those risk as well. This will shock you truckers, but I actually agree with the brokers taking a larger cut from a load when it is indeed a risky situation. Me personally would rather figure out how to mitigate the risk so I can share the reward with my customers (the shipper, receiver, and yes the trucker). Sometimes when the blinders of greed are on our eyes we fail to be able to do basic problem solving anymore.

Greed, Greed, Greed does not fill the Need, Need, Need.
Replied on Wed, Jun 01, 2016 at 06:28 PM CST
- 1
Alfred; this is wher your factoring co. comes into good use. they will take ther percentage acording to there wait time to get paid. Then no risk only if you dont get paid at all!
As we spoke before I dont believe in factoring but in a startup like yours it is a nessesary evil such as Brokers. Just saying
Replied on Wed, Jun 01, 2016 at 07:10 PM CST
Originally Posted by: GERALD MICHALUK
Quote: "Alfred; this is wher your factoring co. comes into good use. they will take ther percentage acording to there wait time to get paid. Then no risk only if you dont get paid at all! As we spoke before I dont believe in factoring but in a startup like yours it is a nessesary evil such as Brokers. Just saying"

This account is even too risky for my factor, we have discussed it several times.
Replied on Wed, Jun 01, 2016 at 07:18 PM CST
Originally Posted by: ALFRED JORDAN
Quote: "This account is even too risky for my factor, we have discussed it several times."

Its just money- the central banks print more every day!
Replied on Thu, Jun 02, 2016 at 04:47 PM CST
Originally Posted by: ALFRED JORDAN
Quote: "This account is even too risky for my factor, we have discussed it several times."

I KNOW THIS IS GOING TO GET ME IN TROUBLE QUESTIONING SOMEONE'S BUSINESS PRACTICES, BUT I GUESS I AIN'T TOO SMART. IF THE ACCOUNT CARRIES THAT MUCH OF AN INHERENT RISK, IS IT WISE TO TRY TO DEVELOPE THE ACCOUNT AND RISK GETTING SEVERELY BURNED. NO DISRESPECT INTENDED, JUST CURIOUS ON THE THOUGHT PROCESS.
Replied on Thu, Jun 02, 2016 at 05:37 PM CST
Originally Posted by: DUANE GEISELMAN
Quote: "I KNOW THIS IS GOING TO GET ME IN TROUBLE QUESTIONING SOMEONE'S BUSINESS PRACTICES, BUT I GUESS I AIN'T TOO SMART. IF THE ACCOUNT CARRIES THAT MUCH OF AN INHERENT RISK, IS IT WISE TO TRY TO DEVELOPE THE ACCOUNT AND RISK GETTING SEVERELY BURNED. NO DISRESPECT INTENDED, JUST CURIOUS ON THE THOUGHT PROCESS."

120 days to pay.. That can wrap up into alot of money... And what happens to all of your money if the company decides to go tits up or bankrupt.. You get to eat it.. No matter how much that load pays.. Zero is still zero.. That is like walking up to the 100 dollar slot machine.. Either you can make alot.. Or loose alot.. And most factoring wont lend on that much time... Think of this one .. YOURE in bankrupcy.. Well your honor Im broke but this company owes me hundred of thousands when they decide to pay me.. Then again.. It could work out well after the first 120 days... Welcome to that hundred dollar slot machine.. Good luck
Replied on Thu, Jun 02, 2016 at 07:03 PM CST
+ 1 - 1
Originally Posted by: DUANE GEISELMAN
Quote: "I KNOW THIS IS GOING TO GET ME IN TROUBLE QUESTIONING SOMEONE'S BUSINESS PRACTICES, BUT I GUESS I AIN'T TOO SMART. IF THE ACCOUNT CARRIES THAT MUCH OF AN INHERENT RISK, IS IT WISE TO TRY TO DEVELOPE THE ACCOUNT AND RISK GETTING SEVERELY BURNED. NO DISRESPECT INTENDED, JUST CURIOUS ON THE THOUGHT PROCESS."

You are right Duane, that is why I am going at it from a different approach. You are indeed smart to realize the risk associated with the account, I posted this example for others to see, so they would be able to recognize when a somebody was trying to run a game on them. I have walked away from these types of deals many times in the past. If they take my counter offer then there will not be a problem for us. If they don't then they can just continue to do it the way they are currently doing it (that is not working for them). I will take the receiver to another source that has agreed to pay me within 7 days of the delivery. There is always more than one way to skin a cat.
Replied on Thu, Jun 02, 2016 at 07:30 PM CST
If I told you how was I going to solve the problem then that would decrease my value as a problem solver. I have eluded to my first fix in my posting, I have found that most in our industry are so inside of their blinder that they can't see the solutions that are right in front of them. If I don't take this account then that will be my choice because of the risk assessment that I have performed.

I like the whole dollar slot machine thing that Jeff mentioned. Pretty funny actually.
Replied on Thu, Jun 02, 2016 at 08:47 PM CST
Scott I'll float ya the money for a small nominal gratuity every Friday compounded every other Tuesday
Replied on Thu, Jun 02, 2016 at 08:50 PM CST
Originally Posted by: JASON WEAST
Quote: "Scott I'll float ya the money for a small nominal gratuity every Friday compounded every other Tuesday "

Can I take out a $54.72 loan on those terms? There's a new fishing pole at farm and fleet for flat heads I want to get to use this and next week while I wait for the DOT heat to cool down.
Replied on Thu, Jun 02, 2016 at 10:27 PM CST
Originally Posted by: JOSH BUSTER
Quote: "Can I take out a $54.72 loan on those terms? There's a new fishing pole at farm and fleet for flat heads I want to get to use this and next week while I wait for the DOT heat to cool down."

Typical Josh you dumb truckers have your priorities messed up you should be thinking about getting rid of squirrels rather than catching fish
Replied on Thu, Jun 02, 2016 at 10:43 PM CST
Ive lived with the little bastards for 2yrs, at this point whats the hurry? Squirrels aren't in season right now and the flat heads are bitin! Do you want to do a wire transfer or ACH?
Replied on Thu, Jun 09, 2016 at 11:10 PM CST
I got beef with ya now Jason- I never got confirmation for your loan for my new fishing pole. Now there was a bunch of rain up north and the river came up and the fishin won't be that good, plus DOT week is over and I have to go back to work. I think you should loan me the money interest free now.
Replied on Thu, Jun 09, 2016 at 11:10 PM CST
I got beef with ya now Jason- I never got confirmation for your loan for my new fishing pole. Now there was a bunch of rain up north and the river came up and the fishin won't be that good, plus DOT week is over and I have to go back to work. I think you should loan me the money interest free now.