Latest / Exit Algorithms / Safety Scores, Clean Books & Smarter Exits for Trucking Companies | Erik Hansen (#42)
Transcript
- speaker-0: Welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high value exit. I'm your host, Pete Vera, and today I'm joined by Eric Hansen. He's a certified director of safety the founder of Consolidated Business Services, or CBS. A multi-brand consultancy, he's scaled to serve transportation companies and other businesses I found out on the pre-show across ⁓ Canada, and Mexico. He's the guy companies call when their safety scores, you know what, ⁓ and financials are a mess. ⁓ Anybody call him. But Eric, to have you here. Welcome to the show. speaker-1: Thank you so much for having me. truly appreciate it. Yeah, you're actually right. We serve not just transportation, but multiple sectors through our HR compliance, risk management, bookkeeping, financials, a little bit of everything. speaker-0: Yeah, awesome. Yeah, I'm excited to talk more about it. Do you mind if we start off, could you share a bit about your background? Yeah, maybe your business journey, what led you to build CBS? speaker-1: To answer that one, I'm going to go back about 25 years when I got out of the army. Didn't have a whole lot of marketable skills after nine years active duty. So I went into transportation, started driving trucks and started learning some of that side of the business. bought my first truck in 2005, discovered I didn't know to run a truck. I didn't know how to run a business. Not uncommon. So it ended poorly, of course, but there's also a lot of things I learned out of that. Fast forward 2014, went back to school for a degree in a bachelor's in transportation logistics management. And then started working in the safety and HR side with some midsize fleets in the Midwest. operations management and the tech startup eventually come back into transportation and realized during COVID actually that there was a big call for a lot of smaller fleets that were fighting with their CSA scores. They knew how to run trucks. They did not know compliance. They had the bare minimum if they were lucky for a 49 CFR compliance. And so I saw an opportunity there and the time the company was called, it's all the Compliance service solutions, sorry, based at Raleigh to Virginia. And so we started working on that, working with a couple of different firms like moving companies, things of that nature, and to realize that there was a definitely need here across multiple, not just over the road types, but household goods, final mile, three PLs, all had the same issues that they were fighting. And most of them were not large enough that they could have someone like me on staff all the time, and they didn't need it. And so then out of that, eventually CBS was born a little over a year ago with a more, pardon me, a little more refined focus, not just on safety compliance, but also on risk management. There were less over the years. I started realizing the importance of risk management and how it fits into the fold. And then December of last year, I had an opportunity to purchase a company, bookkeeping company called Wild and Associates out of Little Rock, Arkansas, which we purchased, bought them on board. So now it gives us a little bit more with a couple senior bookkeepers and accountants on staff, it makes it easier to service not just freight industry, but other industries as well. So it just it was a few other things in the process here, we've got a some more growth coming, probably second quarter, maybe third quarter of this year, that's also going to expand into transportation. So we're not done growing yet. speaker-0: Yeah, no, awesome. That's exciting. Yeah, our audience is really business owners looking to scale and grow. I love that you chose the acquisition route as the means to do that. How was that process for you? speaker-1: This one was actually pretty simple because I actually knew the owner of the company. Due to health reasons, she decided to retire. Attempted a sale earlier last year and it went bad. It was just the company she sold to that did not understand the client base. They heavy tech and AI. Nothing wrong with that, but unfortunately their customer service not align with what her customers needed. But being that I was very familiar with the company, doing my due diligence was very easy. I knew the customers, employees. And so making that purchase was pretty much a no-brainer. speaker-0: Yeah, that makes sense for sure. was there any with ⁓ with your existing business? speaker-1: Not so much. The actually the biggest challenge was some of the customer base that were there through the previous buyout attempt and it went bad. Rumor has it probably even a couple of lawsuits are pending with the company that purchased them originally. And so that was the biggest thing was overcoming it to realize, hey, you know, I'm retaining a hundred percent of the people. So it's like the people that hailed your books for the last three or four or five years are still here. They're still running your account. They are still your primary point in contact. so it was the, again, so much what we do is relationship regardless of the