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In the logistics and transportation industry, several components come together to ensure consumers and businesses get the products they need. Freight brokers are a key part of that ecosystem, as the work as the intermediaries between motor carriers and manufacturers. Although the freight brokerage business offers ease of entry for those with varied experience levels, as well as somewhat minimal start-up costs, being a freight broker who is successful requires a sharp focus on the relationship side of the business.
Breaking Down the Freight Brokerage Business
A licensed freight broker is someone who has taken the necessary steps to start a business in the freight industry. This involves obtaining certain authorities through FMCSA, getting the right insurance and freight broker bond, and going through the proper training over time. Being in the business has far fewer barriers to entry than other transportation and logistics careers, but the number of freight brokers currently operating in the US is small in comparison. To date, an estimated 17,000 licensed freight brokers work on their own or as part of a team to help the industry move forward each day.
Because freight brokers work as the in-between for motor carriers and manufacturers, strong relationships with these players is a must for their success. Share on XThe small size of licensed freight brokers leaves some room for growth in the business, as more motor carriers and manufacturers seek out assistance in getting goods from one location to the next. However, new freight brokers coming into the fold may find it difficult to get up and running quickly if they do not cultivate the right relationships. Because freight brokers work as the in-between for motor carriers and manufacturers, having a strong relationship with these players in the business is a must if brokers, new or old, want to experience success on any level.
Relationships are also crucial in other areas, including access to financing and expanding business operations in the future.
The Need for Financing
Many freight brokers face financing needs as they get started and grow over time, just like most small businesses. Brokers need to have the capital to cover a variety of business needs, from a freight broker bond or trust fund to paying motor carriers for their work. Overhead expenses may also come into play for larger freight brokerage operations. When business is slow, cash may not be pouring into the business when these expenses come up. However, given the fluctuating nature of the freight brokerage business, having easy access to borrowed funds is not always a reality.
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Some brokerage businesses work closely with alternative finance providers, such as invoice factoring companies, to get the capital they need to keep their doors open during slow seasons. While this can be an affordable way to get fast funding, not all factoring companies are quick to work with businesses if there is not a relationship already established. Freight brokerages need to have a strong relationship with their financing partners if they want to maintain the ability to get the funding they need when it is needed.
Keeping Carriers and Customers Close
In addition to freight brokers having close relationships with their financing providers, there must also be a focus on creating and sustaining relationships with motor carriers and manufacturers.
The face of the transportation business is constantly in flux, with recent challenges making it difficult to keep up with freight load demands. Drivers are being pulled in several different directions due to the shipping boom and trucker shortage across the country. If freight brokers do not work to maintain strong relationships with motor carriers, they aren’t likely to have the ability to deliver on their promises to manufacturers and other customers.
As more freight brokers come into the business thanks to the high demand and ease of entry, existing brokers need to focus their efforts on relationship-building on all fronts. Communicating clearly with finance partners, motor carriers, manufacturers, and even the surety agency providing your bond, is crucial to keeping a healthy relationship alive. Each of these business partners can help keep your freight brokerage business profitable and successful over time when the partnership is built on a solid relationship foundation.
Recommended Reading
- The One Thing Freight Brokers Need to Focus on for Success - May 30, 2019
- 10 Best Practices for Working with Freight Brokers - March 8, 2019