On Air with AirFreight.com
On Air is a short-form interview podcast from AirFreight.com focused on the fast-moving world of emergency freight and expedited shipping. We talk to people in the logistics and supply chain industry who deal with the pressure of time-critical freight every day.
On Air with AirFreight.com
Inside Private Equity's Perspective on the Transportation Industry with Daniel Perry
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In this episode, Kevin Carpenter hosts Daniel Perry, a private equity expert from Court Square Capital Partners, to explore how investors evaluate transportation companies for scalability and growth. We delve into what makes a transportation business attractive to private equity, the role of sales and marketing, and how AI is transforming sales processes in logistics.
Main Insights:
- Private equity firms like Court Square raise billions to acquire and improve companies, aiming for a 2.4x return over 4–6 years
- Evans Network exemplifies a value-driven, service-based transportation company focusing on owner-operators and small markets
- Key factors for investment include company culture, business model, customer concentration, and contractual relationships
- Evans employs dual sales forces: one for agent partnerships, another for direct customers, utilizing AI to enhance targeting and lead qualification
- The company’s core expertise is in drayage, providing backend support for port-to-warehouse freight, mainly short hauls
- AI tools assist in sales efficiency, lead qualification, and proactive account management, including early warning indicators for agent attrition
- Private equity evaluates potential acquisitions systematically, emphasizing scalability, contract stability, and service-based assets
Timestamps:
00:00 - Introduction to private equity's role in transportation 00:19 - What private equity firms like Court Square do 01:20 - How investments generate returns 02:42 - Notable investors and global reach 03:14 - Private equity exit strategies and company improvements 04:11 - What makes Evans’ model attractive for investment 05:01 - Evans’ focus on small markets and owner-operators 05:27 - Providing backend support as a service business 06:07 - Sales strategies for Evans, including agent and direct sales 07:43 - Explaining Evans' official classification as a 3PL 08:03 - Drayage operations and local freight hauling 09:15 - The agent network and customer base 10:25 - Use of AI in sales prospecting and lead qualification 11:37 - Efficiency improvements with AI and human collaboration 12:10 - Setting sales targets and organization structure 13:14 - Sales process automation and account management 14:02 - Early warning systems for agent retention 15:11 - How AI enhances sales and operations 16:30 - The importance of human touch in customer service 17:08 - Handling non-emergency freight customers 18:36 - Analyzing sales calls with AI for performance insights 19:14 - Key metrics distinguishing top salespeople 20:34 - Providing industry insights to customers as a sales advantage 21:34 - The value of operational expertise in customer interactions 22:26 - Active market assessment and quality criteria for acquisitions 23:50 - Customer concentration and contractual relationships 24:36 - Assets versus services in transportation acquisitions 25:00 - Closing remarks and promotion for airfreight.com
Welcome to On Air with Airfreight.com. I'm the host, Kevin Carpenter, and I love to talk to the people shaping the future of logistics, technology, and business. We spend a lot of time talking about operations and supply chains on this show, but today we're gonna switch it up. We're gonna look at how investors look at transportation companies, what makes them scalable, and where they think the industry's headed next. So let's get into it. Dan Perry is a resource partner focused on sales excellence at Court Square Capital Partners, private equity firm that owns the Evan network of the Evans Network of Companies, which is absolutely no slouch in the in the industry. Uh we'll get into that. Dan works closely on the sales and marketing side. He that's that's his focus expertise. He scales the sales and marketing. Thank you for joining me, Dan. Kevin, thanks for having me. It's great to be here. Thank you. Um, so right off the bat, uh a word that you know people have a love-hate relationship with is uh private equity. I'm sure you know that uh sometimes it gets a bad name. So let's just let's just address that right off the bat. For people that aren't in private equity, which is most of us, what what do you actually do?
