Ready to start a freight brokerage business? Your application of the 80/20 rule could make or break you. What do we mean? Before diving in head first, you’re going to want to spend some time first thinking about all the things that you do.
Focus your efforts to start a freight brokerage business.
When you’re just starting out, you’re never going to feel like you got everything done that you wanted to. You’re going to feel like you’re spread thin. Getting things going is going to pull you in a lot of different directions. When you want to start a freight brokerage business though, you will want to pay close attention to how you are allocating your time. You will have a million ideas and a million and one suggestions from outside advisors. But spreading yourself too thin is a recipe for disaster.
How should you approach what you spend your day-to-day time on? Understand the 80/20 rule.
Why you should observe the 80/20 rule when you start a freight brokerage business?
Also known as The Pareto principle, the rule states that:
“For many events, roughly 80% of the effects come from 20% of the causes.”
Basically, 80% of your sales will come from 20% of your customers. Or, 80% of what you achieve will come from 20% of what you focus your time on.
So how are you supposed to take this and apply it to how you manage your day-to-day activities? This is where self-examination will come in handy.
Your mission over the next 30 days should be to figure out which 20% of your time produces 80% of your business’ results. This way, you can spend more time on those activities and less time on the non-revenue-generating activities that secretly suck the life and profit out of your burgeoning freight brokerage business.
Break out your work into categories when you start a freight brokerage business.
What are categories? Let’s define some.
Administrative: These are necessary to-do’s like paperwork related to keeping your LLC in working order, human resources documentation. Maybe you’re setting up your Zenefits account to handle all HR matters. Maybe you spent the morning managing your payroll system.
Sales and Business Development: This is time you spend calling, researching or visiting current or potential customers. Do we need to elaborate here?
Operations: This is time you spend managing your freight. From establishing the process for getting loads into your system, to carrier on-boarding, to what happens when there’s a late delivery. Systemizing everything you do in your organization falls under the category of operations management.
Marketing: Did you spend two hours updating your website recently? Did you spend three hours trying to design a sell sheet in powerpoint? Did you send out some tweets and make some connections with shippers on LinkedIn? Put this time spent in marketing.
Using these buckets, estimate the amount of time you’ve spent on each in the past month. Or, pay careful attention to how you spent your time over the course of the next month. How is where you have spent your time over the past couple of weeks impacting revenue or profitability? What activities can you say have not contributed to your ability to increase revenue, decrease costs or both? When you want to start a freight brokerage, everything you do should be evaluated under this lens.
20% of your customers will end up generating 80% of your profits.
When you start a freight brokerage business, be prepared: 80% of your profits are going to come from 20% of your customers. It’s better to think this will come true than to deny a principle that has been observed and embraced for hundreds of years.
Try applying the R-M-F rule. This involves looking into your customer lists to figure out who has bought most recently, who has bought most frequently and who has spent the most money. Honing in on this group should give you a basis for what types of businesses can comprise your 20%. It’s this group who you will want to prioritize your time around, and prioritize your time and targeting more customers who look just like them.
Understand your customer niches when you start a freight brokerage business.
Beyond figuring out who has bought most recently, frequently and spent the most money, spend some time understanding other characteristics that can allow you to put customers into buckets. What industry do they operate in? Is there heavy seasonality for some? Where are they geographically located? Do they require special, harder-to-come-by equipment? Do they ship a lot of LTL freight? All of these variables can help you understand the customers you want to focus on and those who you should actually fire.