The 5 Reasons Most Food Brokers Fail

Nick: 00:00:02

There are a million ways to make money in the food service industry. You just have to find one. On the Titans of Food Service podcast.

I interview real life movers and shakers in the food game who cut through all the noise to get to the top. My name is Nick Portillo and welcome to the Titans of Foodservice podcast. Let's jump right into it. Most food brokers fail in their first three years.

Why? It's not because they lack sales skills, that's for sure. It's because they don't understand how to run a brokerage business.

Today, I'm breaking down the five biggest reasons new food, new food brokers struggle and what it takes to survive in this industry. Hello, welcome back to the Titans of Food Service podcast. Nick Portillo here, I'm your host once again. I appreciate you joining me here this week.

Please, if you're enjoying the podcast, if you can leave a five star review whether you're on Apple podcasts or Spotify or however you get your podcast, that means a lot. Check out my YouTube channel. Go to. Just type in my name, Nick Portillo, spelled P O R T as in Tom I L L O Nick Portillo. Check it out.

Subscribe if you can share content like my content, all those good things, it goes a long way. Thank you so much. So I hear it all the time. I have, this is on the broker side.

I've got great manufacturer relationships and I know if I start a brokerage business, the brands are just going to come to me and then it happens and then nothing or money's going out faster than it's coming in. I started a food broker and a food brokerage and it's much, much harder than people expect.

It's funny, people think, hey, I've got, I have experience in food service sales. I work on, on the distribute on the distributor side or the manufacturing side. This broker game, that's easy peasy. Hold the fung.

No, it's like me saying, oh, I could be a manufacturer rep. That looks easy. Or I could be a distributor rep. Well, it doesn't look hard at all. That couldn't be further from the truth.

If you're on the distribution side of the manufacturing side, you'd be thinking, I'm crazy. Now I could come in, I can learn it over time and become proficient at it. Sure. Not saying that can't happen.

I'm not saying someone can't come in the brokerage business and absolutely learn it and crush it and be just the best of all time. That can totally happen. But just to start up a business out of thin air and think, yeah, I can do this. I'm going to be successful. Day one.

That's not reality. It's not reality. I'm sorry. My dad and I, when we started our business, my dad, he kind of had that thought. And even I did too. I was pretty naive.

I was straight out of college, six days from graduation. Boom. Portillo sales and marketing has started up. We had that mindset. It took us like, I think it took me 10 months to get my first paycheck.

10 months of just twiddling my thumbs, going out, pitching products, you know, really maxing out my effort every day, being tired at the end of the day. 10 months working for free. So I got my first paycheck. It's a long time.

In this episode, I'm going to share the five biggest mistakes that cause most brokers to fail and how to avoid them. Now, even if you're not a food broker, this can still apply to you and your business.

So the hard truth about new brokers is, and really in just food service sales in general, this can go towards a distributor rep or manufacturer rep. Too many brokers, they think they have having some context. Context. Having some context and being a great salesperson is going to the end all, be all.

It's not, dude. If you're going to start a business, first and foremost, you're a business. Selling products is one thing.

In the broker business, we speak the languages of three uniquely different customer types. We speak the language of the manufacturer and what's important to them. That's our client.

We speak the language of the distributor and the demands that they have. And then the last one is the operator.

And, and the unique challenges that come with that, being able to speak and understand what's important to them. So you have the manufacturer, you've got the distributor, and you have the operator. Very unique. Think about it.

If you were work, if you were to go get a job at Nordstrom, you really only have one customer type. It's the person walking in the door. So you have to speak the language of the people walking in the door.

Much different than being a food broker where you have three different customer types. There's not many industries or agencies or businesses that are like that where it's three uniquely different.

On top of you're running a business, who's managing your books, who's managing the ops, who's managing the admin, who's managing to make sure you have samples coming in, they're being stored properly, who's managing the client and their expectations, all these types of things. It takes time to learn and understand. So the thing to come in day one and be successful is not going to happen.

Well, my dad and I, when we started, we learned quickly that being successful in the food broker business, again, it wasn't about selling, it's about running a business. You got to learn how to run a business fast if you've never done it before. So here's the five biggest mistakes that brokers make.

One, they don't know how to run a business. It's the number one reason I see brokers not make it. After a year or six months, they go without making a paycheck or very little paycheck.

They went from, you know, having a guaranteed income, working for a manufacturer or working for a distributor to starting from the ground up, not understanding the costs associated with running a business. And they eventually say I'm not going to do this. And you know what good on them. Sometimes it just, it just doesn't work.

So many brokers, they don't understand the, the financials, the cash flow or how to scale. I remember when my dad brought me into the business because I could handle the financial side. I understood the numbers.

Him, oh boy, that's not his strength. Get that man away from the numbers. Keep him focused on building the culture of the company and working with our team and selling.

That's what he does well, financials, back of the house stuff. No, no, no, no, no, no. It's nice to have a little bit of that, that give and take as well.

Sometimes having a partner in the business now it's two mouths to feed having two people, but you kind of can balance each other out sometimes. So the second thing is the lack of broker specific experience.

I see it all the time where manufacturer reps or distributor reps, they just jump into the broker business thinking that hey, I could be successful at this. But it's not, it's not necessarily always the case. We are completely different than manufacturers or distributors.

And you have to learn that pretty, pretty quickly.