SPEAKER_00Right. Great question, Kevin. So I'll I'll I'll simplify it for everyone. Uh so Kevin, we go out and we raise money uh from we call them limited partners, but really investors. Uh, we then take that money and we go by companies, various sizes, various industries, uh, and we try to then improve the company or gain value for the company, and then sell that company within a window of anywhere from four to six years, and then hopefully return dollars, you know, investment dollars back to our investors or limited partners. We're currently our Court Square in particular is uh founded in 1969. So we're one of the oldest private equity companies out there. We're part of Citibank until 2006, and they divested us. Uh, and then we are now raising money, and we're just raising our our new fund called Fund Five. We just closed on that fund. That fund was $3.8 billion. And so some of our investors that invest in our money are Caliper's pension system, Alabama's pension system, Harvard's endowment, um, the Chile, the country of Chile's pension system, um, the country of Kazakhstan as well, too. Like so all over the globe, people come and commit capital dollars to us. We then go out and look for companies like the Evans Network of Companies. Uh, we buy that company hopefully at a good price. We then add value to that. And I can tell you, show you how we do those at value, and then we sell that company and return those proceeds back to those companies. Over 47 years, we've averaged 2.4 times people's money. So, Kevin, if you were to give me a dollar, I'm gonna give you in total $2.4 back or $1.4 in earnings over the course of anywhere from four to six years.
SPEAKER_01Okay. Um, and obviously leaving the company in a better spot than it was when you got involved. That's that's the goal. That's what you hear about a lot. You hear a lot about a private equity company coming in, cannibalizing it, or you know, you know, making the business cannibalize itself and then moving on, leaving leaving that shell behind and moving on to something else.
SPEAKER_00Obviously, Court Square is different. We we try to be different, right? So, but at the end of the day, our goal is to make money for our besters, period. But we want to obviously leave a company a better position. And when we sell that company to a to another one, I can go through some examples of wow, we sold companies in the past. Uh, we want to make sure that company's better and can continue whatever growth pattern they're on or culture they have. Of course, it's out of our hands then at that time, but we we definitely want to do that.
SPEAKER_01Sure. And I'm not gonna, I'm definitely not gonna make you uh that's all the grilling for on that on that subject. Sorry, Kevin. Anything you want, it's all good. But but I mean, obviously a big part of adding value to a company is improving their sales and marketing. And that's I mean, that's your that's your thing, right? Correct. Absolutely. So um backing up a little bit, what makes a transportation company investable? What what made Evans investable attractive?
SPEAKER_00Yeah, so so we look at the not just the transportation industry, but the cult the culture of the company, but what what kind of what's their business model? So, in a sense, Evans, Evans' business model is providing back office support for owner operators. Uh, and we tend to focus on the middle or small markets, though, and not obviously not not the enterprise or or large markets. Uh, and we're really valuable to that person with five to ten trucks who struggles with doing everything driving, selling, dispatch, invoicing, insurance, et cetera. So for a fee, we provide that back end support. So in the sense we subcontract out that back-end office. That and we like that market because why? It's a services business, sure, um, obviously, but but we we're really in there to help the companies perform. And as those companies get better, we get better too, because we have a we charge a percentage of the revenue versus a flat fee.
SPEAKER_01So we are we're incented to be to have the company pulling in the same direction as your customer, which is always correct. That's always a good uh it's always a good model. And and airfreight.com is similar to that in that we are a service. We talk to people who have something that desperately needs to move, or you know, or a number of other different uh factors that make it critical and can't be trusted to just any provider, you know, especially these large networks, which is what I would have guessed Evans was. But so that's really interesting about uh about what Evans does. Right. Do you how do you uh do the sales? So is that that's part of the service that you provide these owner operators?
