We are joined this week by Matt Pyatt, CEO of Arrive Logistics, a $2 billion revenue freight brokerage based in Austin, TX.
Matt's work ethic and entrepreneurial spirit were strong from an early age, as he took his first job working on a farm at the age of 10. He worked various jobs growing up, before starting his first businesses in college. He talks about the valuable lessons learned in his early businesses before joining Command Transportation as a sales rep after graduating.
Matt and his partner, Eric Dunigan, founded Arrive Logistics; he shares their story and all the important aspects to building a successful brokerage.
The conversation takes an interesting turn as we discuss Matt's strategic approach to scaling business growth. He shares his strategies, from efficient resource allocation to effective capital management, and the importance of incentivizing employees. Furthermore, we probe into the potential disruptions in the freight industry and the outlook for brokers in the challenging months ahead.
Toward the end, Matt walks us through his thoughts on the future of the freight industry. He elaborates on his vision for Arrive, leaving us intrigued and excited for the prospects. This episode is a testament to the power of reflection, the value of learning from experiences, and the necessity of adapting to evolving circumstances. Join us for this stimulating conversation that explores the nuances of building a successful business, celebrating accomplishments, and planning for the future.
We are joined this week by Matt Pyatt, CEO of Arrive Logistics, a $2 billion revenue freight brokerage based in Austin, TX.
Matt's work ethic and entrepreneurial spirit were strong from an early age, as he took his first job working on a farm at the age of 10. He worked various jobs growing up, before starting his first businesses in college. He talks about the valuable lessons learned in his early businesses before joining Command Transportation as a sales rep after graduating.
Matt and his partner, Eric Dunigan, founded Arrive Logistics; he shares their story and all the important aspects to building a successful brokerage.
The conversation takes an interesting turn as we discuss Matt's strategic approach to scaling business growth. He shares his strategies, from efficient resource allocation to effective capital management, and the importance of incentivizing employees. Furthermore, we probe into the potential disruptions in the freight industry and the outlook for brokers in the challenging months ahead.
Toward the end, Matt walks us through his thoughts on the future of the freight industry. He elaborates on his vision for Arrive, leaving us intrigued and excited for the prospects. This episode is a testament to the power of reflection, the value of learning from experiences, and the necessity of adapting to evolving circumstances. Join us for this stimulating conversation that explores the nuances of building a successful business, celebrating accomplishments, and planning for the future.
Welcome back to another episode of the Frey.
Speaker 2:Pod, before I ask you how you're doing Paul, a question that has caused some strife, I would say, in our relationship A little bit Before I do that, I have to say last week, when I did do that and you were caught off guard, you're being caught off guard caught me off guard so I thought to myself do I really never ask him how he's doing? Am I that big of a? Is it an a-hole? I don't know what my word is.
Speaker 1:There's a couple of different things.
Speaker 2:I actually went to the tape. I went back. Thankfully we do record these. You know the whole point of what we're doing and I checked and in the eight previous episodes I did in fact ask you how you were doing on one, two, three, four, five of them.
Speaker 1:Right, but let me, can I just say so for the three, that you didn't. Those really hit at the heart Like those hurt really bad. So it felt like a lot more than that. So my bad, but fair Fine.
Speaker 2:I see that, so I'm sorry I didn't. I will say you didn't ask me in one of the three of those episodes, so that's what I didn't know. Fine, fine, fine, all right, so what I?
Speaker 1:didn't know first of all was that we're small. I mean, this is a small unit, this is a small business that we're starting. I didn't realize that we had a corrections and retractions department already, but clearly we do so. With that being said, since we do, I do want to issue a formal apology. I, paul Martin Estrada, do formally apologize to you. Drew Mark, retracted. Mark Silver Do formally apologize for calling you out on something that was illegitimate, although there were three misses in there, so let's let's keep that in mind as well for calling you out on public, in a public form like that.
Speaker 3:And I will effort.
Speaker 1:I will effort for that not to happen again.
Speaker 2:After further review, the rolling out field has been overcharged, andrew does in fact ask? Paul how he's doing. So, paul, how are you doing?
Speaker 1:I'm doing. I'm doing great, you know what, but I, I want to actually flip the tables this time because I'm you got me feeling a little bit bad. I want to ask how you're doing and I do want to preface that by saying I can hear a little twinge of something in that voice. We all know you're coming off a conference, so I mean, how are you doing? And like, let's get the full picture there.
Speaker 2:I'm not doing. I'm fortunate that this is an audio only show and you can't actually see, because I wouldn't have to answer if you could. I'm not.
Speaker 1:Let me describe for the audience. I'm just go ahead.
Speaker 2:Okay, I'm not in great shape today. I will say it's, it's. You know this. I just got home. I landed a couple hours ago. I just got back. It was a very fun conference. The TI concert was was pretty awesome, I mean he threw it back. A lot, a lot of bangers he was playing. You could have whatever you like. I mean we were we were up there.
Speaker 2:We were, we were, we were, we were singing along, yelling along Probably that's why my voice is gone and I talked to a lot of people and for three days I was talking nonstop and it was great and I want to actually turn the table. So I I met a guy named Sharm. He worked at green screens and you know, you go and meet all these people and they go. What do you do? Or how are you doing Whatever? Sharm did not do that. And when I met Sharm, he comes up to me and he goes. All right, I got a question for you and I said, okay, what's up, man, he goes and you're going to answer this ball. He goes. What are three things that you want to do that you haven't?
Speaker 1:Okay, in the, in the podcast professionally, career wise, family wise what do we talk about?
Speaker 2:Or just open it and, like that, it's your question to answer how you want. I mean, he did this. I think just about everybody.
Speaker 1:Okay. Well, I made very little progress in my pursuit of owning a piece of the Los Angeles Dodgers and I'm at this point starting to lose a little bit of hope that that's going to be the case. You know to, I think. Professionally, you know, I'm still trying to make my way in this space. I haven't told you guys that I grew up in a performance environment, so I was on, I found myself on stages, in front of crowds often. So this is a nice little, you know, I guess, continuation of what I'm trying to do in that regard. Third, getting a little deep with you guys, but you know, just being a good parent, husband and all good family members. So it's a little on the spot, maybe a little too, you know, that's a great much to the isn't all right.
Speaker 2:Do I get to ask you now too? It took me about 20 minutes to answer that, and and several people couldn't even answer, and there's a set. There's a part two to the question. I'll answer mine after. Okay, part two, all right. Part two is what are three things you've accomplished that you're proud of?
Speaker 1:Holy cow, andrew. Really, I think I went. I hope we're going to, we're going to edit some of this, because this is getting a little tough here. No, this is that I'm proud of Get to know someone quickly yeah. Is just a standard.
Speaker 2:What do you do? You know, what do you do? Okay, you tell me your job that you, you know, do every day, but, like I want to get to know you, this is a great way to figure it out.
Speaker 1:Three things that I'm proud of. I am proud of bringing, I think, helping to get my family to the next level of success security. I've been afforded a lot of, I've given a lot of, been given a lot of leads into my life in terms of education, in terms of the family support. So I felt like I owed it to my family to help bring us to the next level, and I feel like I'm on the journey and making some progress on that front.
Speaker 1:And two you want to be. You know, when you become a parent, you certainly want to be a really good dad and somebody that your kids look up to and respect, and so you know they can't really communicate all their feelings in that way, but I hope I'm making some progress on that end. And three, you know just that the people that I interact with, I think, enjoy being around me. That they think I'm adding value to their lives is something that's really important to me. So, again, getting really soppy and deep with you, but you know that's kind of how I am. So, all right, can we turn it now, cause that was, that was tough.
Speaker 2:I'm like sweating over here that was very difficult, I intentionally didn't give you that information before we got on here, because I wanted you to do it on the spot. It's hard yeah.
Speaker 1:Well, now you have the benefit of having been able to think about it. So my answers are going to seem. You know, I don't know how they're going to sound once I hear yours. But okay, go ahead. You're going to be very philosophical and deep with it, right? No, I won't. I'll give you the same answers I gave Shar. All right, let's hear it, let's go for it Shar can confirm.
Speaker 2:These answers were mine. So the three things that I want to do that I haven't. So I want to become a father. I'm engaged and getting married next April and I, you know, this is something I've always wanted and just you know that's, that's just a next chapter in my life I'm excited for.
Speaker 2:I want to run another business, um, either whether I start one or join one that I help lead, um, there are things that you know, I feel like I could have done better in my last role and I just, you know, I think about that a lot and I I want kind of that second chance there, and this one, this one's the deep one, um, and this one maybe is why I may have been a little well, I'll just say it. I want to develop my ego, and I think that a misconception maybe is something like ego. You've got a big ego, dude, um, but it's an underdeveloped one and that's why it maybe comes off the way it does. So this is something that I've talked to my therapist about and realized, like this is an opportunity for me. So that's kind of where my head is in terms of three things I've accomplished that I'm proud of. Uh, I would absolutely have to start with Molo.
Speaker 2:The team that I, you know, built that business with was incredible and they're still. They still are that business is, is is a really great company today and I'm really proud of of what we did there. I rehired my coach, reengaged my coach my kind of executive coach and hired a therapist. So you know, those are two things that I think you know I'm proud that I've kind of stuck with that now again and and I'm fully engaged there. And finally, how about a tribute to this podcast we started? You know I'm proud of this podcast. I think that the the feedback and support we've gotten this far has been really great and it's you know, I'm proud of what we started here. So there's a lot to do still, but step one was just, you know, hitting record, and here we are a couple of months later and we've got people who listen every week, so that's pretty cool.
Speaker 1:I love it, andrew, and you know I appreciate you getting deep and sharing some of those thoughts with us. You caught me extremely off guard but you know, I think it's a good reminder for all of us and our listeners to to maybe answer those questions for yourselves and to the extent that you're willing to share. We just shared with all of you, share with us and let's let's all learn and get better together.
Speaker 2:You know I was thinking about this is a little odd. I was talking at this conference. Everybody I was talking to would bring up this podcast and somebody was like it's so great getting to know you guys. And I'm sitting there and I never met this person and I'm just thinking it's kind of weird that you and I sit in front of a microphone and speak into a void and just like put it out there and we're just like letting people get to know who we are and you like create this intimate relationship. But our relationship is with the void and like everyone else has a relationship to you know, to us, and that they got to kind of get to know us and understand all this stuff about us and we're just. You know, it's an interesting table that I never thought about before. I don't know.
Speaker 1:I agree, but let's make it a two way street. It is a two way street, you know where to find us. So reach out to us, let's talk, let's get the community going.
Speaker 2:I think we should post these questions onto our under our LinkedIn this week after this episode airs, and hopefully some of our guests will. I'm sorry. Our listeners will give us their answers. That'd be a great way for us to engage. So what do you say?
