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The job of a freight broker is to connect shippers who have goods to transport and carriers who have the capacity to move those goods. Today’s freight brokerage market is rich with opportunity, but taking advantage of the ease of getting started and straightforward licensing requirements does not guarantee future success. With countless licensed freight brokers coming into the mix every year, it is essential to know what it takes to be successful — and profitable — from the start. That begins with recognizing the ten most common reasons why new freight brokers fail, and how to avoid these pitfalls whenever possible.
1. Failing to create a business plan
Every new business owner, whether operating a sole proprietorship or a large company, needs to know where they are headed if they want to be successful. Having a sound business plan is one way to accomplish this task, but it may seem like a daunting task when starting a freight brokerage business. Failing to create one can mean trouble for the business, and quickly. Be sure to take the time to project out the potential marketing strategies, customer acquisition methods, pricing models, and business financials before jumping into a new brokerage business.
2. Not planning for capital expenses
The financial barriers to entry into the freight brokerage business are not as high as other transportation or logistics companies. That does not mean that overlooking necessary startup expenses and future financial needs is a smart choice. New freight brokers need to be aware of the costs associated with starting the business, including but not limited to:
A laptop and cell phone for business use
Potential office space
Branding and marketing costs
Freight broker licensing and bonding expenses
Technology for managing the business
Outsources professionals, such as an accountant or bookkeeper
These costs can add up quickly, and freight brokers who are not prepared with financing or cash on hand to cover them may not have the ability to stay afloat for long.
3. Misunderstanding licensing requirements
One of the most important requirements in becoming a freight broker is the federal regulation that requires specific licensing. New freight brokers, regardless of how much industry experience they have, need to acquire a freight broker license as well as post a freight broker bond or trust to operate legally. Misunderstanding these requirements or failing to meet them before starting a brokerage can lead to negative consequences down the line.
Related: Freight Motion Inc – Company Profile – Entrepreneur 360™
4. Overlooking marketing needs
The freight brokerage industry is highly competitive, with newly licensed brokers entering the market each year. With so many options, shippers and carriers need to know that your brokerage is both available and able to take on new business. Creating a marketing strategy is necessary if you want to remain relevant to your current or potential customers. Consider options for print or radio ads, as well as technology-driven marketing campaigns through e-mail, social media, or the web.
5. Missing networking opportunities
Although marketing is a necessary component of being a successful business owner, networking can make all the difference in making the right industry connections. For freight brokers new and old, having the ability to meet and build relationships with other industry professionals, including other brokers, is a helpful aspect of business growth. Seek out opportunities to network, whether in person or through online forums and commit to following up with contacts you gather in a timely fashion.
6. Failing to communicate with prospects and customers
Because there are so many freight brokers in the industry today, being able to communicate effectively with prospects and current customers is a must. Not returning phone calls or e-mails, avoiding uncomfortable calls when loads do not go as anticipated or failing to provide accurate information during any part of the sale process can be devastating to your business. Have a plan for communication with prospects and customers so that they feel valued.
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7. Setting rates incorrectly
Another common mistake among freight brokers is the inability to set rates correctly. Pricing services too low can lead to a loss instead of profits for the business, even though it may generate more customers. Alternatively, pricing on the high end of the spectrum may turn customers away over time. You can keep a pulse on pricing trends in the business as well as current rates for freight through a handful of online resources.
8. Failing to stay educated
As with many other professions, having the most up-to-date training and education is crucial not only to personal development but as a business owner as well. Freight brokers have several options for freight broker training, in person and online, that can help stay abreast of best practices and trends in the industry.
Related: 7 Rules for Shipping Freight Internationally
9. Avoiding technology tools
Many industries are moving toward a digitized business model, and freight brokers are no different. The use of technology tools designed to make managing business financials, scheduling, communication, and marketing easier can leave more time and energy for building customer relationships. Instead of being concerned about the investment of new tech into the business or a steep learning curve, plan to add the digital tools best fit for your business model and customer needs over time.
10. Mismanaging time
Getting into the freight brokerage industry takes some industry experience as well as business connections, but those don’t get brokers far unless they are willing to put in the work. Acquiring new customers, creating new opportunities, and staying on top of business management all require time and effort. The most successful freight brokers determine the most efficient ways to manage their time, often outsourcing tasks to other professionals when it is beneficial to the business.