Freight brokerage is a challenging business, and there are a lot of reasons why brokers fail. In this blog, we're going to discuss some of the most common reasons, and we'll also provide some tips on how to avoid them.
Let's start by listing some of the most common reasons why freight brokers fail:
- Lack of experience: Many freight brokers start their businesses without any experience in the industry. This can be an obstacle, because it will take time to learn the ropes and build a successful freight brokerage. Especially when you're going it alone.
- Lack of capital: Freight brokerage is a capital-intensive business. Brokers need to have money to cover the cost of insurance, technology, and to pay carriers. Without enough capital, it can be difficult to stay afloat.
- Inadequate sales activity: Freight brokers need to be able to find and attract new customers. This requires a strong sales strategy that includes both cold calls, emails and other creative approaches.
- Unrealistic expectations: Many freight brokers start their businesses with unrealistic expectations. They think that they're going to make a lot of money in their first month, but the reality is that it takes time to build a successful freight brokerage business.
Now that we've outlined the major reasons why a brokerage fails. What can you do about each of them?
Lack of experience
Everyone that was ever good at anything, was once a beginner. Don't be discouraged if you've just started out and don't know everything yet. To be honest, no one in our industry is an expert at every mode of transportation or every commodity. That's the good news. The even better news is that every expert out there started by learning 1 commodity or 1 type of equipment at a time. Then as time passes and they gain more confidence, they expand into others.
If you are starting by yourself, find a mentor. Reach out to some experienced brokers on LinkedIn and ask to shadow them. If you're unable to hook up with a mentor, there are plenty of coaching options to help you get your first customers. Check out the links in the comments for more on our coaching program.
Lack of capital
Yes, Freight brokerages require a lot of money to run. That's the downside. The upside to this is that there are plenty of factoring companies available to assist you with financing your brokerage. Check out both of our episodes on factoring. Episode 131 and Episode 73
Inadequate Sales Activity
If we were listing the reasons freight brokers fail by order of importance, this should be number 1. And the good and bad news about this one, it's entirely in your control. Which means, if you're not doing consistent daily outreach to new shippers and prospects, you have no one else to blame. You don't have to make 150 calls each day. But, you do need to make progress consistently and daily. Our industry runs on relationships. So, you should be establishing at least 1 or 2 new relationships every day. And developing stronger relationships with prospects you've already spoken to every day.
Have you ever heard the quote, "slow is smooth, and smooth is fast." You don't need to make frantic calls to dozens of people just to put up numbers. Be methodical and intentional about who you're prospecting and improve that skill every day. For more on this check out our video Prospecting with a purpose.
Finally, unrealistic expectations. This one doesn't seem like it has much to do with the others. I mean what do expectations have to do with the amount of money we're making? More than you think. Where most newer brokers get discouraged is directly related to their expectations when they start. If you think that you'll make a handful of calls each week and earn thousands of dollars of business, you are in for a very rude awakening. And after a few weeks of getting no wins, you're very likely to quit.
On the other hand, if you have the expectation of building a successful freight brokerage over the course of a year. You are much more likely to stay positive and optimistic when you don't make $10k in your first month. And you won't be burned out by sprinting the first mile of the marathon. This is industry is a marathon not a sprint. Stay the course and put in the work daily. And you'll get there. Maybe not today, maybe not tomorrow, but soon and likely sooner than you think.