Speaker 1:I love it All four. Let's make it happen. All right, On that note, Andrew, who do we have today?
Speaker 2:We have Mr Matt Piat, ceo of Arrival Logistics. This is going to be a great episode. A guy who I just has become a good friend of mine over the years, and I think our, our, our listeners will really enjoy this. So, without further ado, paul, what do you say? Let's go? Welcome back to the freight pod. We are here with a very exciting guest. Welcome, mr Matt Piat, a man who I considered my fiercest competitor in the industry, who has also become a very good friend of mine. We are very happy to have him here today. A quick background for Matt he started his career at Command Transportation, paul Loeb's company that was acquired by Doug Wagner and Echo, before going off with his good friend and college roommate, eric Dunaghan, before they started Arrival Logistics in July of 2014, which, nine years later, is now a $2 billion company. Thank you so much, matt, for joining us today. How are you doing? Welcome? Thank you for having me.
Speaker 3:I'm super excited. You and I have done this a few times, and so it's good to reconnect and catch up on everything related to freight.
Speaker 2:It's a little weird that we're not doing this like head to head this time, because we've now, I think, three times been at Freight Waves or whatever conference and and been speaking, and it's been kind of against each other. And here we are. I'm hoping that we can make you and your business look great and help people understand kind of what an awesome guy you are and and really get a better feel for your story. So I do want to jump right in with this, though. So you know, you are a 35 year old. You're the CEO of a freight business that did $2 billion in revenue this year, or last year. If I take it back, 25 years ago, you were working on a farm in West Virginia at the age of 10. Am I right? 10?
Speaker 3:or 11, but, yeah, my first job. You know I was in West Virginia, not a whole lot to do, played a lot of sports but one of my neighbors he was 18, I was 10 or 11. And he worked all summer long. He worked 800 hours a week. He was planting and picking and washing and cleaning, sorting all sorts of different things, and he convinced me to kind of tag along because I was like that hyperactive kid in the neighborhood and so I started working one summer and I never stopped and so that was my first job and worked there every summer until I graduated and went to college.
Speaker 2:Where did that kind of drive come from? I mean, working at that age? That is not common for people. So what kind of instilled that in you?
Speaker 3:Well, I would say that I always like to save money. I think I'm more of a spender today, but I was always a big saver when I was young and I was just really laser focused on being able to go to the movies or being able to spend an extra buck or two if I wanted to. And so I worked at the farm, I moved everyone's grass, I shoveled snow, I worked at a CD store, I worked at Circuit City, I worked at a computer store when I was a senior, so all sorts of different jobs before I graduated high school. And so it was always just, you know, I wanted to stay busy. You know, as I said, I was active in sports, but whatever free time I had, you know I like to earn some money.
Speaker 2:And correct me if I'm wrong, but when you were working at Circuit City, you weren't even a sales guy, right?
Speaker 3:Yeah, I was hired as a temp in the CD department and I ended up selling more computers and digital cameras. At the time the digital cameras were popular than almost everyone in the sales department, so they ended up hiring me full not full time but extended me from a part-time employee through the rest of the year.
Speaker 2:Okay. So you know you're, you're, you're growing up and you're obviously working hard trying to find a way to make money. Wherever you can, you go to college. You attend Miami, ohio. This is where you meet your partner, eric Dunnigan, right? How does that kind of friendship come to be?
Speaker 3:Yeah, so Eric and I met in our pledge class and so we, we went through Rush and all that, I think in the second semester of our freshman year, and we both joined the same fraternity. You know, he was actually a year older than I was, but he was just transferring from a community college Miami community college onto the main campus and so he was rushing as a, as a sophomore rather than a freshman, and so we've been friends since then and you know there's a lot of good stories that go back to the Miami days. But yeah, we, we went in the same fraternity, we lived together as soon as I graduated in Chicago for four years and then obviously started arriving, moved down to Austin together.
Speaker 2:All right. So you and Eric are in college together. You become good friends. You also, if I recall you, started a business together there, right?
Speaker 3:Yeah, so I started a couple of businesses in college and my first one was called Miami Muscles, and that was not with with Eric, that was with my buddy, nino Natali, and so we were freshmen and he was. He convinced me that I would learn more by starting a business than going to class, and I probably took that to heart a little bit too much, and so he was. We were just talking about different industries that we knew and growing up in West Virginia, like wrestling and football and working out are super popular, and so I was always really well researched into health supplements and so I knew the companies that did private labeling and so I was like, hey, we could private label some health supplements and convince a bunch of our friends at different college campuses to sell the product, kind of like the Mary K model and so that was our first business and we sold proteins, creatines, weight loss, all sorts of different products, and so that was my first foray into business. And the real reason why we're here today at arrive is we kind of came across this product called the vortex, and the vortex was a handheld, portable drink mixer that we thought was like the coolest product it was like back then was like the snuggie and we're like this is going to be the next snuggie, right, like that direct marketing kind of stuff. And it was such a fad of a product and we were like we got to get this into GNC, we got to get this into all these different stores. And so we ended up partnering with a company called Cellucor. And so C4 is a big energy drink company. It's a pre-workout. They're still successful today. They actually just sold a third of their business to cure Dr Pepper early or late last year, and so we partnered with them and we sold like a million of those mixtures when I was in college, and so that was like my first, my first foray into business.
Speaker 3:And then we had some other side businesses. One of them was like this green beer day was this big party at Miami and everyone wore these green t-shirts right, and back then no one had e-commerce websites. So we're like, why don't we just start an e-commerce website and let all these people buy these t-shirts with their parents' credit cards? And then we made all of our pledges at the time pass them out around campus, and so we had free delivery and we basically were like the first company to have the e-commerce store, and so that was. That was a cool little business.
Speaker 3:And then the one the one that Dunning and that you're talking about was called DPN marketing, and at Miami there's this thing called the Du Bois card, and so what it was was a discount card that had 16 like little emblems on the back of discounts, and if you went to, you know, taco Bell would be like buy one, get one free, kind of thing, right. And so we basically started this knockoff company and we went into University of Dayton and sold all these like advertisements on the card, and so that was my first business with Eric, and so that's when we started working together.
Speaker 1:So, matt, I'm picking up on a common thread. Already I'm just seeing this entrepreneurial spirit in every single thing that you're already talking about. So I just want to get kind of go back to the origin story and capture as much of this as possible. But you know, you talked about working on a farm growing up in West Virginia. Did you come from a family of entrepreneurs? Was it something that you learned? You clearly had a knack for it. So is this something that you just kind of learned through friends or family? Where did this sense of entrepreneurial spirit come from?
Speaker 3:I was really fortunate that my mother was a stay at home mom, so she was there for everything, which was awesome, and my dad worked at the government, so he was in the Department of Treasury, which is basically the government agency that raises all the debt, so all that great deficit that we're facing right now. The Department of Treasury is the one that's raising those funds, and so neither of them were entrepreneurial. My first roommate in college, nino, who I referenced a little bit earlier that I did all those first companies with, he came from a very entrepreneurial family and so that rubbed off on me and it was more like at the time he was like you're going to be a loser if you don't drop out of college. You need to drop out of college and start businesses. That's the only way that you'll ever be successful. And obviously I did not drop out of college, but I think that kind of ingrained in my head that that was, you know, a cool path for me and I always thought that I wanted to be like a management consultant and like travel around the country and do things like that.
Speaker 3:And so once we started to get a little success in the vortex and we started to make some money. I'm like, wow, this is a lot more fun. And so that's kind of where the desire came from. And, honestly, I graduated a semester early with the intent to move down to Texas and help them grow the vortex brand. And so the vortex unfortunately became defective and every single unit basically put in the dishwasher, water would get into the motor and the batteries would explode, and so you'd have battery acid and all these things. And so they basically discontinued the product for a period of time until they found a new manufacturer. And so they're like, hey, you need to go find another job. I'm like, oh God, what do I, what do I know how to do? And so, you know, at the time, you know, I wanted to be an entrepreneur, but, you know, eric convinced me to move up to Chicago and get into freight.
Speaker 1:But, man, I think a lot of people say that they want to be entrepreneurs. I I went to Cal State, fullerton. I got a business degree with the emphasis in entrepreneurship. So I had this same grandiose plan, too, about you know, I'm going to leave college, I'm going to become this super successful entrepreneur. That did not happen for me, but you know, with you, you've had a lot more success in that space. So, just trying to dig a little bit deeper to understand, you know, again, you can say you want to be an entrepreneur, but doing it is a very different thing. Sounds like you had some good forces with some of the friends that you met, helping to kind of push you along. Was there anything more than that, though? Was it? Did it had to do with your personality, or like what was really driving you then?
Speaker 3:So I always say that the best opportunity to start a company is when you have the least amount of risk. And I, like you know, I didn't have a wife and kids and bills and mortgages and all those things, and that those are the people that are really impressive entrepreneurs that are willing to like put all that to the side and, like take a major risk. I mean, I literally just decided, instead of, you know, waiting tables or working on a bar, that I should just do this side hustle as an entrepreneur Right. And so I was really fortunate that I kind of got started when I was 18 years old and I started to get like my you know, my at bats. I always talk about getting at bats because you're going to have to start a few different companies to like really learn and probably have some success.
Speaker 3:I would say the vast majority of people's first few companies fail, and I was really fortunate to get those out of the way very early.
Speaker 3:And so, yeah, I think that for me, especially like when you go to like starting to arrive, I was 25 years old, I didn't have any debt, I had a lease that was coming up, I didn't have a car payment, didn't have anything Right, and so to me, I don't look at that. It's like I didn't. You got to be willing to take big risks to be an entrepreneur, and I looked at it at the time as like, well, my worst case scenario is I can just go get another job at another freight brokerage if this doesn't work. And so you know I'm not going to sit here and pat myself on the back and be like I took all this risk as an entrepreneur because there are people that do that and those are super respectable decisions. But yeah, for anyone listening, like, I'm a big advocate of like start little things when you're young because you'll learn a lot, and like, if you fail, it's easy to fail when you're 18 or 19,. Get those out of the way and so that's. You know. That's kind of how we ended up.
Speaker 1:There was a quote, and I think it was actually by your partner, eric, but he said that you guys discussed it together and it's we'd point to a building and say someone owns that right, somebody started that business. What do they know that we don't? So I find that fascinating, right, because, again, coming from your background, you didn't, you know, you know you didn't have somebody to lean on, entrepreneurial per se, to fall, to fall back on, but you had this on top of the drive and just going out and doing it, you also had this almost inquisitive mind as well, or this confidence, I guess, by asking those types of questions. So, when you're thinking about people that maybe also come from a similar background as you, right, where they don't have maybe the playbook, so to speak, what are some of the advice that you give them to help, you know, make that happen for themselves?