SPEAKER_00So we we look for, we have really two sales forces at Evans. We have a sales force for agents, and so we quote, get agents to partner with us. So we go out and look for agents to and contract with them wherever they're at. Uh, and agents come and go in the marketplace, as you know, we've had a it's tough, it's been a little bit tough sliding for the last several years in in the industry overall. It's good, it's picking back up and thank God greatly improved, which we're we're really excited about. But we look for those agents. So we have a sales team that literally goes out and says, Hey, airfraight.com, would you like, you know, if you were in the in in our ideal customer profile, or we call it an ICP, if you're in our ideal customer profile, then we would try to solicit you to get you to sign up and use your instead of you doing the back end or a competitor of ours doing the back end, you can deal with us. We also have a direct sales force that will go out to direct customers and try to get their shipping needs. And then we provide that to our agents as a value add so that they have some business. So we we then give them some business along the way too. Not so instead of just back end, we want to try to provide some revenue for them as well, too.
SPEAKER_01So that's all almost like that's 3PL services right there in a nutshell. Do you is that official though? Is that are you officially a 3PL?
SPEAKER_00We are officially a 3PL, but our our expertise is in Dreyage. Uh that's where the company was founded, right? And that and that that's really where we uh we excel. Uh, we do have some other stuff too, don't get me wrong, but um as our customers asked us to do that, but drage is our is our big, big really focus.
SPEAKER_01And Dreyage is uh interesting. Well, I mean it's it's kind of an inside baseball term from my perspective as an expedited freight agent in plain English, those are the guys that are hauling freight from the port to the warehouse. Is that uh usually local moves, usually picking up containers, dropping the containers all day long back and forth, short haul, right? 20 and 20 haul, short haul.
SPEAKER_00Yep, 20 and 40 short hauls, right? We don't get into too much 53s, but 20 and 40 feet uh containers off the off the the ship, right, to the warehouse. That that's what we do. And then those drayage companies, so those drayage companies are make up your customer base in a in a in a well, so direct-wise, but the agents that do that work make up our customer base, and we provide all that back-end support for those agents. But when since we know the industry or that part of the industry so well, we have a good reputation uh and we provide a lot of value for our customers. Very interesting.
SPEAKER_01Um, uh just a little more because I'm not I'm I'm a little curious. The agent themselves, are they uh a company, an MC, like a trucking company? That's yeah, yeah. When you say agent, that's what you mean.
SPEAKER_00Correct.
SPEAKER_01Yes, they are.
SPEAKER_00Yeah. Yeah. And again, we we excel with the small ones. So, Kevin, if you had five or ten trucks that hold health, you know, um got containers off the ships, you'd be ideal customer for us because we would take care of all that back and support for you. Got it.
SPEAKER_01But then there's but then in between those guys that you're working with and the actual customer, there's usually some middle, some larger size companies that compile these agents, and that's kind of where you guys add value is you connect these agents with these with the dray edge companies, basically.
SPEAKER_00We do, correct. We absolutely do that as well, too. And then we've got some really large customers too, simply because they've grown with us. You know, we had them when they were they were smaller and they've grown to be five to ten to five hundred to a thousand drugs, right? So uh or bigger, and so we then would provide value for that as well too.
SPEAKER_01So you you gave me like the two um flavors of of sales and marketing that you guys do. Uh on the agent side, what is what does that look like? And and which side, first of all, are you on both? You you handle both of those aspects of sales? Correct.
SPEAKER_00Yes, correct. Yes, and marketing too, with all of that. Um, so for Evans, what we've done is we've really said to uh to our team, what agents do we want to pursue? Or I mentioned it's early the ideal customer profile. So, Kevin, what what we've done lately um using artificial intelligence is we've gotten really specific on the criteria that make up our ideal customer profile. So it's not just the number of trucks per se that are that are are what we want to prospect or our customers are, but it also has other factors too. What city are they in? How much ton tonnage do they haul? What kind of products do they have? What shipping companies do they use? And with with artificial intelligence, we can literally scrape the web for data to get though that criteria to be much more specific on who we want to call on, which improves our win rate, right? Because the lead is more qualified and it shortens our sales cycle length and improves our average sales price as well, too.
