If you run a freight brokerage, the idea of firing a customer might sound completely crazy. But it’s true. There are times when you just need to say goodbye. What are the telltale signs? And, could you be moving freight for a client who is actually a detriment to your business? We’ll explain what you need to know.
No matter what type of freight you are moving, your business comes down to margins. And margins are going to be thin. You’re in a volume business, but you need to consider more than the number of loads you’re moving. Time is money. Your carrier sales team has to find trucks to cover these loads.
How many calls does it take for your carrier sales team to cover a load?
If you’re committed to running a profitable freight brokerage, there’s undoubtedly many pieces of information that you watch like a hawk. But what about calls per load covered? Time is money, and even if the cost per mile is acceptable, what if it takes 100 calls to cover the load, when other loads take only 25? Sure, call volume is an imperfect science, but it should be a factor in how you assess the difficulty and true cost in covering a particular load.
Be sure to keep track of this statistic over a considerable amount of time. Carrier sales may have good fortune and make a one-call close. This may result in them dancing through the office, bragging about what they just accomplished. But using average number of calls as a statistic to evaluate lane quality is a one where you want a lot of data on.
How many hours does a load stay on the board?
Let’s face it; some lanes are just tough to cover for your freight brokerage. You may have picked up a customer who runs these tough lanes. This customer they could actually be running your carrier sales team into the ground. Asking carrier sales to devote a ton of effort into covering a really tough lane, over and over, is tough on morale. It’s also going to be tough on their commission. Every freight broker has to use their own judgement.
But if your carrier sales team doesn’t have the right carrier relationships, and it’s taking too much effort to cover a tough lane, it may be best to gracefully decline that customer’s freight in the future. Be sure and pull numbers from your freight broker software to be sure you’re making a decision based on math, not mood. Tempers can flair between frantic calls to carriers. If you’re going to run a profitable freight brokerage, you need to base your decisions on sound logic and math.
How many carriers can you realistically estimate could have a truck for you?
Log into your freight broker software and run down the listing of your carriers who service the region of your potential customer. Now, you may be in the habit of telling yourself, “Oh, Big Star Trucking has trucks down there all the time”. Even though they’ve come up empty for you 7 out of the last 10 loads. Sure, they bailed you out once. But think about that their general batting average, or success rate, has been for you. Don’t get into bad habits of irrational reassurance. For example, telling yourself that, “because they had a truck for you one time, that they’ll be able to cover a low-margin load for a tough customer”. If the load sits on the board until 2pm and takes 100 calls to cover, is it really worth it.
At some point, the margin does not justify the effort it takes to cover the lane.
Does the shipper make your life a living hell for your freight brokerage?
You actually haven’t missed a pickup yet in 65 loads. You’d think that’s an fair start to your track record. Sure, you’re wouldn’t qualify as an eBay power seller, but your freight broker software has your operations team on top of every load.
Then you post one load to a load board and your shipper sees this. And they flip out. A customer start questioning your abilities on every phone call. Then request updates every 15 minutes. Finally, a request is put in for automated updates from your internal freight broker software. Have they lost all faith in your freight brokerage’s ability to do your job? What the heck?
What to do next
You’ll need to work to restore this shippers confidence. Figure out a way to track the amount of time your team is spending on managing this relationship. Weigh the time spent to service the client against the margin made per load. 20 percent of your customer base will account for 80% of your revenue in many instances. You should have a sense for how many loads your shipper is moving. It may change the way you devote time and effort towards servicing this customer.
Take some time to forecast out what your expected account penetration could be for each shipper with a high volume of freight. The short term pain of managing a high-maintenance shipper must be managed against the long term potential and expected lifetime value of each customer.
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