How to Prepare for Fluctuations in a Freight Brokerage Business

Steady income you can rely on. What freight brokerage business doesn’t want that? Heck, every business, no matter how big, wants predictable revenue. But as you know all too well, there are fluctuations that can hit a freight brokerage business if your portfolio of clients is not well balanced. Here are some things to think about to add stability to your 3PL operation.

 

Sniff out the type of fluctuation your clients may experience during the sales process.

Ever had a costume store customer? I bet your July – September were busy. But what about February? As a freight brokerage business, it’s on you to know that the client you’re taking on has seasonality to their business. If you’re just getting your freight brokerage business started, you certainly should turn down freight you can cover profitably, but if you take it on, don’t start spending money like you’re Jordan Belfort in The Wolf of Wall Street. Be conservative with your cash; you’re probably going to need some down the road.

Seasonal fluctuations can be easy to spot, but what about economic, cyclical or irregular fluctuations to the customers of your freight brokerage business? Those can be less predictable and much less predictable. If you’re not following general economic trends, you should start. Because as the economy goes, so goes freight. For example, when there’s income growth, this usually signals higher consumer spending. This generally leads to an increase in business spending. Is unemployment on the rise? This could foreshadow a dip in consumer spending, which means lower business revenues and profits.

Cyclical fluctuations are alternating periods of contraction and expansion that can last 18 months or longer. During contraction, consumer and business demand falls. During expansion, demand goes back up. In periods of contraction, businesses will look to cut costs by reducing staff, cutting back on operating expenses and delaying investment decisions. During expansion, consumer spending increases, which leads to higher demand for cars and other big-ticket items. In a time of expansion, your customers will be increasing production, which increases their need for trucks.

Have carrier sales inform their carriers that you’ll have freight in lanes they cover at a particular time.

This can be particularly important if you’re vying against other carriers for the seasonal customer’s freight. But, get at least a verbal from your carrier sales team and you can approach your customer with more confidence and let them know that you’ll have capacity to cover the influx of trucks they’ll need during their busy season. Now, we know trucks are generally reserved no more than 72 hours in advance, but by communicating this information ahead of time, you can stay top of mind with carriers and have a leg up on other brokers who wait to the 11th hour to call and expect their carriers to pull of miracles for them.

Think about how you can make life easier for your customer(s).

Your customer may be dealing with a seasonal downturn, but what if it’s bigger than that? What if the downturn is specific to their business? Are there any ways you can make life easier for them outside of the freight that you’re already moving? Your freight brokerage business is going to succeed or fail on relationships. You have to have good relationships with your carriers, but you have to have even better relationships with your customers who supply the freight. Talk to them and figure out what they’re struggling with. Even if it’s not related to supplying trucks and making pickups. The more ways you can add value in creative ways can take you really far in the freight brokerage business. It’s more than just providing GPS tracking for the exact location of the freight. Think people skills.

 

Be conservative with your cash.

The phrase “don’t spend it all in one place.” could probably be written above the door in your freight brokerage business. That way everyone could be reminded of this valuable piece of advice. If you’re going to have seasonal clients as a smaller(ish) freight brokerage business, you’re going to need to get better at squirreling away money so you have it if you hit a lull in customer activity. If you are trying to forecast revenue for all your clients for a year, a simple trick to stay in a conservative mindset is to simply divide the revenue by 12. This way, you start to look at revenue by what it means per month over a 12 month period.

 

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