SPEAKER_01Yeah, totally makes sense. I mean, AI, that's changing every every business across the landscape. Um in your use case, it's like having um, you know, inside sales agents, basically, and you're but you're giving these inside sales agents a giant haystack and saying, all right, I want you to filter based on this, this, this, and this. Oh, and by the way, these agents don't need to get up to use the restroom and they don't need to leave at night. They just they constantly go. So that they're you know, they're like a human that you've assigned a job, and uh they're compiling these way more detailed and filtered lead lists for you guys.
SPEAKER_00And then and then what we do is we prov we then you know put a program together to say, okay, Kevin, we want to earn this much revenue next year in new agents as an example and keep our existing agents or but stick with the new agents, go for new agents with this much revenue. So, what kind of budget do we need? How many people do we need to go hit that revenue? Because there's only so much time in the day you can work, right? Then where do we put those people at? Do we put them all in the central location? Do we put them in other places around the country country? You know, well, what what's what's the biggest port for us? Like Jacksonville is a big port for us, but that's kind of saturated. So we wouldn't put in somebody, we'd have an we'd have a customer service person or account manager in Jacksonville, but I put a new logo agent, maybe in um in uh I think we have one in Houston as an example, right? So so the example is where do you put these people? Then how do you like pay them? What's their job description? What quota do you put on them as well too? And then what process do they use? How do they approach an agent? What's the steps they go through? How do they get that agent interested? Discoveries, what we call it. How do we provide a solution for that agent as well too? How do we actually negotiate terms and contracts and pricing? How do we close the agent? How do we implement the agent once it's closed? How do we have account manager? So it's all process we put into place as well too to make that even more efficient and effective.
SPEAKER_01Got it. And this, what you're what you're referring to right now, as of now, is a human. It's a human, correct. But we use AI to implement that human, right? Yeah.
SPEAKER_00Absolutely. Right, yes. And then we have a technology stack as well, too, a CRM system to make sure you know we load everything in our CRM. So we have a all the customer's data set at fingertips, et cetera.
SPEAKER_01And then another AI that's reading that CRM and and reporting, you know, generating reports.
SPEAKER_00Well, we even have gone so far, Kevin, to have what we call early warning indicators that agents thinking about quitting us. Wow.
SPEAKER_01Without telling you. You're you're just picking up on certain metrics right off the bat. Which absolutely. I mean, a lot of these things that we are now c freely calling artificial intelligence, you know, they've been around, you know. Some uh even things like that that are that are just reading certain metrics. But I mean, a AI really is shaking things up. There's just no getting around it. Uh, people that were kind of waiting to see if it was really gonna shake things up, it is to the extent, to what extent is still remains to be seen.
SPEAKER_00But uh, so what what we've seen, Kevin, is a artificial intelligence can help us go faster, find data faster, find you know, key metrics faster, and may and then, but a human needs to make the decision, AI will cannot do that for us, at least not yet. Um uh, and so we're what we're doing is running really hard to make sure our people, like I mentioned, are more efficient and effective using these metrics. Yeah, that makes sense. Makes a lot of sense. Right. So, so and Kevin, instead of saying, you know, hey, go call on a hundred, a hundred people today, I tell you call call on 20 people, but those 20 are really qualified. So let's do some preparation work for that ahead of time and get really prepped.
SPEAKER_01And that's a great, that's a great point. Because from a sales perspective, when you have to call on a hundred people, you're not gonna put that same quality forward that you will on 20 really that you know are gonna be good leads.
SPEAKER_00Correct.
SPEAKER_01Exactly.
SPEAKER_00That's it, Kevin. Yeah. So that that's so so for Evans, that's uh that's what we're doing. And then conversely, from the direct sales portion, it's kind of the same thing. It's a different ideal customer, obviously. It's a different sales force. You an agent's a very different sell than a direct customer, is a different self. So you say different things, you look for different discovery tools, you ask different questions, but in theory, it's the same kind of process.