I, for me, I learned the hard way that if you don't understand the language of again those of the distributor, the manufacturer and the operator, you ain't going to make it. Number three, they run out of time and money. Many new brokers, they assume manufacturers will sign up with them quickly.

Man, I hear this all the time. They've got their relationships and people are going to just, they're going to be knocking out, lining up outside the door.

Not necessarily true sales cycle in food service, that buying window for a food service manufacturer, for it to open up, it may be six months, maybe 12 months. It may maybe two years, three years, five years, maybe never. And you know what? You have to just wait it out. You had to be patient.

I've seen too many brokers, they burn through their savings expecting fast deals. They, they turn on their 401k or their life savings to be able to fund this.

And they find at some point, like, they just don't have the financial Runway to wait it out. So if you don't have that Runway, keep aside income or secure funding before just going all in.

Sometimes taking baby steps and putting one foot in first kind of goes a lot further than just going all in. But you know what? I do say this then.

For me, I love going all in and not having that plan B and figuring out, I call it building, learning how to build a parachute as you're falling out of the airplane, you know, but to each their own. Number four is they have weak manufacturer relationships.

Just because you're good at selling something doesn't mean someone wants to partner with you and trust and trust in you and give you their money. Past relationships, they don't always translate into new business. And manufacturers, I find they're afraid of. Okay, okay, let me take this back.

I can't just point out manufacturers directly, but just in general, people are averse to new and to change. If you're new, oh, man, you have to overcome that hurdle. And then the second one is change the decision maker to manufacturer.

If they're going to hire you, they have to make a change.

And you know what, many times it puts their job and their security at their company in jeopardy if they don't make the right change, especially if it's to a new broker. That's very, very risky.

And so you have to think about those types of things when starting your business is, hey, how can I help bridge those, those people across that, get them comfortable with new, get them comfortable with change. What am I going to be doing that's uniquely different than what's available right now in the marketplace?

I remember my dad thought his past connections would turn into these, into new clients, but it took. People didn't want to just, they weren't lined up at our door.

They didn't want to just make that jump and go to something that was new and make that change. So you have to make sure you get, you know, the right people have that financial Runway, and it just takes a little bit of time.

Number five is they don't stand out new brokers. So many times they try to copy the national brokers. Don't do that. Those national brokers, they're huge behemoths.

They've got the, an army of sales people. They have systems, processes, technology. You cannot compete with them up front. Like it's just not going to work.

They have the scale and size across the entire country where they can take a manufacturer and represent them in all 50 states or regionally. And you even have your regional players, your regional brokers. It's hard to compete against them.

If you're a small broker or you are a boutique broker. Don't try to be a mini version of these national firms. Instead find what makes you different and learn from it and lean into it.

Make sure you really lean into it. People want to work with you because you're uniquely different. They, they, they value you.

You have to just find what that different differentiator is and, and super like lean into it and build your marketing around that of like hey, you gotta pump your message out into the marketplace cause people don't know. So overview what successful brokers do differently. The brokers who survive and thrive, they do things a lot differently than others.

One, they get their financials in order early. They understand their, their, their inputs and their outputs. How much money is coming in versus how much is going out.

Being careful of not investing too heavily AKA bringing on more labor because that's our highest expense on a P and L. Our profit and loss statement is is salaries. So not having too highest salaries too early in the game and blowing out cash.

So get your financials in order early. Number two, learn the broker side of the business. Not just the manufacturer or the operator or the distributor side.

Be able to speak to all three types and yet to be super well rounded. Number three is build long term relationships beyond just those old contexts.

When you start in the broker business or even in the manufacturing business, whatever company you come from, you're going to rely on those contacts that you've always had those relationships. But you have to understand that at some point you're going to have to far surpass what you have.

You have to continually for long term sustainable growth. You have to continue to build your network. That's ways to, to, to build the business.

And to do that you define ways that you stand out from competitors. You can continue to build your network and your base of contacts by standing out from, from from competitors and finding your unique differentiators.

And plan a long financial Runway to handle those slow periods. I, I'VE been in this for 10 years now. I can't say every year. Portillo sales and marketing has been great financially.

We've had tough years, we've had lean years. I've had negative months, negative quarters. It's just part of the game. It's hard, especially when you start to build, build, build.

You're adding in, you know, your expense, AKA you're bringing out people and salary and then next thing you know because you have a 30 day clause with your manufactured clients and then you get terminated and then you had to figure out and scramble and say, hey, how do I make this work and balance it out so I'm not all financially out of whack.

So if you're thinking about starting a brokerage or if you think about jumping into the manufacturer side or the operator side or the distributor side, whatever it is, if you're struggling to get traction, focus on the five areas that I, that I just went through.

Avoid, avoid the mistakes that others are making by not being unique, by not by thinking you're going to have fast success, by not understanding the financials, all those types of things, by avoiding those types of things, at least trying to get better at them, you're going to have a better shot at success. Now, if you're in the broker space, or how about this, if you're in the food service space, which of these challenges do you see the most?

Let me know. I'd love to hear your perspective. I'm always learning. I'm always picking up new nuggets from others.

So if you can, you know, maybe on this video you can comment or shoot me a private note or give me, give me a call, whatever. Would love to hear your perspective. I'll catch you next week on next week's next week's episode.

I appreciate you again for tuning into the titans of food service. I'm Nick and I'm out.