Starting New Brokerage With Seasoned Players In Trucking

So there is you(an investor) and another investor and you plan on factoring? Where is the investment? And you have five people with their hands out? And you bought a book on how to do this?

If you hold off paying carriers for thirty days you will still have 4-5 weeks of payout until your first checks come in. How are you going to handle advances, quick pay?
Factoring? Is that from a CEO with a finance background?

 

"#given that these carrier contracts are in "the bag" so to speak"

I'm guessing these are contracts with trucking companies (single owner operator to multi truck fleets). To make money you will need contracts with shippers first. The shipper pays you; you take a percentage; you pay the trucking company.

 

I would think that the guy with experience would have these answers,but since you already have the business getting trucks to haul for you is your biggest problem, a lot of fly by nights in the broker business, we won't haul for new brokers, could maybe factor you at first but that is a lot off money going to factors

 

Don't walk away from this. RUN! I started my own business (in a separate industry, though still customer service related) very young and I learned everything the hard way. 9 years and I am still in business and I can tell you that having a business partner is not the worst thing you can do, having multiple business partners is the worst thing you can do. With a BA in business I almost think you should know that. Almost. The truth is that formal education is not what teaches you (and yes, I too have a university degree), it is applying what you have learned to real life experience that teaches you (and in that experience you learn that some of what you were taught was completely wrong). I'm trying to save you before you have to learn the hard way. Your CEO with a background in finance is overkill. Why do you need a CEO? You are trying to start out too big. And hire a consultant? That sounds OK, but to think that you can employ the person who taught you to do your job is insulting. How would you feel if you had to train your boss? It sounds like you have delusions of grandeur. Your 25-year-veteran should either go out on his own, or get together with the agent. Why are they dragging you and the CEO around? You're dead weight. If you still want to pursue this, consider going out on your own. Your veteran is not your "golden ticket." Anyone can find shippers. You've been preparing to network your whole life. Back in kindergarten we called it "making friends." You're going to have to know where the trucks are before you even think about shippers. And when you do have an income coming in you are going to cry when it comes time to split it 4 ways. Lets assume you take 10% off of a $1,000 load. That is a big $25 for you before taxes and overhead.

 

MsFortune, I agree with you 110%! Partners are for dancing. No offense to you, you seem (emphasis on seem) like a smart individual. You're doing independent research so you don't get burnt. However, seeking an unbiased opinion shows that you are cautious of bias. If you don't know the industry, and you're already cautious of the one that does, I'd run like Hades the other way. Stick to what you are good at. If you are a finance guy, work in finance. If you fix cars, open a shop. Leverage YOUR connections to do what YOU want to do. If you want to be an angel investor, send the experienced broker some seed capital (with you as a silent investor) with the contingency that he relieves the CEO (who is dead weight at this point). If you insist on a consultant, bring in a small business start up consultant. Marketing, advertising, capital reserve accounts, ERISA, and more information that the average investor or freight broker doesn't understand or care to understand. Then, you at least have a return on investment.

Why hire a freight broker to tell your freight broker how to do business? You already have the experience on staff! And remember that a VAST majority of startups fail, especially in this industry. Don't bank on this. There isn't really enough margin after paying carriers, expenses, and payroll/commission to justify a decent ROI, anyway. Not unless you plan on becoming the next TQL in the next 6 months, copying both their size (economics of scale) AND business practices (which may give you a not-so-pretty name on the carrier's side of things).

If I were you, and I'm not, I'd probably open a convenience store somewhere. Or a Subway franchise. Much better ROI, much less regulation/headache, and easier to exit if it's not your cup of tea.

I hate to be the bearer of bad news, but, this industry is struggling enough, and the influx of the inexperienced and underfunded is giving us all a bad name.

 

The only kind of ship that won't float is a partnership.

 

I assume that as an investor, you primary job would be to buy the software and pay the 25 yr guy a handsome salary and all his travel expenses to solicit all these customers. IF this guy really does have 25 years in the transportation business he is probably a liar. Doubly so if he was a broker. He knows lots of ways to screw you.

Is this 25 year guy currently gainfully employed in his field or does he see a winfall?

 

I say run too. More hands in pie and nobody gets enough to eat. But opening a subway or something like that takes a lot more cash. Alot higher risk a lot more BS to get into a franchise. For a non asset broker this is a great time to start. Manufacturing is up a couple points and line haul rates are rising too because trucks are shrinking. If the industry is fledgling its because there are shysters involved. When there is a lot of attritio. In a given industry it creates opportunity for those who are of good character and want to treat people fair and make money. There are opps for exploitation every where you turn in this business, but that means there are more opps for people who are solid look you in the eye and do what they say they are gonna do and not try to rip people off. I say run for this business but pare down some of the people involved. Keep it simple and get rich in process. You be the ceo and financial guru and recruiter. Get more agents to work for your company and grow that way. When someone trys to neg you out, ignore or delete them as friends.