SPEAKER_01Yeah, that makes a lot of sense. Um, so for airfreight.com, we're definitely, you know, exploring and and utilizing artificial intelligence and trying to be at the forefront of that. However, what makes us really special is that you're getting a human. Uh, for instance, when you call our our any of our 800 numbers, there's no phone menu. A human picks up.
SPEAKER_00So there's no phone, there's no phone tree. No phone. Or I like to call it a sequoia tree because the phone tree is so long, right? That you can't get through it. Exactly. But yeah, yeah, good. Yeah.
SPEAKER_01So uh, you know, to kind of go back to what you were saying, so we're we're inbound, inbound calls, and uh our marketing is geared toward uh catching people that are in that emergency freight situation. We're very good at that. We've been doing it for a long time. That's that's Dan's um that's Dan's specialty. And you know, I've gotten to get a better view of that over the last couple years, and uh I admire it a lot. However, we get a lot of calls from people that are not in emergency freight situations, you know. So back to that, like when you have a hundred leads to work through, you're not gonna put the same effort forth. So we are really focused on getting the quality of every call that comes in up and educating the customer, maybe, or educating our non-customers before they call us and and tie up a human for even one or two minutes. Because we are good at the we one thing we're good at is the verbal jujitsu of taking over a phone call with with somebody that's not our customer and getting them off the phone. Because maybe somebody that is in an emergency freight situation is waiting on hold, waiting to talk to one of us. Yeah.
SPEAKER_00So Kevin, we we call that we we call that lead qualification criteria. What's your lead qualification criteria? Usually it's an acronym. Uh there's all kinds of medic, band, champ, there's all kinds out there, those type of things. But we usually for you guys would be a customized one, is my my imagination. And that lead qualification criteria is going to be uh throughout your your kind of workforce. So anyone can call in. You're gonna go through that qualification criteria quickly and either qualify that that out or qualify it in. So I want to tell you a little stat, Kevin. So we we record, we have one of our companies that we own in our business, not in transportation, but it has 400 sales reps and they're they're selling us a software. But we took recorded their calls on a uh technology feature called Gong. Doesn't really matter who what it is, but we record their calls and we dump that into Chat GPT. And all we said was here's Kevin Carpenter, he's a quota producer, here's Dan Perry, he's not a quota producer, analyze these calls. So six months of recorded calls over 400 reps. Three big findings. Number one, a sales, good salespeople, quota bearing salespeople talk 23% of the time, bad salespeople talk 62% of the time. Wow. Second big thing, and that's why we trigger my memory when you said this. Second big thing, great salespeople qualify out leads in the first stage of a process 41% of the time, salespeople only 12% of the time. Right. So what's happening, Kevin, is the great salespeople are saying, I don't want to spend my time working on this lead because it won't fit in our company. We won't give a good value proposition. And even if we get the customer, we might turn them over. Yeah. Yeah.
SPEAKER_01Knowing your customer, knowing who is your customer and who is not your customer is is a big part of the battle. Perfect. What was the third metric?
SPEAKER_00The third one, yeah, of course. Yeah. The third one was what actually are people saying on the actual call, the great reps, code of bearing reps versus the poor reps. The poor reps say, Mr. Customer, I want to uh this I'll give you a meeting recap, or let me talk to you about my company. The great sales reps say this is what your competition has been doing lately. Here's what the industry is doing, here's what's happening. So we're per they're providing insight for that person over the phone that they don't know otherwise, where a poor sales rep just pro this is kind of hyperbole.