Speaker 3:I would not be able to start any of these businesses if we didn't have mentors, and so, like even back when I was 18 or 19, nino's dad had started multiple companies, and so they were help, able to help us with the legal aspect and all these little things that you wouldn't even think about. You know, when we started to arrive, our first investors they own their own businesses, and so they were able to put all the pieces together that you know most people don't understand, and so I would always say most of the successes, who you show up to, you know, surround yourself with and do you have a good network of people that you can lean on to help you with all of those things, and so anyone that's younger that doesn't come from just like I didn't come from it it's really surrounding yourself with the right people and, you know, going to the right schools and going to the right business classes. Like you said, I was an entrepreneurship major, so had a lot of good mentors there, so I think that's the best thing you can do.
Speaker 2:I'm curious. You talk about risk. Like how do you think about risk with respect to the decisions you make today? Like, how do you what's the thought process as you're making decisions and evaluating the risk involved in big decisions, where, now it's, you know, you've got 2,000 employees at your organization? Like, how do you think about?
Speaker 3:that I mean you can talk about risk in a lot of different lights, right, you can talk about are you going to sign a contract, are you going to hire 1,000 people versus 200 people? Are you going to spend 50 million on technology or 10 million on technology? And so each one of those is a different situation, you know, I think that what you'll say is, as you start your company, you're way more risky and that as you get more successful, you, by nature, have to become risk adverse, a little more risk adverse. Obviously, you have a target on your back. Everyone wants a piece of the big company, and so you know, I think that that profile and that decision making alters based on where you are in your career and the success of your company.
Speaker 2:But you know to even go a step further. I think there's a world where you could describe a freight brokerage as, in a shippers eyes, a risk management firm, because in a lot of ways, that's what you're doing for shippers is you're managing a lot of their risk. So I'm curious you know, as you think about I like your comment that as companies get bigger, you have to be a little bit more conservative there. But how do you keep the growth pedal on and continue to attack big opportunities with new customers and such, knowing that you know that the risk gets bigger as you're making those bigger decisions?
Speaker 3:It's something we talk about all the time. And so you know, look back seven, eight years and we get a big shipper fortune 100. And you know, the terms of that agreement are going to be absolutely terrible and we probably just sign in and look the other way.
Speaker 2:Just do it and demnify them. Just do it.
Speaker 3:What are you talking about?
Speaker 2:No, problem, just indemnify them. Why not?
Speaker 3:There's no liability here, and so now it's like we're walking away from big opportunities. Now, look, it's in this market environment which everyone's well aware as you know, it's a shippers market there's not a whole lot of room for negotiation, and so we basically have a very structured process that we put together and got board approval, we got our legal approval, and there's like steps that will go through, like what amount of liability are we willing to take based on the size of the opportunity, based on you know what we think the margin profile is. And then what we'll do is, on the contracts, that we take more risk. We're going to revisit that on a quarterly basis. Are the loads? Is the business playing out the way that we thought?
Speaker 3:You can't build a business without taking risks, especially on a contractual landscape, especially in this industry where the shippers have all the power right. And so you know when the market's really, you know, really tight. We're probably the seventh or eighth largest truckload broker in United States right now and so shippers want our capacity and so you have a little bit more leverage when the market's in the brokerage favor. But you know the last 18 months, or you know however long it's been, there's been really not a whole lot, and so we've been very like diligent on like we've walked away from opportunities. You know one of the largest vendors into the retail sector food and beverage. We literally didn't sign their contract this week, and so it's it's stings, especially for the salespeople right the salespeople. They're just like sign in and move on, like let's get that freight and to be able to get a big shipper to give you that contract and us have to walk away from it. It's pretty challenging internally as well.
Speaker 2:Yeah, I like kind of your. You're essentially saying you know, despite market conditions and making things more challenging, you can't get desperate, you can't get to a place where you're putting yourself at too much risk in the long run, and I think that's a really, I think that's wise, I think that makes a ton of sense.
Speaker 3:And you have to. You have to mitigate the risk as much as you can, right On the contracts that you sign with your carriers, with your, your insurance policies and the way that those are structured. I mean, you have to make sure that you know you're going to take risk as a broker and you got to make sure that you're mitigating that risk through through other avenues as well. And so you know, we spent a lot of time on that, as you know, to obviously donorize and, you know, crossing our T's, because big litigation can be detrimental to 99.9% of brokers out there. They can't weather a $50 million lawsuit, and so we still have to be very diligent.
Speaker 1:Yeah, I was going to say this is definitely a huge topic, right, I mean it's. I think shipper can go one of two ways. One is they can exploit or take advantage of the opportunity, put all the contractual language that they want that you know works in their favor, or they can take the opposite approach, which is like it doesn't matter what market we're in. We need to, you know, work collaboratively and come to an agreement that works for both parties. I've always been a fan of the latter, where you know you shouldn't take advantage of one or the other, because we all know that this is all going to come in cycles. Everything's going to flip around from one side to the other and so and people have short memory we remember those things and how we were treated, depending on what part of the cycle that we're on. So I'm curious to get your thoughts on, if you put a percentage on, how many shippers do you think are exploiting this market versus working in a more collaborative way, as opposed to exploiting the opportunity?
Speaker 3:I would have to honestly pull that information. And I look, I think that the vast majority of shippers you know are great partners and I think that they understand it's a cyclical business and they want partnerships because, you know, at the end of the day, you know it's a people business. I think you know we've continually proven that that relationships and service and pricing are all very important to the equation. And so, look, there's definitely a world of shippers that you know take advantage of it, but there's a large amount of shippers that don't right, and so you just got to figure out which shippers you want to partner with and the ones that don't. Like you know they can be some of the biggest companies in the world and they've got a lot of the power.
Speaker 3:But the thing is that you realize is you might sign this contract that has all these different things, but they actually never enforce them either, and so, like that's, the other side of the coin is like you're signing up for this risk, but level heads prevail when there are situations as well. And so, you know, I think it's it just depended on the shipper, and I don't want to sit here and paint the shippers in a negative light because at the end of the day, they've got to protect their business too, and, you know, once that product leaves their door, you know they want to basically be, as you know, hands off and abstaining from as much risk as humanly possible, which, if we were in their seat, we would do the same thing. Yeah, it's a small percentage, I think.
Speaker 2:I think it makes sense that at the end of the day, when I think about the way that shippers act in a market like this or in a changing market, you know as the broker, it's like you can't control how the other party is going to act, but you can certainly learn from it.
Speaker 2:My perspective has always been you know it's not my job as the broker to make the rules of the game. You know each shipper is the judge and jury of their own game and they get to decide who's going to play. And my perspective was always you tell me what the rules are right, and if you want us to abide by 99% of our contractual commitments and hit 97% on time, I could do that, and it's probably a lot more expensive or a little bit more expensive than if you tell me I only have to hold to 80% of my rates or I only have to hold rates for three months and then I can make adjustments if I'm getting my butt kicked or something like that. So my perspective was always just like let the shipper decide. And if they don't want to be a good partner or they don't want to reciprocate the kind of level of service you're providing, then maybe they're not the right partner for you, or you should kind of alter what you're offering to kind of match what's being asked of you.
Speaker 3:Yeah, you play the game right.
Speaker 2:Yeah, that's brokering. So, anyway, sticking of brokering. Now that we're we got right into the meat of it with the risk, let's go back for a second. Let's go back to you kind of joining the industry. So Donegan tells you hey, I got a job at this company, command Transportation. It's run by this guy, Paul Loeb. Talk us through that. What was that like joining that company? What was your experience like as you jumped into the industry?
Speaker 3:I have nothing negative to say about Command Transportation. I actually spoke to Paul Loeb last week. Paul Loeb, if you could get him on the phone ever, he would tell you he sat next to me for two years. We had a really close relationship. It was awesome.
Speaker 3:What Command did at the time is they built this unbelievable spot engine. Paul didn't want the contractual freight, he didn't want big operations teams. He wanted people that wanted to grind, hustle, make a buck, and that was the culture and it was a lot of fun every single day. I love going in there. Obviously, we built a lot of like our foundational, like the way we build our business emulated a lot of that. And then, as we've gotten to scale, you can't just be that aggressive sales culture right, you've got to be able to pivot and you got to be able to serve big contractual awards.
Speaker 3:The industry is different today than it was back in 2006 when you started the business, or 2010 when I joined the business, or whatever your start date was. It was a great company and I think, if you look across the industry I mean Coyote and Command they have built so many successful people across so many different brokerage platforms today and they just do it the right way. They hustle, they treat carriers with respect, like there's a lot of those little things that we've taken with us that have allowed us to be successful. And so love the Command model. I love Paul Loeb. It's been, it was great to learn underneath of them.
Speaker 2:And you came in as a sales rep. I did customer side and what was that? Were you? Were you crushing it right away? Did it take you a year to get your first customer? Because you know you're not that fond of Doctor or what you know. Walk us, how was that.
Speaker 3:So, long story short, I assisted a guy by the name of Will Diaz, and Will Diaz now runs all of training and development and all of that on the customer and the operation side here at arrive. He's a VP, he reports into my, my CRO, and so we go way, way back. And so I assisted him and I obviously like picked up on things quickly. He would always print every single piece of paper out and highlight everything and circle everything. I'm like dude, I know where the PO numbers, you don't need to highlight it for me.
Speaker 3:And so hit the ground running pretty quickly, started to make calls and I was always about shippers and concenies, like I tried to make the job easy, not hard, like the people that just plowed down a list and they had no reason to talk to him. I never understood that and I just started to really build relationships with those shippers and concenies that I was working with. And so I graduated, I think after eight months of training and I was already moving, you know, six, seven loads a day, I think at my peak I was. I was only in sales for three years before starting arrive and I think my peak was 25, 30 loads a day. So I never got to like that level that we have reps today moving to 300 loads a day. But at command transportation you know that was. That was a respectable amount because it was all spot freight and so it was fun.
Speaker 1:So, matt, you're telling me, you got to. You came out of school and you got to sit next to basically who's noted as the godfather of freight for a couple years. So basically, you went to the MBA school of Paul Loeb is what it sounds like.
Speaker 3:So the first year and a half I did not. He ended up moving by me like after two years, and then my last two years. Yes, how?
Speaker 1:did you entice him over to you? That's amazing. I don't know.
Speaker 3:I think that if you got him on the phone he'd probably tell you a few reasons. But he, we just enjoyed our banter and he's a fun guy. I mean Andrew's dad goes back, I mean a long time with him and Andrew grew up being around him and so he can definitely talk about him at a high level. But he's just a good dude and he likes to have fun, he likes to talk shop and you know so. Honestly, I think it's because I also left him alone. Like you know, if you're the CEO, sometimes people like the overly talkative to you and I think he just respected the fact that. You know, I knew when it was a good time to talk to him, when it wasn't, so he kind of was able to do his thing.
