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The Success of the Small Freight Broker

success of the small freight broker

According to the Department of Transportation there were approximately 21,000 active freight brokers in the first quarter of 2013. One year later, approximately 8,100 freight brokers had closed their doors. This decrease was primarily due to the statutory bond requirement being raised from $10,000 to $75,000.

However, there are even more issues that small freight brokers must address in order to succeed. Some of the common areas that need to be addressed are higher startup costs than in the past, money management, increased regulation, industry consolidation leading to large brokerage competition and lack of technology usage.

While many small freight brokers are indeed closing, Cargo Transit has found that there are many small freight brokers that are successful and are thriving! The successful small freight brokers tend to listen and conform to the concerns and needs of their customers. Over the past few years, customers are increasingly asking for their service providers give them online access to monitor their freight. Most large freight brokers spend lavishly for technology, but small freight brokers can find a very reasonably priced TMS (Transportation Management System). Be sure to have a solid TMS system in place. Your customers don’t have to know it costs only a fraction of what large freight brokers spend.

Most successful small freight brokers are good at money management and make strategic financial decisions. If a small freight broker does not have a financial plan in place, it can run out of working capital quickly. Even $100,000 working capital can get eaten up quickly when an average load may run $800 to $1,200 each and customers take 45 to 60 days to pay. The solution is to collect the (POD) proof of delivery quickly and invoice your customer quickly! If you have a solid TMS in place as discussed above, you can email your invoice with the POD or EDI your data to your customer the same day. Next, constantly monitor your accounts receivables and communicate often with your customers regarding payment expectations. Lastly, ensure you have a credit line or working capital in place to pay your carriers timely. If this is not possible, factoring your invoices may be an option.

Most successful small freight brokers have vast knowledge of the logistics industry and offer customer service that is non-comparable! The large national freight brokers typically employ young freight brokers that are new to the industry that use a “smile and dial” technique to go after customers. It is not likely they are more knowledgeable or care more about offering good service than the typical small freight broker. We get calls almost every week from customers that are looking to make a change from a large national freight broker because they are fed up with the lack of communication and lack of service they are currently receiving.

Small freight brokers will continue to thrive as long as they are current with technology, manage their money strategically, are knowledgeable about logistics management and continue to offer unsurpassed customer service.

By Lisa Fouts, Owner of Cargo Transit, Inc.

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