SPEAKER_01Yeah, that's it, that's very interesting. And from our side, we are sales and we're operations. So we that's that makes the sales part easier when you know the operations, when you get to be the expert friend of the customer that's calling in. And when we do get our customer on the calls where our, you know, it's one of our customers calling in, our close rate is incredibly high because we know what we're talking about and we have all the tools to do the job. And we make it obvious to the customer that we know what we're talking about. Um, which it sounds, you know, including what what their competition might be doing. Although that's not a that's not an angle we have to use a lot. It's more about what are the what are the repercussions for if this does not if this shipment does not make it on time. And you know, that's that's a wide range of things. Sometimes you have a customer that's really ticked off at you and every minute it's late is is a higher percentage chance they're gonna drop you, you know, or if you have an assembly line shut down. Uh I'm I'm I'm sure Dan has if you've been around Dan too much, I'm sure he's told you, you know, how much Ford charges one of their tier one suppliers for shutting them down. It's that pretty. It's not pretty. It's like 60. Well, as of uh a couple years ago, it's like sixty thousand dollars an hour. So a thousand dollars a minute, right? And and it could be higher than that too, depending on what they're shutting down. So that's Kevin, that's more than your wife spends my wife's very frugal, actually.
SPEAKER_00So I'm thankful for that.
SPEAKER_01I'm kidding. Definitely more than she spends. Um, yeah, well, I mean, that's that's all very interesting stuff. Uh I won't keep you too much longer here. Um are you uh are you guys looking at any other transport companies? Is that something that you're all the time, yeah.
SPEAKER_00So we're we're we're actively in the market in our business, you know, at a court square, we're in four industries. Uh and we and one of the industries is business services, where we look for transportation companies. So we we we're actively looking at companies for sale, and there's a lot of them for sale, probably unknowns of people out there, obviously confidentially, but we look at those companies. But we then also just like you have, we have qualification criteria too, right? So we you know, can we make money with this business?
SPEAKER_01Yeah, what I mean without giving away the sequence, yeah, what what what what are some criteria?
SPEAKER_00So we we have a list of 28 things that we look for. Um, is the business scalable? Is it or is it is there a growing industry, sub or subsection of industry, or is it or is it you know declining? Obviously, that's a big one. Is there a lot of customer concentration? Do you is is so what I mean by customer concentration is the revenue of the company focused on one or two customers? Like we don't like that because then if one of those two customers leaves, then we lose a lot of the revenue, right? So uh so we don't we don't like that at all. Um, so I would rather not have that. So there's a like there's a list of those criteria that we look for and that we adhere to. And sometimes it's difficult because the company would be super attractive to buy. Sure. But we but we we know over the past 47 years what works and what doesn't work.
SPEAKER_01Yeah, that makes sense. I mean, it's one thing to take a customer, you know, have a wide customer base and then grow a customer to great heights and let that and then that customer ends up being a higher percentage. But obviously, you don't want all too many of your eggs in one basket. That makes a lot of sense.
SPEAKER_00Right. Uh another one is that does does the does the business have uh customers under contract or is it a bunch of handshakes? Right? Sure. So hand handshakes aren't good. We want contracts. So we'll we'll we'll pay more money for contracts. Absolutely.
SPEAKER_01Um, what about assets? Is that assets aren't necessarily a good thing, is it? Especially in trucking.
SPEAKER_00Uh no, that's why we purchased evidence because they had some assets, but most of it services, right? So we like services businesses too. Yeah, for the most part.
SPEAKER_01Okay. Well, I think uh I think we gave our listeners a good uh look into how private equity looks at transportation. And we even got a little bit of a a sales lesson here uh before I let you go. Anything you want to add or promote? I appreciate you being on.
SPEAKER_00Well, just Kevin, thanks for having me. Airfreight.com is the is in my opinion the the best emergency freight outfit out there. Very nimble, very humble, but very personable experience. Uh, and I enjoy every time I have conversations with you guys around what you're doing. And Kevin, you I gotta let you and Dan know if you're ever up for sale, let us know.
SPEAKER_01Well, that we will let you know. I don't see that happening, but for now, thank you for being on air with airfreight.com. Thank you, Kevin.