Speaker 1:Do you think arrive either exists or is what it is today, without that two years experience of being that close to him?
Speaker 3:No, I mean, look, I think that everything in life happens and shapes and molds who you are as an individual and you know, a lot of different things had to happen to get to where we are, you know. I mean, I look back to when I was 18, 19 years old and we ended up working with this, like I said, sell you a core company to get the vortex into GNC, and I knew someone in high school that owned GNCs. They introduced me to this young startup called sell you core. That was really aggressive and so I got in front of them and they love this product and so, like so many things happen that just mold the success of all business and all individuals, and so you can't obviously look past a two year period of time where you have, you know, access to the guy that understands this business as well as anyone. It was obviously very important.
Speaker 2:How about best lesson you got from him personally that you feel you took for? Not that he necessarily told you, but just that you learned from watching him and being around him?
Speaker 3:I think it's the obsession of your numbers, and I'm not just talking about like profit or this, it's just like he understood everything going on across the company at all times, like there is not a customer he didn't know. There wasn't a carrier he didn't know. There wasn't a rep he didn't know. He was meticulous and you know, I think as a CEO in this industry, you have to be involved in the culture of your company, you have to care, you have to be super involved, and he was just all over things and like he was constantly he'd call someone back. Why'd you take this load? They're like, how did you see, I just built this 30 seconds ago, and so I think it's just the love of the game. And he just even after starting backhaulers and selling it to CH and sitting out and then starting command, the guy came in every single day and worked a full 10 hours and he cared every single day about everything that went on, and so I think that obviously has had a lasting effect.
Speaker 2:Okay, so you clearly learned a lot there, and I know you as a numbers guy and we're going to talk about that. We're going to talk about that later, but right now I want to make the jump. So you spend four years at, or three or four years at, command and then you decide, you and Eric say, screw it, let's rent a U-Haul and drive down to Austin, texas, and start our own company. Right, like what was the thought process there?
Speaker 3:So Meni Yishin Doss, the company, the Cellucor guys. They sold a piece of their business to private equity and so they reached out and they're like hey, we want to make investments into young entrepreneurs and we loved working with you when you were in college. Like, what do you want to do? And like I pitched them on like a Chipotle for salads right Like now they're everywhere, but at the time those didn't exist. And so they're like what do you know about restaurants? I'm like absolutely nothing. And so they basically like pass. And so then we basically realized I was like so how much do you guys spend on freight? They're like well, we spend like five million a year in truckload and a couple million a year in LTO. I'm like, well, why don't we start a company that just manages that freight day one? And then we kind of grow from there and that was literally our aspirations. And so Eric and I were living together, we put together all these business plans. You know, 10-year projections, $240 million Like we were going to take over the industry, kind of thing.
Speaker 1:You're a little light.
Speaker 2:That was in your mind taking over the industry. I'm kidding. I've been in the ceaseless 10 years, $240 million.
Speaker 3:Yeah, I'm kidding, but no, so that was like back then I was 25. I didn't realize the opportunity. I mean, you learn so much along the way. And so we end up pitching on multiple times and they're like, all right, well, this looks like a really low risk investment because you're not going to burn the capital, right, like you're not. You're sitting here saying you're going to get our business day one, you're going to bring over a senior customer and you're going to sit out. You're not compete and non-solicit. Well, we don't look at a lot of cash burn. So, like worst case scenario, like whatever, like you know, we'll move on. And so that was really the premise of it.
Speaker 3:They basically gave us a million bucks and we moved down to Austin and recruited people that had industry experience. We started with 10 people and 36. Have you guys been to Austin before? Yeah, and so you know, like 36, like the street, like it's like the Bourbon Street of Austin, and so we were right, above all the bars, and it was like a 16 person maximum office. So it was tiny, it was like a shoe closet and we got going, and so that's how we got started.
Speaker 2:I can't stop recognizing the similarities in our stories here, because we did the same thing at Molo. You know, our first investor was a produce company and the thought was the same thing. And, granted, ours didn't work out as well as yours, given that our produce company was extremely cheap and they were, like Coyotes, $50 cheaper than you on this lane. Like can you match it? I'm like we are. You're our investor. Like, can you give us the lows, please? We're at 6% margin with you, but we also. Our first office fit 20 people and it was above a bar in River North and Chicago.
Speaker 3:It's the best way to start because it builds culture. You just fall out the door and start hanging out Like that's what the early days are all about. It's fun.
Speaker 2:You know those long days that end up becoming nights. You know 7, 8, 9 o'clock before you finish up. It's nice to kind of just walk downstairs and have a cocktail to kind of wind down.
Speaker 3:One of the good stories about starting is we had the six month non-compete, right, and so our first ever hire his name was Nick Smith. He'll be so happy if we can call him out. He was a command guy, defensive end at Michigan State, just all around, awesome guy. He's like the energizer bunny and we're like, okay, we basically because he didn't have a non-compete, he was basically a free agent and I'm like here's a list of a thousand carriers that we need you to call and figure out who like the dispatchers are, so that when we start this company we know who to call.
Speaker 3:It's just like a simple task, right, and we get them a magic box or whatever that was called, like whatever the phone device you plug into your computer, and so this guy just spends four months making calls to all these carriers and he's a carrier rep through and through. He didn't know how to use Excel to save his life and so he goes for months and months and months and he's just entering all this information in where their dispatchers are, where their terminals are, what lanes they could be looking for, all this fun stuff, and we get the information back and I'm looking at him like Celadon bankrupt. I'm like this camp. This was before that and I was like that can't be right. They've got like 2000 drugs and so we start like fact checking everything. I'm like dude, you sorted the sheet wrong.
Speaker 1:He didn't know when you were sorting it.
Speaker 3:And so the whole thing was just thrown out to the side Like dude. Whatever, just start covered free.
Speaker 2:That's funny, so, but let's actually talk about you driving down to Austin. I heard that was an interesting experience. Tell me about that.
Speaker 3:Yeah, it's not my proudest moment. We rented this huge U-Haul because we were going to move five or six people down. And so we're like we're going to get the biggest U-Haul you can buy and we're going to drive it and we're going to tow my car behind it and all these great ideas that we had. And so we pick it up and I've never been behind a wheel of a big truck like that. And look, it's not a 53 footer, I'll tell you, that's like 27 feet. So it's embarrassing to even have to admit to this.
Speaker 3:And so we're driving in rush hour basically up diversity, I believe and so I'm trying to take a left on the floor and it wasn't able to be taken a left on to because it was rush hour and so you can only go straight. And so we went down to right wood and I don't know if the Chicago people know right. So we took a left on the right wood and went down and there's a metro bridge is like towards the end of it, right before you get to the. There's a department store over there, but anyways, and I didn't realize the clearance on the vehicle, and so I'm just driving along thinking I'm about to move down to Texas and smack the bridge going full speed and yeah.
Speaker 3:So we literally got stuck and so we sat there for two and a half hours I would and Donagie was like dude, like freaking out, and I was sitting there cross legged with a key deflating all the tires because you had a lower, you had to lower the U-Haul to get it out from underneath the bridge and so, yeah, we finally got it out and then I honestly I hit another car in a parking lot because I was like kind of like frantic at that point, but yeah, it wasn't a good experience. We decided to get a much smaller U-Haul and figure out how to move more people down with smaller U-Hauls.
Speaker 2:This is a clear sign you were meant to be managing a transportation company 100%.
Speaker 3:And Donagie sends a. Donagie sends a screenshot or a picture to our investors and is like are you sure you want to start a logistics company with us? And it was literally just. The roof is ripped off. I don't know if you know, but the U-Haul's top is like aluminum it just rips right off Tuna candid huh. It literally looked like a tuna can, and so, yeah, that was my first foray into driving the truck. It did not end well.
Speaker 1:Let's talk about that. So you start this, you start this business with a good front of years. That can go really well. It could go really poorly. Obviously, we know what happened in your case, but what was it like? You've known this guy for a while, through college and whatnot. Was there any apprehension? Was there any discussions that happened at the beginning going into it so that you could set yourself up for success?
Speaker 3:So the first couple of years all we did was sell, like, and we were having fun, like, yeah, I would, I would do all the IT or I would do all I was overseeing, like, counting and all that. I was dealing with the investors and when we ever got we set up with Wells Fargo and our ABO, I dealt with them. But like 99% of the time between seven and five, we were talking we're just selling, selling, selling, selling, and so we never really stepped on each other's foot because we had the same, you know, goal in mind. You know, I think, that there was a time when the business started to see success and we started to grow pretty quickly. We ended up getting a coach that really helped us figure out, like, how we would define roles and responsibility. And you know, I think, that coaches have strengths and weaknesses and you know this coach, like his strength, was helping us really understand you know where each other specialized and where we played. And so very early on we figured that out.
Speaker 3:And you know, honestly, kudos to Eric because he knows what he's good at. He's the most self-aware person in the world. If he was on this call, he would tell you exactly what he's good at and he would tell you it's not finance, it's not the numbers, it's not any other structure. He wants to sell and he wants to build relationships and he's unbelievable at that, and so we've never really gotten into each other's way. I think where founders really get hung up are when you have two personalities that want the same type of role or control, and we were really fortunate that we kind of like slotted into like our strengths and we both were really cool with that, and so we were fortunate, did not have that many issues. Now, look today, we still sometimes, like our executive team, have seen us blow up on each other multiple times, but that's just like at this point we're like best best friends and, like you know, brother, like figures and you always will get into arguments, but yeah, it's, it's, it's worked out really well for us.
Speaker 2:I'm curious, you know, for for the aspiring entrepreneurs or those that are kind of doing it now and have recently started their brokerages, those first few years it's very different, right, the first year, the second year, compared to the fifth year. And I'm curious from your perspective, you know, as a piece of advice to them. It because at first you have to do everything and everybody has to be willing to do everything. You're doing recruiting, you're doing interviews. I mean, I remember I was terrible at interviewing and I would still do it because, like who else you know, we had to do it. But how do you think about, like, when it's time to, like, make a change and say, ok, I shouldn't be doing this, I should be doing that?
Speaker 3:Yeah, so you're talking about delegation, and delegation is not a perfect science. It's. It's an art, and I think it depends on the person, it depends on the company. You know, I think that a lot of people would tell you that I need to continue to delegate more, right? You know, as a CEO of a company this large, you would say that primarily, you think I'm focusing on the strategic plan and the board and the investors and dealing with the top customers, but I'm very involved in the day to day as well, and so you know I'm not going to sit here and say I've done a perfect job at delegation, but I think that, the way I looked at it is the first couple of years you can do all those things that you need to do after hours and you need to be selling because, the end of day, as a founder, you need to care about your. No one's going to care about the business more than you care about it. And you got to be grinding.
Speaker 3:And the way to grow freight brokerage is sales and we all know that right, whether it's selling and covering freight.