industry. really it down that that relationship that they developed was still there. It was still intact. I'm not rid of anybody. We're not getting rid of your favorite people, the favorite systems as we're using. The only difference really is going to be the name on the invoice each week the email address. And that is it. Everything else remains the same. Once they can realize that, it made the transition a lot easier because the company had built a really good relationship with their customers, some they worked with for eight or 10 years. speaker-0: Sure. Yeah. Yeah, that makes sense. It's a delicate process, changing ownership, speaker-1: It is. speaker-0: That's awesome. So, so when you get a new client, what are ⁓ some of the first things you you look at or audit for in the business? speaker-1: And this one doesn't matter if it's on the bookkeeping side or the compliance risk management side. This is still the same process. What we've done is we've created a kind of a generic intake form, if you will, that will have the business information. But we also, before we get to that, we will actually sit there and talk with them a couple of times to find out, OK, are your needs? What are you trying to achieve? Because products can turn, are we a good fit for that? If you're looking for something that we can't provide, I'm not going to oversell and over promise something that not be delivered. So I've got a recent customer which is on the bookkeeping side was several years behind on their taxes. So they were interested in a flat rate source, which we do offer. But we always tell everybody, I'm not going to even offer you a flat rate for at least six months because I want to find out. What are we up against exactly how much work there is? And that's the same on the trucking side too. I've got small carriers, one in Michigan, I've worked with for quite some time. He's on our most basic flat rate because he's small. I know exactly how he does things and how much time it takes me each month to make sure that they're taken care of. I some other customers that it's a constant 15, 20 hours a week. because they are so large or they've got so many different things going on or we've taken so much of their process. But the big part really is we're going to sit down in a no pressure environment and going to pick your brain, find out exactly why are you looking for help now? Not saying you don't need it, but why? What are you looking to get out of this? ⁓ What you ⁓ is does success look like to you in this? ⁓ really in this venture, in this partnership with UL. speaker-0: Mm-hmm. Got it. Yeah, so makes sense. It depends on the customer, of course. Let's, ⁓ guess let's focus on the trucking businesses first. What are some things they frequently do wrong or ⁓ how do increase ⁓ their safety speaker-1: People often confuse compliance and safety. They're not the same. They look at the idea of saying compliance is like, well, if we focus on complying with every single part of 49 CFR, we're going to be safe. Well, no, your paperwork may be in line, but unless your culture is aligned with what it takes to be safe too, because the score is just a reflection of what we're doing as a carrier. It's not the end all be all. If your goal is to knock down numbers, yeah, we can do that. But if your goal is to actually be safe to where everybody understands that getting home at the end of the day is what's actually important. That making sure that we're taking care, we're looking out for each other, we're taking care of our coworkers. some simple core principles. We take care of our coworkers, we take care of our customers, we take care of the company. We do the first two, the third will happen automatically. And so that really is there because there's a common thing. They say, well, we're compliant with the law, therefore we're safe. No, you're compliant with the law on paper. But now let's look behind the scenes and see what's going on. Well, you see a score, it will show accidents, but that's all for your portable. You it doesn't deal with anything. You you hit your guy backs up, hits a fuel island or takes out a tree or scrapes another trailer in a parking lot. Those little claims radically add up quickly, but they're never reflected in your CSA score. So if you're a broker and you're trying to find a carrier, you go to safer, you pull the data down and say, cool, they've got, you know, six million miles last year, but they only had two accents. Now they had two do to reportables. speaker-0: Hmm. speaker-1: They could have had literally 150. That would not have due to a portable that you don't know anything about, but that will still impact their ability to service you as a customer. speaker-0: I see, yeah. speaker-1: So it's breaking down and the realization that a lot of people, they they equate that CSA score to safety and it's not the same. Look at eLogs. They've been out for 15 years now, they're running under them. And we were told that 100 % compliance with equal safety. How many accidents have been prevented as a result of eLogs? speaker-0: I don't know. Not one, yes. speaker-1: Not one. So even if we have fleets with a 95 % compliant rate, there's