Freight Broker Business: 5 Tips for Improving Your Brokerage P&L Sheet

Kevin HillFreight Market Blog

Freight Broker Business

Operating a freight broker business in a competitive industry takes grit, perseverance and love of the grind to keep the lights on and the phones ringing. It also takes quite a bit of strategy to manage and grow the profit and loss sheet (P&L). It’s not all about growth at any cost for most in a freight brokerage business  – it is about spending money wisely to get the biggest bang for each and every dollar. 

Here are five tips that will help all freight brokerages improve the bottom line on their P&L sheet. 

#1 – Be an expert on the freight market

The freight broker business is all about selling transportation at a higher rate than buying transportation. Every gross margin dollar is vital to a freight brokerage. This means investing in technology and freight data that allows your team to understand real-time load demand and trucking capacity in individual freight markets. 

With data solutions like FreightWaves SONAR, freight brokers have access to near-time tendered load volumes and tender rejection data that measure supply and demand, along with predictive truckload rates for 135 freight markets in the U.S. And to make it even easier for freight brokers, SONAR now has Lane Signals, which automatically scores market activity and provides rates on thousands of individual truckload lanes. 

#2 – Focus on niches for your freight broker business

“The riches are in the niches,” it is said. The freight broker business has hundreds of niches and it is almost impossible to be an expert at all of these. Pick one or two and specialize in those geographies, lanes, trailer types or industries. The more of an expert you become in one or two of these niches, the higher premium you can charge for your expertise. Plus, you will continuously lower your operational costs as you progress up the learning curve. Over time you will make fewer mistakes and have stronger carrier sourcing strategies than your competitors. 

The goal is to dominate a niche. Freight brokers who try to be all things to all shippers often spend too much time chasing unprofitable business just for the sake of growth. Be strategic, because it’s all about your P&L, so fewer customers can equal higher profits. It’s all about focusing your freight brokerage on where you can build the best relationships and add the most value. 

The shipping industry needs
a new metric – the Market Rate –
to end the spot vs contract battle

#3 – AUTOMATION

The options to automate workflow in a freight broker business have exploded over the past five years. From technology to handle administrative tasks, like Robotics Process Automation, to load matching tools and outsourced work forces, there are several ways to keep your costs in line. 

While relationships still and always will matter, you should automate the dull tasks that your employees would rather not do to free up their time to add real value to your freight brokerage that you will see sooner rather than later on your P&L.  

#4 – MANAGE CASH FLOW

Always keep an eagle eye on your finances and plan ahead for all scenarios that might affect your cash flow. The quicker you pay your carriers, the happier they are (and the more effective your carrier sourcing). The slower you allow your customer to pay you, the happier they are. It’s a delicate balance of cash flow management, but it is essential to improving the P&L of your freight brokerage. 

Cash crunches for a freight broker business are a constant threat. An uptick in write-offs in accounts receivables, service failures, and underwater contracted rates are some of the most pressing threats. Another threat most forget is revenue growth. Landing a new customer means more cash on hand is needed to pay carriers before you receive payment. 

#5 – COMPENSATION PLANS

Designing the right compensation plan is a complex task that is difficult to get right in any industry, much less logistics. 

However, it is vital to your freight brokerage P&L to have the best plan in place . Whether your structure is the buy/sell Chicago model, cradle to grave, or freight agent model, there are plenty of complexities baked into the cake. The core, though, revolves around having the right mixture of incentives in place for both new business acquisition along with growth of your existing freight broker business. 

The first step in the process is knowing what the benchmarks are right now for freight brokerage compensation. Luckily, FreightWaves SONAR has you covered in our review of freight brokerage compensation

SONAR provides the fastest freight market data in the world, across all major modes of traffic. The SONAR platform is the only freight forecasting and analytics platform that offers real-time freight market intelligence driven off actual freight contract tenders. 

Also, SONAR has proprietary data that comes from actual load tenders, electronic logging devices and transportation management systems, along with dozens of third-party global freight and logistics-related index providers like TCA Benchmarking, Freightos, ACT, Drewry and DTN.

Whether you’re working from the office or from home, SONAR can provide you the data and intelligence you need to stay ahead of your competitors. 

Find out more about FreightWaves SONAR for brokers.

You can find more information on freight brokerage sales on the popular FreightWaves sales show, Put That Coffee Down