Speaker 3:And, honestly, the hardest thing about starting a freight brokerage is credit Getting factors to factor you and getting carriers to take your loads. It's like that was the most challenging sales challenge is like how do you convince them that you have a strong balance sheet so that they'll actually take your loads? And so, like all of that was very obvious. And then, once it gets to a point where you bring in a little bit of outside money and you have to start to think and manage more personalities, then you need to start to build like a management team. But until you get really big, you can't take your foot off the pulse of sales. As the founder CEO in this brokerage business and like even today, I spend more time with my head of sales than anyone else on my executive team, and it's just. You know, I spent not just customer sales but carrier sales right, and we spend so much time just talking strategy and everything that we need to do to get better, and so I don't know, I don't think you can take your foot off the gas.
Speaker 2:There, I agree 100%. I mean sales is the head of the snake right and you know, without it you've got nothing else. There's nothing to operate if you can't bring in business. I mean, I remember like I had this idea in my head and it just was a very easy way to stay disciplined. And always trying to sell was what I would ask myself is what am I going to be doing if I'm not selling?
Speaker 2:So you know, if I found a Saturday afternoon, I wanted to watch Michigan beat Ohio State, which probably wasn't happening a lot at the time. I was starting Molo, but you know, I could sit there and watch the game. Or I could sit there and watch the game with my computer in my lap, sending emails to potential customers, and it was like what? What did I have better to do than to be selling and trying to bring new business into the new customers, into the business? And I think that's the mindset that founders need to have if they want to be successful. Like that's when people ask me stuff like that, that's all I think about.
Speaker 3:You can't pay people enough for them to care the way you do. Like, no matter. Like you, yes, you can get people to like, love it and care about it, but, like the founders, love for the company. Like you can't replicate it, and so you're ultimately accountable to the success.
Speaker 1:Matt, I'm surprised to hear you say that. You know, landing new shippers wasn't one of your biggest concerns early on. And you know when I think back to you know, when I first heard about arrive, I do remember there being a pretty decent buzz around you all very early on and it was kind of around the time of the Uber frates and you know the convoys and the digital freight matching boom, so to speak. And arrive was in that conversation but also thought of, I think, a little bit differently. So I'm just curious how deliberate were you and how you were positioning yourself in the market in those early days?
Speaker 3:I mean I could talk for hours on this. But look, we've always talked about the co-pilot model and I'll be honest with you. We had off-the-shelf technology until COVID, until March of 2020, when everyone went home and worked remotely. We were in off-the-shelf technology and so all we cared about was how do we build better relationships, how do we out-hustle, how do we make more calls, how do we service people better? I mean, we were just a grind shop and now that's not scalable forever, but that was our MO. We wanted to run through walls faster and harder than anyone and we just landed customers left and right. We had good people, we had strong training program. We hired the right people.
Speaker 3:We have always obsessed around the profile of who to hire, how to onboard people, how to train people, how to make them effective, and we were just really good at it. And so landing customers was never an issue, and I always say this, and I actually mean it landing customers is the easiest thing to do at a freight broker. It's growing a customer. Anyone can get the first load. It's. Can you get 1,000 loads, can you get 10,000 loads, can you get 150 loads a day? Because you got to manage that relationship. You cannot mess up. You got to be unbelievable at communication and you got to build that Like shippers, if you make enough calls, you're going to get enough yeses. But getting a yes to a consistent yes is a very different thing, and so that's what we obsessed about constantly early on.
Speaker 1:I remember what it is now. So you had taken or you had recruited over somebody from CH that I had been doing business with for probably Brian Miller, seven or eight years. That I thought of very highly of and I said wait, wait a second. I've never heard of this company and you're going where. And obviously the non-competes and things like that. We couldn't really talk about it, but that was what originally got my attention was you were starting to pull in talent that I knew of. That I thought very highly of and I'm like how are these guys pulling this kind of talent?
Speaker 3:And it's actually funny because we hired Brian. So we have this thing called executive sponsors for people that are familiar with our business. We went out and hired a bunch of X shippers to come in and basically be the liaisons with the largest shippers. And so when we look at a relationship with a shipper, we've got the executive sponsor with a VP or C level relationship, we've got the sales manager with some layers, we've got the day-to-day rep with some layers within the organization, then you have the ops team with some layers within the organization. So you've got like four points into every single customer. And so that was one of our big things that we did back in 2019, 2020.
Speaker 3:And so we tried to do that back in like 2015, when we hired Brian Miller. We're like, hey, we're going to bring this guy in. He's a seasoned vet and he's going to help us with all these customers, and we just weren't ready for it at the time, and so he ended up getting back into the brokering scene. He is one of our top reps if not our top rep at the company today. He's an awesome dude. He is awesome, awesome. We were so fortunate to have him. He works really hard, and so we ended up bringing that team back to life. But he was doing so well back in the broker seat that he decided to stay.
Speaker 1:The other question I was going to ask was kind of starting up around the same time as the let's call it the digital freight matches, but yet you're not getting lumped into that category per se. Was that deliberate, and how did you guys think through that early on, when all those moving parts and all those different companies were starting to come around?
Speaker 3:Yeah, I think, look, everyone wanted to be lumped into the digital because of the valuation perspective, but we had an unbelievable growth equity partner that has been steadfast in warning me of hey, there's a lot of negatives at raising, at unrealistic expectations, that creates a lot of issues down the road. And so he's like you don't want to do that, those are impossible shoes to fill. This business doesn't trade like that. You're going to get ahead of your skis, and so that was the only reason we ever wanted to be lumped into that category so we could raise more money at a bigger valuation. But we've always been steadfast.
Speaker 3:We talk to our customers all day, every day, and one of the things we surveyed, like our top 250 shippers, and we asked them what they liked about arriving, was like 10 different things, and the one they cared the least about was technology.
Speaker 3:And so we were like, ok, if the big shippers are all telling us that the last thing they care about is technology, they care about our service levels, they care about our pricing, they care about their relationship, they care about this proactive communication, like all of these things.
Speaker 3:We don't want to be lumped into this set of people that are saying, hey, we're going to really just focus on the technology. So we now focus on technology. We spend $50 million a year building technology, but it's different. It's very purposeful and purpose driven, whereas I think a lot of the digital brokers were just building technology to try to figure out how to solve all these problems without incorporating the human dynamic, and it costs a lot of cash burn. So, yes, we never really lumped ourselves into that boat. We always believe that the co-pilot and I continue to believe that the top 10 brokers are going to continue to take market share and continue to scale, because we're investing into the best technology and we're building all these great products which allow people to be more efficient and let them focus on what they need to do, which is build relationships and take that incremental load on a daily basis.
Speaker 2:Can you define the co-pilot model? Because just for our listeners is you're using that term.
Speaker 3:Yeah, so co-pilot is like we can drive. It's like an airplane there's still two pilots and a plane can fly itself the vast majority of the time, but you don't want to have a plane with no pilots. And so that's the same analogy to customers. Like the customers want points of contact, they want relationships, they want someone they can call, someone that's calling them and telling them when things go wrong, all the time and proactively. And so the model is basically building technology that surfaces what needs to be surfaced to the reps when it needs to be surfaced and allows them to do their job more efficiently. And so there's a lot of great technology off the shelf.
Speaker 3:But when you talk to the top 10 brokers, they all have different tech and they all want their business done different ways, and so that's why the top 10 end up having to build their own software. Because I want something done a very particular way, I want notifications on a very particular way, and so that's the way we look at the business is like. We need the technology to make people way more efficient. The day where, you know, carer reps used to do 10 loads per day. Well, that's not acceptable anymore, right? You need carer reps to do 25, 30, 40, 50 loads a day, and so you need to build technology that allows them to be more efficient and to allow them to have a better cost structure so that you can continue to take market share.
Speaker 2:So I think it's interesting. You started like 99.9% of brokers will or have which is off the shelf. You know bought a TMS that you just have your team start up using, and then you at some point made the pivot and said we're going to build our own. Can you talk through that thought process? I mean, that's a bit. You said 50 million a year you've been spending on that. That's awesome, but that's a big difference from where you were. So how did you get to that point where you thought that was necessary and why?
Speaker 3:Yeah, so 50 million was 2022 and into 2023. I think everyone with the margins were what they were in 21 and 22. Definitely spent a lot of money that they probably wouldn't have spent otherwise, and so that number will continue to be right sized. But really, the way we looked at it is like there is so much table stakes, right, like when you go on, you decide that you want to build a platform that can handle 10,000 truckloads a day. There is no off the shelf system that you want to put your entire business on 10,000 loads a day. It's just too much of a risk. It's your entire business, right, and so we really really focused on.
Speaker 3:Obviously, at the beginning it was all about truck entry and matching, because what is a broker without entering trucks and getting matches right?
Speaker 3:And then so then it just continues to evolve and there are so many things whether it's you get into Mexico and you have to do cross-border and you have to have multi-currency and you have to have all these different tracking there's a million things to build that you need to be a top 10 broker, and so it was just a necessary evil. We had to spend that money, right, and so we've continued to spend it and we're finally at a place where all this stuff we're building is all going to be super value at. It's not just table stakes anymore, because I mean the first three years of building technology I don't care how good you are, I would even ask your data master. It takes time to build the foundation of the system and the table stake things that everyone needs, and then you start to move on into bigger, better, more fun things, and so our whole premise of doing it is like how are we going to scale? We can't scale with a system that we don't have full control on.
Speaker 2:But for you personally, let's say right, so you haven't built technology before, none of your college businesses were building technology. And now you're like, hey, we're going all in. Like how did you personally think about that? How did you need to level up, and how did you need the team to level up so you could even scale that?
Speaker 3:So I know you know this, but Eric Harrison, who was with your dad and with Paul Lowe for many, many, many, many years, we brought him on and he helped us when we went. This was like 2016, 2017, where we don't even know how to spell technology, so he was able to help us kind of get to a place of a basic understanding. He'd been doing it for 30 years. He understands freight tech as well as anyone. Did he ever bring up build a platform that moved 10,000 loads a day? Absolutely not, and so he was awesome at getting us to a certain point.
Speaker 3:And then we went out and we built a really strong technology leadership team. I mean, being in Austin, we're really fortunate that this is like behind San Francisco, it's like technology town 2.0. And so there's a lot of good tech talent here in Austin, and so we had to go, make a lot of investments and make a lot of hires that are outside of our comfort zone, because we don't want to. To your point, I didn't understand technology. I had never built technology, and so for me, it was finding the right technology leadership that would help us bridge that gap.
Speaker 2:And one of the benefits of brokerage is there's the general low overhead cost that is attributed to it. Your assets are your people and I guess your technology cost, but a lot of brokers aren't carrying that level of cost. So how do you think about that? Now, especially, we're going to go right to this down market. We're in a down market now where everyone's all of a sudden like batting in the hatches and saying, hey, we got to preserve and be careful. How do you think about that? How do you navigate that and manage it?