been no meaningful evidence of anything, the decline in collisions. Because you're focusing on compliance, you're not focusing on the root cause. Well, again, you mentioned I'm a certified director of safety, I'm also a certified fleet investigator and a big accident investigator. And so the part is we do a root cause, we find out, why did this happen? not just, okay, somebody ran a red light and they T-boned somebody else. That was the accident. No, that's what happened, but it's not necessarily the root cause. What led up to, know, running that red light? It usually comes down to a factor of actions, know, choices that were made. The same thing happens on the big fleet side. We do that root cause and find out and say, okay, complying with hours of service is one part of it. but it's not going to guarantee that your fleet is operating safely or efficiently. A lot of people, sorry, here on my screen, is realize that safety and operations do not need to work against each other. In fact, the more that we work against each other, the more ineffective the organization is. We're going to cause tension, doesn't need to be there. We're going to affect the bottom line and we're going to affect the customers and they will find somebody else. speaker-0: Yeah, yeah, for sure. a lot of sense. Yeah, and I find it interesting, know, you do both keep the books and safety. I imagine there's a lot of some crossover, right? If you improve safety scores, then you know, you're more likely to increase your revenue, right? ⁓ You'll the right people. speaker-1: Sure, because there is an ROI. And that's why a lot of carriers, look at the safety department as a line item expense. And one of the first things they'll do is they will cut back on the safety department and the maintenance departments to save money. Yeah, initially you might for the first 30 to 45 days, but now all of a sudden you've got everything else that's slipping. And what happens if there is an incident and it goes to litigation? Now, then your ROI that you thought you had is now eaten up in training fees. insurance and everything else. yeah, there is a there is a definitely crossover. And more a here's money that we're not spending versus what we are spending. No, ⁓ and we look over time and say, yes, there's been a 30 % reduction in claims. Well, that right there could save you ⁓ paying on your fleet millions of dollars a year. It's not an insignificant amount. speaker-0: Yeah, yeah, it makes sense. the theme of the show, exit algorithms, it's preparing a business for a successful exit and a truck line that has a poor safety score, obviously that's gonna take away from some of the value they could capture when they do sell. speaker-1: Well, yeah, you're absolutely right. Again, someone like me who will buy or who will buy another company is we're going to do our due diligence reports. We're going to crawl through everything. I'm going to look through at a minimum of the previous two years of financials. I'm going to interview customers, employees. I'm going to look far beyond just your PNL. I'm looking for what claims you have, what's been paid out, what went to litigation, how's it solved? What did you do about it afterwards to reduce the likelihood? And if you've got a So you've got an ISS score of 70. On paper, your company may have a valuation, say of $5 million. But if I've got somebody with an ISS score of 40 and that same valuation, I guarantee you they'll make the valuation. Yeah. But if I've got somebody I'm looking at and they've got a horrible safety score, I'm only realizing and say, OK, now it's not a driver issue. It is a leadership issue. speaker-0: Mmm. speaker-1: And so I know the first thing I'm going to do is I'm going to buy this company and I'm firing everybody. And now you're, I'm incurring more time and cost because I have to replace the people that put it where it is. speaker-0: Yeah, yeah, that's a good example. For sure. ⁓ curious, what's process when you go through a new customer? Do you have any tools that you use, like software? speaker-1: ⁓ no, I'm actually, it's... On the bookkeeping side, we'll go through their books, we'll pull the P &L and we'll start, we have to do that side. On the carrier side, I use a lot of what's open to me. Again, I'll go through all the regular, you're safer and everything else, but I'm also going to do an audit. I will do a full carrier audit. And that's one of the first things I do is, all right, what are we up against here? And it's not to say if I'm a new customer or someone looking at buying. So, It's going to be the same drill. I'm going to do a full audit and say, OK, maybe you're the owner of the company. You say, need some help here, but I don't know what. I'm going to do the audit and say, all right, fine. Here's what I have found. Here's my instant recommendations. And here's the projection timeline and cost of what it's going to take to achieve this. And a lot of stuff is not expensive. It really isn't. know, training programs. mean, there's training programs I've developed that, you know, I'll darn near give you. Because at the end of the day, it's like, you know, I can sell to you if you want it. Or I can go