Becoming a freight broker isn’t actually the easiest thing in the world. There’s quite a few steps – and quite a few things you need to watch out for or be aware of.
There’s plenty of (excellent) guides on the basic steps to becoming a freight broker. DAT.com has one with a high level overview of what you need to do at the various stages of starting your brokerage. Entrepreneur goes into more real-world details with lots of explanations for the steps they outline.
But becoming a freight broker isn’t as easy as following a few practical steps to register your business and get insurance. There’s a lot more to running a business than checking off boxes on a business license application, or using the excuse of “it’s a tax write off!” to buy a new laptop or phone.
If you’re preparing to jump ship from an established brokerage with your own carefully collected book of business, you might feel pretty confident in your ability to stay afloat while you get the details figured out.
Or maybe you’ve collected a slew of contacts from your work in a related business, and again – you’re confident that you’ve got enough guaranteed clients that you’ll be able to more than make ends meet while you ramp up.
Boy, do I have news for you.
You think those clients are guaranteed. You think you’ve built up enough of a relationship that once you’re running your own brokerage, they’ll let you handle their freight needs. You think they’re going to give you the bulk of their business, like they did when you handled their accounts before you opened your own brokerage.
They will. I’m sure they’ll give you what they think is a perfectly reasonable amount of business – which is very little. They’re going to make the smart business decision and not burn their bridges with their current transportation broker, and give you a much smaller amount of business than you might have expected. They want to make sure you can handle it, after all, and be sure that you on your own can provide the same level of service they’ve become accustomed to.
Okay, that’s fine – you’ll win them over.
Except that they need reporting, integrations, APIs, and a slew of features that you aren’t finding in that free TMS you signed up for.
They want to see up to date information about the insurance of the carriers you’ve negotiated with, and they want rates for lanes you haven’t quite had the chance to negotiate carriers for yet.
You can’t quite offer everything they want, when they want it, and you start to run into difficulties. If you’re one of these brokers, at this point, you probably struggle to make ends meet – and if you can’t get your business up to speed quickly, you’ll fold.
Maybe you make it past that initial phase of scrambling to provide service on par with the company you managed to woo your clients away from.
You start to grow your business. You do well – except that now, you’re working even longer hours than you did before quitting the job that you hated working long hours for.
With a growing number of clients, carriers, and shipments to manage, you start running into different problems. Keeping documents organized, figuring out bills, who owes you, who you owe money to, bills, shipping labels… It’s all become much more complicated than you’d ever realized.
How do you go from frantically trying to keep up with it all to easily and seamlessly managing everything you need? How can you get ahead, for once, instead of scrambling just to keep up?
Organization is key. You need to keep on top of your documents, your billing, your accounting – all of it. The right infrastructure can make or break a third party logistics provider.
You need a system, and that’s, naturally, a transportation management system.
We’ve already talked about what a transportation management system is, but what matters to your business as you struggle to get home before dinner time is what actually works for you.
At this stage of running your brokerage or third party logistics business, you’ve gotten over that frantic initial time of keeping up with what your clients expect without going broke to do so. Mostly.
But that often means you spend more and more time handling things you shouldn’t necessarily need to handle yourself anymore.
That’s where effective transportation management software comes in handy. You need something that will centralize everything you’re doing. Why double-enter your accounting information from your TMS to Quickbooks, or hunt around for documents you need to attach to shipments?
Wasted time is one of the biggest things holding the average freight broker back from really growing their business.
If you can’t find a way to eliminate that wasted time, you’ll be perpetually stuck in the loop of never having enough hours in the day.
Once you get to a point where you’ve got things under control, business is growing, and you’re in need of more staff – you run into yet another problem.
After you hire staff, how do you manage them?
You might think you’re going to be a great manager. You experienced lots of terrible management, and you know what a good manager should be like.
No matter how great of a manager you are, your team still has to work with each other. It’s harder than it looks to find and hire people who work well together.
While there’s no easy way to learn how to be a great manager, you can still take steps to make life easier for everyone and give them fewer things to fight about.
Providing login portals that limit access protects your data and keeps your team from tinkering in areas they shouldn’t. Josh from Sales doesn’t necessarily need to see the entire business plan, nor does Sally in Accounting need access to the Rateshare portal. User permissions let you separate your departments, and in a well-designed TMS, while each department doesn’t necessarily have access to the others, the necessary information does sync everywhere it needs to.
Sales teams are notoriously cutthroat, and guarding your sales people from each other can be as much of a headache as making sure they don’t up and leave with their contacts the way you did.
Again, this is where an effective TMS allows you to segregate contacts. Ensure that each salesperson can only see the contacts they have ownership of – so that Josh can’t look through George’s leads and start calling them up when he has a slow day.
Third party logistics and trucking are the backbone of what keeps US businesses running smoothly every year.
It’s not easy managing hundreds of moving parts to keep loads on the road, trucks full, and your profit margins high enough for you to keep your doors open.
Folks starting a brokerage for the first time often don’t realize just how much goes into running a successful third party logistics business. It’s not just managing loads and calling up prospects – there’s more than even the three major stumbling blocks we listed above.
Technology is constantly changing, and logistics providers have to keep up to keep clients happy. There’s a unique mix of older technology (EDIs) and new technology (APIs) that have to work together seamlessly to provide the experience your clients demand.
How you provide that experience is up to you, and can be a key differentiator between your business and your competitors.
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