Speaker 3:Yeah, I mean, look, interest rates are zero and money is basically free and raising capital is super easy. The business of growing at all costs and burning cash it was widely accepted and there is a clear pivot. Away from burn a lot of cash and build scale, it's all about unit level economics, and so we're in the same boat as everyone. We've made significant cost structure improvements over the last 18 months from where we were in 21 and 22. At the end of the day, our P&L is super easy what is your loads per day? What's your spread per load? What is your spread per day? And then what is your cost per load slash total OPEX? It's not that hard of a P&L, and so it's all about getting leverage on the OPEX, and we've done an unbelievable job and, looking into next year, we basically put the business into a position that, no matter how bad the market is, we're going to be break even or profitable, and so that's kind of the mandate that we have going forward. And if we can spend $40 million a year in technology and be break even or profitable in a terrible market like 24, then we can make that decision. And so for us it's all about resource allocation. Is what is this bucket of dollars that we're willing to invest and where are they going to be allocated, and where are we going to get the highest return to those dollars? And is it a smaller pool of dollars than it was in 21 and 22? Absolutely. What brokerage has it made different decisions from a cost structure standpoint?
Speaker 3:And so we're very bullish on our model and we want to continue to invest through the cycle. I mean, the last thing you want to do is start growing 7% to 10% a year. Like the public guys, you want to continue to invest, and the only way for us to get to that $5 billion, $10 billion number is we have to continue to build technology, we have to continue to hire people, and so it's always a fine line between being profitable and still investing into the future of your business. Absolutely, we can sit here and be extremely profitable. We want it tomorrow. But, like then, our growth over the next three years is going to be five to seven percent, and like that's not what we're signing up to do, and so it's, like I said, like we are meticulously in the numbers, constantly deciding how much we can invest that maximizes shareholder value while conserves liquidity even in a down market.
Speaker 2:Speaking of a bucket of money you guys have spent. You're just raised $300 million dollars for your business in 2021. Can you talk about that experience, like why, then? And why that amount? Like how are you thinking about that? That's a big number. I mean, you talked about raising and the valuations and the pressure that comes with that. So to walk us through that experience and that decision making process that you endured, yeah, so we had really early investors.
Speaker 3:Like I said, we have a lot of operators. So one of the things that we talked about how do we recruit people at the beginning? Like we tied a lot of people in with stock, like we were like the technology company in the freight industry 30% of our business is owned by the employees, and so we had early investors that wanted a little bit of liquidity. We had employees that wanted liquidity. We had some people that we wanted to clean up some preference on the cap table and so, yeah, the $310 million raised seems like a lot, but it was really only $60 million of primary and so, like arrive, since inception, has only raised $125 million of primary. If you compare that to over a billion of a convoy, you can obviously see we've been extremely capital efficient, and so a lot of that money was cleaning up the cap table, buying out some early investors, giving operators some liquidity, and so, yeah, it's a big raise and so it's solved a lot of our problems, because we knew we had this business that we could take and build to $250 million, $350 million of EBITDA. We have all the confidence in the world that we're going to be able to accomplish that. But you have to give people liquidity along the way or else people, like, start to lose faith. They're like, okay, is this stock even valuable? That's the benefit of being public is people can sell their public stock. Being private. You have to give people liquidity.
Speaker 3:And so when we went on, did that deal, we're like, okay, how do we build a business over the next seven to 10 years where people can go heads down and really really love what we need to do and what we're going to build? And so that was the amount of money that we needed to do to get that done. And so we still have $75 million of cash. Today We've raised $125 million. We built a $2.4 billion company last year. Obviously, this year, revenue per load is down, so call it $2 billion this year and we've got a strong liquidity position. So we feel fortunate and we've raised the right amount of capital. We underraised until then, and then we basically said we're going to put enough cash on the balance sheet that we're not going to have to worry about it again 30% going to employees.
Speaker 2:So we're talking equity now. I think this is interesting. We haven't talked about equity once on the podcast and I think that it's an interesting thing that is almost like taboo to talk about within businesses. I feel like it would be interesting if that was a metric of comparison for brokers. What if people tried to evaluate brokers by determining their cap table and how they distributed equity to employees? If that was the case, you guys would be in good shape, because that is a lot that's going out to the employees. How did you think about that?
Speaker 3:So, look, eric was 27 when we started this company. We didn't know a lot of different things, but we had early investors who had phantom plans and different type of stock plans for their company and they always talked about the importance of tying people in, and so that was just our mantra from the beginning. I think we have 600 employees that have stock Now. Obviously, it ranges in amount of stock that they have based on their role and based on when they joined the company and all those different things. We've done so much creative performance plans and equity plans. There's just so many different levers that we've pulled and I honestly think that's one of the most important things you can do as a CEO.
Speaker 3:I think there's a lot of companies out there where the founder owns 100% or the founder owns 90%. They're like I own 90, 100%. It's like that's cool, but like I get up every single day excited because I know that there's people we're creating, hundreds of people that are going to make a shitload of money at this company and that's really exciting and like sharing the wealth. At the end of the day, it's the people business. Anyone knows that right, your people are what drive this business and if you're not tying them in and rewarding them for what they've done, then I just look at that as almost an unethical decision, and so I've been very, very adamant about tying people in at a very high level from the beginning, and I think that it drives retention of your team, like our board one time asked me. He was like are you worried about losing any of your senior leadership team? I'm like no, not even at all, and so it just creates a bond and alignment internally that everyone knows what they're running at, and so to me, that's imperative.
Speaker 1:So, matt, you're putting your money where your mouth is is what you're saying, and you've kind of gone on the record in talking about your people in a very important way. I think there's some quotes that they're even about how you get satisfaction out of seeing your employees being able to put their kids through college, to buy houses, to buy cars, go on nice vacations, and so I mean that's really important and I think it's a very genuine thing of you, and so I'm just curious you know, where does that mentality come from, to want to do that, to be so passionate about that? Certainly something I'm sure your team gravitates to in a big way. Yeah, I mean.
Speaker 3:I think my team is sick of me saying this, but I always try to put myself back in the rep seat, like when I was a rep at command. I always think what I have appreciated this, what I have worked harder, and so I always want to make all of the decisions of like is this what's best for the rep? Is this what's best, is this going to get the best results for the rep and for the company? Because, at the end of the day, like you can own 100% of $100 million or you can own 30% of $2 billion and you can make a lot of people really happy and excited along the way and have a lot of fun. And I'm just making those numbers up. Those aren't real numbers. I'm just saying like, at the end of the day, like you can have better financial results for you personally and everyone else can have better financial results for them too, and so that's the, that's the misconception of like. Oh, I need to keep this all like that.
Speaker 3:To me, it's always been. I want a smaller piece of a much bigger pie, and so, and then, once again, like I said, it's how do you motivate people Like? This is a hard job. Anyone that comes on this and listens to this like this is one of the hardest jobs. I think. There's 30,000 brokers, there's hundreds of thousands of carriers. Everyone wants Niagara's freight like. You have to be really good and you have to be on the ball and you have to work a lot of hours and it has to be worth your time or else you're just not going to show up.
Speaker 2:Yeah, I agree. I mean I think you know we had a similar perspective on on equity and it's important that you you lock in your great people and especially you know. One of the ways I thought about it was who are the people that are sacrificing compensation today for the good of the company? The people who could stay in a sales role but but chose to take a more elevated role, knowing that you know you're the people who make the most money annually, are sales reps, and, at least as far as I remember you know, the biggest paychecks were going out to the guys that had the biggest guys and gals with the biggest books of business. But sometimes the people who were capable of doing that were needed a higher level, and so that was kind of my perspective when I was thinking about equity was making sure to distribute it to people who were kind of sacrificing the short term compensation for the good of the business and for the opportunity and the impact they were creating within the business.
Speaker 3:Yeah, I mean, I think that's one way right. I think that when we do our, we do annual equity grants every single year. We have a pool of equity that we give out at the current, you know, four and nine a and it there's a lot of different things right who got promotions, who outperformed, who, like landed the biggest customers, like there's just a million different ways that we look to tie people in and reward people. I mean, one of the things that we're doing now which I think is awesome is we're giving the vast majority of the equity grants on the rev gen side to mentors and, like, the future of this company are the new hires and the ability to bring people in and train them to be the future of this company. It's dependent on the senior salesperson that's mentoring them for that six to eight months, right.
Speaker 3:And so we're basically saying, hey, yes, these people are helping you do your business day to day, but if you go above and beyond and they're successful, when they leave you and become a sales rep, I'm going to give you even more stock, because that's really what's driving long term equity value is how many successful sales reps can we graduate and make productive, and the more that we can, the more valuable this company becomes.
Speaker 3:And so now we're basically putting our money where our mouth is and saying, hey, mentors, you guys are getting 80% of the stock grants going forward and so we really want you guys bought into this program, and so that was a change that we made last year and we'll see how it works out. But we're adamant, like I mean, that that is the future. I mean every time you bring people in, you develop them like we know that. You know we are a cohort based business. We are methodical about what productivity looks like by month, based on how long they're here, and we know what the value of keeping someone for 36 months or 48 months is to this organization. So the more we can do that, the better it is for everyone?
Speaker 2:Yeah, and I will say there's no perfect answer here. You know, for people who are starting their own companies or thinking about, you know, their role within their business, it's like there's there's not a there's not an equation that says, hey, this is the right way to distribute equity, whether it's this group of people, well, there's 10% of the people, 50% of the people, 100%. You know you want to make it meaningful and so if you give everybody, it's just it's a really hard thing to do. But I definitely think as, whether you're the employee or you know, as the employee, the thought is like are my leaders putting my interests, like putting, do they have my best interests in mind as they're making these decisions, or do they only care about themselves? And then, on the other side, as the employer, it's you know, it's up to you. I mean, if you care only about yourself making, owning that business, then yeah, go ahead. But you're like less likely to win over talent against you know company like arrive now.
Speaker 3:And I look at legacy, like what gets me excited is, like 20 years I hope that people are talking about me the way that people talk about Paul and Jeff, right, and if we have the opportunity to create thousands of jobs and train thousands of people that have long careers and they, you know, have this big, you know liquidity event, like that's awesome, I, you know it's. It's hard to fight that, and so that's one of the things that you know we obviously want to, you know, accomplish or to arrive is we want to set people up for success for their entire career.
Speaker 1:So, matt, I picked up on a comment as you're talking about, you said you can see, on the onboarding of a new employee, their performance and production three months, six months, et cetera, which takes us into a really big topic on something else we found out, which is that you're a big data guy, right, so talk to us about how data plays a role in your decision making process. I know that's a very open ended question, but maybe you can give us an example of just how critical that that's been to the success of Arrived's growth.