ahead and train your people's train the trainer program at my regular rate. And then I can help monitor and make sure that these are following through. speaker-0: Yeah. Okay. Got it. Are you using any AI or ⁓ anything that in either of your ⁓ two ⁓ speaker-1: On the bookkeeping side, no, we are we do not we actually have a prohibition on the use of AI in it. The reason being a lot of our customers that we've taken over the last year or so came from firms that utilize AI in the process. And to say that it was incorrect, we'll just say it was it was done very poorly. And it costs some of them thousands of dollars. So because of that, we only use people that actually I have experienced some decades of experience. So I love my team I got there. On the tracking side, I will utilize some AI tools. Now, granted, big thing is I love telematics. If a company is not using solid telematics, that's always one of my first recommendations. Let's go with something like Motive or Samara, something that will give you the quality information feedback at a relatively low cost. The ROI on that is great. I could teach them how to use it. And so they know what they're looking at with these reports. But no, I'll do a driver scorecards. I'll do an entire company scorecard. That takes a little bit of time. And it's a result of those audits. Just all right. Now, again, keep it simple. 30,000 foot overview. I'm not going to get somebody lost in the weeds. OK, here's what we're seeing. Here's your strengths. Here's your weaknesses. Here's what could be a weakness or could easily be a strength in little tweak. speaker-0: Yeah, makes sense. Yeah, that's interesting. I you never use AI and just let it let it go and just, you know, not monitor it closely because it does it does make mistakes. Yeah. And that's that's unfortunate, especially financial errors are missed. Yeah, it's a good ⁓ cautionary tale. know, AI not quite there yet, or you can just let it let it do things for you completely without human intervention. speaker-1: Well, even while researching 40 is something in the 49 CFR, I've seen it make multiple mistakes. There was a, it was a LinkedIn conversation I was on this morning and someone said they've got a lot of company owners now that they're trusting their AI platform to research say 49 CFR 383 and it's giving them bad information. And then they're having, you know, they're running into all kinds of issues. And so it's one these members that say, it has a place. It can be useful, a useful tool for some things. But at the end of the day, it comes down to people who are knowledgeable, that know what they're looking at and understand the process and can actually properly interpret it. 49 CFR is not rocket science. But if we dis-apply it, can get very expensive very quickly. speaker-0: sure that makes sense. you mentioned telematics. Are there any other areas you think AI would affect? We'll focus on the transportation industry. Yeah. speaker-1: most of our telematics providers these days have some sort of AI, usually when it's screening ⁓ in the camera, looking for certain characteristics for speeding, running stop signs or red lights, aggressive driving. So there actually is a decent amount of AI that's already integrated with the telematics. I remember right from talking to Motive about this about a year ago, it's actually really pushed that model. However, they also will review ⁓ a potential instance that's flagged before sending to the carrier. even while it's being used to as a filter, you still need to have a set of human eyes on there to say, okay, what's ⁓ interpret this data correctly? Because at the end of the day, that's all it's doing is interpreting data, actually and zeros. And say, okay, does this fit this criteria or these thresholds? speaker-0: Yeah, got it. Yeah, that makes sense. It's useful in certain use cases, very useful. But again, you do need an expert to guide it. Yeah, fascinating. Well, yeah, I know we're coming up on time here shortly. I always ask guests this at the end. If you could leave a business owner one practical tip they can implement this week, what would it be? speaker-1: It's not personal. This is business. Don't give up when it gets hard because there's times I've self-employed before, it's not my first rodeo and I failed miserably. Take your time, step back, catch your breath. If something's you know, constantly reassess. What we did 20 years ago doesn't work today. What we're doing today may not even work next quarter. So slow down, take things, don't grow too fast. Controllable growth will destroy your business. No question about it. and try to save that free. speaker-0: little more than one, but really good solid advice. Thank you. ⁓ said. Where listeners find you easiest, Eric? speaker-1: www.cbsvc.com or erik at cbsvc.com or even plug my number is erik 307 445 1372 We're busy we stay busy, but I've always got room for one more I always hire somebody else take care of customer if I need to so speaker-0: Yeah, I'll leave that in the show notes as well. Well, thank you so much for your time today, Eric. It was great having you. speaker-1: Thanks for having me. truly appreciate it. Thank you so much.