Speaker 3:Yeah, I mean look, I literally could spend two, three hours talking about how we built the financial model of business.
Speaker 3:It's truly I don't and I don't say this loosely I don't know if any other broker has figured out this financial level of like data, like we know exactly how many loads per day a customer rep's going to bring in on every single month. Now, this is a cohort average, right, and so when we add up all of our people, we get a total number of loads per day that we're going to have. When we set up our loads in 2017, we've never missed a number. When we set up the capital raise to 2020, we've never missed a number. I'm talking about loads per day on a given month. We're so accurate forecasting the future of this company, which is why our investors are so comfortable with us making investments right.
Speaker 3:In the past, it wasn't just burn cash because you want to burn cash. It was like, guys, this is a very repeatable cohort growth strategy that we know that when we layer in $25 million of investments, this is what the ROI is going to be in year two, three, four and five. Right, it's like starting a franchise location. Once you've started 30 franchises, starting 350 more isn't that complicated. In fact, you get better and better and better at as you get more and more data right, and so, every single month that arrived, we're updating our model, because we might have 350 customer sales reps, we might have 400 carrier reps. Well, all of those are in different tenure buckets, and so they're adding to the model, and so the model is getting more and more accurate. Right and so the act. The model, though, is a historical look back of what is the average production on every single month that our reps been here, and so when we sit here and say, hey, these are going to be our loads for 2024, we can then layer in a higher plan. How many ops do you want? Do we need to hire? How many carrier reps do we need to hire? Because we know that we need to have more capacity than the loads that are coming into this business, and so it just makes this unbelievable predictable model that we've created, and then all of the technology investments that we do. We're basically layering back to how does that increase productivity? How does it get people productive faster? How does it steep in the curve and allow people to be more productive across the entire cohort? And then we actually layer in attrition. We know exactly when people are tripped out. We know what percent of those business, that business we retain. And so all of that is built into this really, really complicated financial model that gives us all this confidence to continue to make these investments.
Speaker 3:If we didn't have confidence in these investments, it'd be like you're flying blind. It's like why, well, why do you think you're going to grow this much? Well, how do you think, how did you guys get to 2.4 billion in eight years? It's like, well, we figured out a model six years ago and we just pounded into it and just continued to hire and hire and hire and build confidence in this model, and so that is really arguably the most important thing we figured out.
Speaker 3:I mean, the easiest way to put it to an analogy is like if you own a manufacturing facility and you know you can do a million widgets, right, the carrier side needs to be. The carrier side is like the manufacturing facility, so they got to be able to cover a million widgets. Well, if you bring in 1.2 million widgets, you either have to give back 200,000 or cut quality and have lower quality to service that order, right, and it's the exact same thing on loads per day. And so it's this perfect model that we're able to keep in balance as we continue to scale. We're not just flying blind Like, oh, we should hire 13 people this month. It's like, no, we're going to hire 15 people this month, 17 people and boom, boom, boom, because we know what that's going to do to manage bull curve.
Speaker 1:So I just want to acknowledge here that when I started, when we started talking about data, there's just like an extra pep in your step. So it's kind of obvious to me just how, how, like, how passionate you are about this stuff. So I find that awesome, because I think when a lot of when we talk about data in our industry, it's so often centered around like the pricing component, the pricing why I'm doing it wrong. That's obviously extremely important. But I think the perspective that you're sharing is very unique, because I'm just trying to think through the different organizations that I know that we've talked to, that are actually doing what you're doing at this level of granularity, and I, I, I personally can't think of a single one. Andrew, I don't know if your thoughts on that, but it's from the financial granularity of our models.
Speaker 3:I talked to all the investment bankers like we are as dialed in as it gets, but I'm just as excited to talk about the pricing and all the data behind all that too. So it's it's not just a financial model, it's also like I I love to obsess over, like power lanes and how to create power lanes. What is a power lane? Well, power lane is the lane that you run consistently, that you have below market capacity with high, high levels of service. Since, like, how do you create that? How long does it take?
Speaker 3:Like we obsess about all of it and like we always talk about we have five cohorts. We have our customer rep cohort and how they mature. We have our carrier rep cohort and how they mature. We have our customer cohort. So, basically, what is the average loads per day we can bring in, based on the size of the customer SMB, mid-market enterprise and then we have the carrier cohort. And then we have lane level cohort Like, how long does it take us to get good at a lane? And so we have literally just obsessed with all of this data and it just allows you to have such confidence in all the decisions that you make on a day to day basis. It's like it makes it takes a lot of the stress. It's like, yeah, the market sucks right now, but we're confident, like we have so much data to support that what we're doing is the right thing.
Speaker 1:So to summarizers there's no guessing. Everything that you're doing is extremely deliberate and when you talk well, it makes sense, right? We're tying it all back to how you're able to scale Well, you know, not going through much money in the process. It's pretty clear that you just laid out the roadmap at a very high level, obviously right, but of exactly how you're able to do that. Is that fair? That that's basically yeah.
Speaker 3:And we went out. We then buy market share. I think there's this huge misconception about arrive of like, oh, they lump them into the digital guys, they're just buying market share. It's like, yeah, that's not the case. Go ask any freight management company, go ask any shipper. We don't do paper rates Like that's not a Rives game. And I think you probably know that with Niagara, we've probably negotiated a lot with you guys over the past and so you know we believe that you have to build a financially viable business and you know having net revenue is what is our lifeline. And you know not having net revenue and buying market share is yeah, if you want to. Let's just say you want to get really, really good at these 25 lanes. Yeah, there might be a strategy to go buy market share on those 25 lanes for a period of time, but you don't do that across the entire business and so everything is very deliberate in what we've done since we've started.
Speaker 1:How much of a leg up does that give you? You know, just from an operating leverage perspective? Obviously, if you're measuring everything down to the penny, it sounds like you know you get to a point, even on these power lanes, where you've got hyper efficiency operationally in terms of the overhead and dollars that are being spent on that. That. Then that yields tangible savings or opportunity when you're going out selling. So I guess how do you tie all those things together where you're able to say, okay, you know I'm able to lower my operating margin and then that allows me to go to the market and be more competitive?
Speaker 3:Yeah, I mean at the end of the day you're you're nailing it, it's. The question is and like this is the hardest thing for any broker to answer let's just make up numbers. Let's say your cost per load is 150, right, it's like, well, I can't take that load. That's at $70. Well, that's not true because incremental loads only have a variable cost associated with it. So if you already have the capacity, you already have the technology and you already have the ops people that have the bandwidth what is the actual variable cost of that load Right Now, when you're not profitable, then yeah, you got to be a little bit more diligent about it.
Speaker 3:And so, like, really understanding how cost scale within the business is is how you get leverage in this. And like, obviously, the CHs of the world and the Rx is RxOs the world, they get it Like they're great. And so like really understanding customer contribution margin is what you're talking about and like how do you get leverage on the customer contribution margin and how do you make that account that's 300 miles and $60 in margin per load a profitable account? Well, you do exactly what you just said. You got to get it super efficient. You got to buy really, really well, you got to get great like rep level productivity on it and so like just obsessing about all that stuff. It's the only way to build a successful business and, honestly, you got a lot of different opinions inside of the walls of Rive on what the right decision on all that stuff is, so we spent a lot of time debating it.
Speaker 2:Well, so okay there's an interesting point. I mean, all of this is fascinating and I think it. I don't even want to keep going on this data piece because you're maybe giving away too many of this, too much of the secret sauce, to your competitors here, yeah, no kidding.
Speaker 2:But I want to dive into Matt Pie, the person with respect to this, because I think we saw in Ink Magazine you talked about being very numerical, very logical, but not very emotional. I think we're your words and that's definitely one of my issues, especially in my relationships People hate to hear statistics. So what did you mean by people hate to hear statistics?
Speaker 3:You cannot manage the day to day people with numbers, right. That's not how you get people excited and motivate them, right? The C level people they have to understand the data, they have to be kind of emotionless when it comes to what the data is telling them, because the data is not going to lie right. And so I think it's all about. It's almost like in my relationship with my wife. She doesn't want me to be logical, she wants me to be empathetic, right. She just wants me to say that I understand her right. And so it's all about who you're talking to and how you cater your messaging.
Speaker 3:And so I've surrounded myself at the executive level with people that I know I can be extremely direct with that. I can just get into the numbers and be like guys this is what it's saying, like take it or leave it, right. But you can't have that same candor with the entire, you know, with every single person in the company, because that doesn't motivate people, it doesn't excite people. And so I think it's more like, as I've matured, it's like it's how do you tailor to your audience and how do you like get people to want to work even harder and be more productive? It's not like well, if you did this, this and this and this would be the result? It's like they don't care. So I've had to learn and get more mature from that standpoint.
Speaker 2:So clearly data is a superpower of yours, as we just saw with. I think. Actually, people are going to be confused and think that they sped up the podcast to 1.5X speed because of how excited you were as you were giving those answers.
Speaker 2:But, as I think about that though you said to yourself not very emotional in this ink magazine article, not very emotional, and that's definitely one of my issues Do you struggle to empathize or not empathize? But is that a challenge for you managing people, and I like that. You said that you've surrounded yourself with people who you can be very direct with, so it sounds like you've had a mature understanding of yourself, a self-awareness to support yourself with those kind of people. But as a leader, as someone who's kind of always trying to grow, how do you think about your kind of relationship to people and how you can manage them?
Speaker 3:Yeah, and absolutely that is my biggest area of opportunity. I think when we did the 360 that every coach likes to give every CEO, I think that empathy was definitely my biggest area of opportunity, and I think it's something that comes with. You have to work hard at it. I think that I'm having a daughter in July. I think that's going to probably change my outlook on life a little bit. But, yeah, I think I have to always be mindful of it Because at the end of the day, it goes back to what I was saying earlier is you've got to find what makes every single person tick, and not every single person. Even if they're in my executive team. They don't always just want to hear about this, this and this. They want to hear how is their family doing, how is their wife doing, how is this? Everyone obviously would probably tell you that that's an area of opportunity and I think I've gotten a lot better over the last three or four years, but it's definitely still a possibility to get better.
Speaker 2:Well, let me say this I reached out to a friend of mine who works for you and I asked them for a quote about you, and I'm going to read it to you. I'm going to steal one from Paul's book that we did with Dobby. He says you seem like a pretty good leader, but you're not as handsome as Andrew. Oh wait, sorry, no that was something else.
Speaker 2:What he actually said was it doesn't take very much time around Matt to see. He is a special leader who people follow without hesitation, and for good reason. But what truly stands out is his way with numbers. Matt's ability to digest data and information and convert it into action is top tier. Those closest to him also all talk constantly about his loyalty. He is extremely competitive and successful, but also a great friend and teammate. I see your eyes maybe starting to well up a little bit. How does that make you feel to hear that one of your employees speaks that way about you?
Speaker 3:I think that, at the end of the day, we can always do better, but that's what I aspire for everyone to say. But I think when you have this many employees, it's not the case. So, yeah, there's probably like 50, 60% that feel that way and 40% that don't. I always keep myself up at night at how to make that 100%, which is why I never get into politics, because I could not deal with that divide.
Speaker 2:That makes sense, no that's awesome.
Speaker 3:I appreciate that comment.
Speaker 1:I'm not as good with numbers as you, so you're going to have to forgive me on this one, but you're 35, you're running a multi-billion dollar organization. That's got to be one in 10 million, one in 50 million, somewhere along those lines. So do you have constant out-of-body experiences? Do you have a bunch of oh shit moments? Just give us a little piece of what the heck, what is?
Speaker 3:that like I've had very few, and I get this question all the time. It's like well, do you ever sit back and pinch yourself? I always, and one of the things that I think you're in that quote is like I'm all in the data and I always understand things that we can do better. And I think that it's actually a negative thing because I'm always sitting here looking like, oh my God, these are 50 areas that we haven't done well enough and so I need to sit back.
Speaker 3:And obviously my wife and my friends are, you know say similar things that you just said, but I never take the time and I'm not going to compare myself to like one of the great athletes, but it's like you never rest on your laurels, you're never content, you know that you can do better and you want to come in the next day and get better, and so I've never allowed myself, because I think once you get complacent and once you start to have too many of those, the hunger and the drive stops.
Speaker 3:And this is a business that you got to be hungry and you got to be driven, because it's hard and it is not. Every day is different and it's constantly managing different things that are going on in the macroeconomics and the industry and the people of the business, and so I just stay really hungry by not like allowing myself to think like that, and so I don't know if it's a good or a bad thing. At some point, maybe when I'm older and retired, I have that epiphany, but as of right now, I always tell myself I haven't accomplished anything yet and I got to get better. So I'm just wired like that.
Speaker 2:Stay humble. Let's pivot here as we start to wrap up the conversation. Let's talk about what's going on in the world today, specifically in our industry. These are, you know, some would say unprecedented times. Some would say there are some similarities to past kind of freight recessions, but we are certainly seeing things that maybe we didn't expect. Or it's challenging out there, as you know, convoy. We saw what happened with them. What's your take on the current landscape of for brokers and what do you kind of expect to see for brokers over the next six to 12 months? I'm not even talking about where rates are going, but, like, do you think there's more convoy situations happening and what kind of companies will be that kind of experience that in your mind?
Speaker 3:Yeah, so great question. I think that's something we could do an entire podcast in the market, and the way I look at it is there's going to be more pain. Things went really really high for a long time. If you look at historical inflationary cycles, they typically last six to nine months, and so this was inflationary for 24 months, and so rates went so sky high that they're going to have to come down, and I think Andy Clark, who's on my board, always says lower for longer, and so that's kind of how we're looking at the market.
Speaker 3:There's a lot of capacity that entered the market. Demand's actually not that bad. Demand from like a versus 2019 is actually up pretty significantly, and so this isn't a demand issue, this is a capacity issue, and so you've got people that made a lot of money over the last couple of years. You've got government assistance come in, and so it's going to take longer for the washout to happen, and so by now, typically, people would be getting washed out. Well, they just made so much money from 2020 on and they got assistance that people's balance sheets are a little bit better, and so I think that the next six to 12 months are going to create a lot of pain in both the brokerage market and the asset-based market, and so the number one thing I always talk about is you've got to look at spot to contract. There's never been a good inflationary cycle where spotting contract weren't close together, and so people always like, oh, we hit the bottom of the cycle. It's like what does that do? For anyone, though? It's like the bottom sucks, it's going to be pretty crappy for a little bit of time, and so what has to happen is capacity has to exit the market, and then demand's either going to come down and that's going to bring rates even down more, but at the end of the day, this market's not going to go back in a significant inflationary environment until capacity is officially out, and we're starting to see those trends, but it's actually held on longer than I think a lot of people thought, and so I look at 24 as a very similar market to what I always say is what we do in Q4 is going to be what most brokers are probably looking at for the duration of 24. But, with that said, I actually think there's going to be something that we've never seen before, and there's going to be two disruptions. The first disruption is going to be brokers going out of business. And then the second disruption is when the spot to contract mix gets close, and then we'll see a truly inflationary cycle for the entire industry. And so why are brokers going to go out of business?
Speaker 3:Well, money was free. Everyone went out and got ABLs, everyone got serious investments into their cost structure, they hired all these expensive salespeople, they spent all this money on technology, they went out and hired all these nice to haves, and then revenue per load collapsed, their borrowing base collapsed and their cash burn increased, and so they have to either do massive restructurings or raise more money or go out of business. And so there's a lot of companies that are in that. You've got companies that have been pushing carrier payables to pick up liquidity. Well, that is a vicious cycle that, as these factors start to clamp down and start to say, no, you must pay me in 30 days, that's going to be a negative drag on working capital on a lot of these brokers and it's going to send people in a tailspin, and so I think the next six months could be ugly.
Speaker 3:I mean, I talk to the banks all the time. I actually had a bank in here today and they're echoing the same statement. They're looking at the P&Ls of these brokers and a lot of people are hanging on by a thread, and so everyone is basically figuring out how do you get to cash flow neutral? How do you stay relevant? Because you've got to weather this storm, because there's going to be a lot of pain, that happens, and the people that survive it are going to have a massive opportunity to take market share, and so that's the way we're looking at 24. And now, if the market changes and there's a massive disruption whether it's a COVID repeat or a hurricane or whatever it is that you can't forecast that's great, that's upside, but we're not building a base case on that. We're hunkering down and getting ready for a pretty tough 2024. And I think that a lot of brokers are going to feel that pain.
Speaker 2:How do you keep a team motivated through that? I mean, commissions have got to be the lowest they've been for reps across the board and now it's been for a while and it's hard to keep people seeing the big picture that, hey, this is cyclical and it will come back, but this is going to be the longest downturn I think you or I have ever lived through. So how do you keep your team tied in and ready to go to work?
Speaker 3:And to that point, though, is margins aren't that bad versus historical low points of the market. It's just that they're so bad versus 22 and 21. And so the commissions are down significantly because the margins went higher than anyone's ever seen, and so the year over year is absolutely hard. So your point it's absolutely tough, and so we have to continue to make investments into our people and into our technology so they can do more transactions. If margins are going to come down, the average number of transactions per person has to continue to go up, and so we're doing a lot of different things.
Speaker 3:Earnings everyone knows that earnings are down, and it's hard to stay motivated because it is a grind, and so you have to have really good managers, and so we've spent I mean, we've got 60 people managers on the day to day, and they spend a lot of their time on building culture and figuring out what drives these people and how to get them excited on a day to day basis.
Speaker 3:It's not easy. In fact, I've taken more notes and more time in my brain to try to figure out how to get people reinvigorated, because it is a tough market right now, and there's no denying it. It's even more tough because of the peak that they came off of, and so the fall has just been so rapid. Now I do think that people are seeing the improvements in productivity. So if the average rep at 13 months used to do seven loads and now they're doing 13 loads, they're making more money because productivity continues to go up. And we have to continue to make those investments and they have to see those returns, or else you have people who are going to get disenfranchised. They're moving 10 loads a day two years ago and they're moving 10 loads a day today and they're making half the margin. And yeah, it's tough.
Speaker 2:So, paul, as a shipper, hearing him talk about what could be an even uglier six months ahead and brokers going out of business, carriers going out of business. How do you think about that? Is that concerning to you? Is that? How do you prepare yourself for that?
Speaker 1:We're looking closer than ever in terms of the. This will be an interesting bid cycle. I've been doing this 15 years and there's never been a procurement cycle where I've gone into commercial discussion and said, hey, how's the financial stability of your organization? You just kind of assume that to be the case, but there's certainly going to have to be some conversations around that and taking that a step further and not even just taking people's word for it, but having to go look at some third parties that can do some back room assessments on the overall financial health of these companies it's, quite frankly, it's unprecedented territory that we've never experienced. So, learning how to navigate it is something that I'm learning right now, to be quite honest with you. But yeah, it will certainly be asking questions that I've never asked before.
Speaker 3:More shippers are asking questions than ever before, and I think those are the right questions to ask, and so I don't want to pick on any brokers in particular, but it's the sub scale brokers that are going to be left with the toughest situations. There's sub $250 million of revenue that are facing the toughest challenges, and so I hope that they go out and get their cost structure right and they get their right capital, and if they need to raise more, that'd be great. I mean, I never root for anyone to go out of business. I always say when the market, when the industry is doing well, everyone's doing well, and so hopefully we can get past this.
Speaker 2:Yeah, great insight from both of you. We've clearly covered a lot here today and this has been great, matt, so thank you. Let me say that I want to end with one question here. You're not going to be a freight broker forever. I'm waiting, frankly, for my chance to do business with you. I want to be your partner one day. What kind of business can we start? In five years, in 10 years, I don't know, whenever? You're no longer the head of arrive? What do you think it is?
Speaker 3:I think I'm going to go with an Italian restaurant with an amazing wine list that's super low, key 10 tables. Think like Carl Bowne, that's the next business venture. Ok, but no, in all seriousness, people have asked me that a lot and I think it goes back to do. I have those experiences where I'm like, oh my god, I've made it. I don't even look that far in the future. I'm so focused, especially in this freight market, with just building the best business. I mean, I'm committed to building a $5 billion company here and we're going to get there. And it's a lot of work between where we are today and where we're going and once we get there we'll figure it out right, do I stay on as executive chairman or do they tell me that they don't want me involved in the business at some point? But I don't know what my next venture is. Hopefully it has something to do with sales and hiring, because I feel like I've really really learned a lot about those two things. But yeah, we'll have that conversation when we need to.
Speaker 1:All right. Well, you heard it, so I'm going to try to do my best to get us to a wrap here. So here's a couple of notes that I took, and I love the first one because it's a baseball reference, that is, you said take batting practice early and often right. So get your entrepreneurial chops going basically early on. Play around with it, especially while the stakes are low. Don't be stingy with equity. Get out there, share a little bit. Keep your people motivated. Right, you don't need money to scale a business. And finally, the numbers don't lie. Know your numbers inside and out. So what did I miss, matt? Did I get everything? No, those are great takeaways.
Speaker 3:You took away that he's a numbers guy.
Speaker 1:I didn't catch that, you didn't catch that part, we'll go back to the table.
Speaker 3:Yeah, just rewind it Now. In all seriousness, thank you so much. I really appreciate you having me on and giving me this opportunity. We'll talk soon. I look forward to hopefully being a guest in the future.
Speaker 2:You will be Thank you to our listeners and we'll see you next week. See you vraiment na financialeo.