How Freight Brokers Diversify Their Book of Business
Your book of business is your lifeline. In other words, the more robust your customer base, the stronger your business continuity.
In logistics, your book of business is every customer who is working with you. Maybe you even still have a few cold customers in your list. Regardless, you have conducted business with all those names, and could conduct business with them again.
At LDI, we talk a lot about your book of business’s health, and that means evaluating all those customers. If one customer accounts for 10 percent or more of your revenue, add more revenue streams by finding new shipping customers. If your customers don’t enable you to earn a reasonable margin, it’s time to start prospecting to replace them.
LDI Recruiter Tom Simano offers advice on another way to improve your business: diversify your book.
Tom’s been with LDI since early 2014 and has seen his fair share of brokers experience business devastation, so he’s adamant about preventing that from happening to his agents. He pushes his agents hard to diversify their book of business for long term brokerage success.
If you haven’t gone through your book for a while, now’s the time. Look at how often you do business with each customer, see the margin/profit you’re earning from that customer, and what percentage of your overall gross revenue they contribute to.
If you’re an LDI agent and would like assistance segmenting your book of business, contact your business developer directly. Alternatively, email AgentDev@shipldi.com and one of us will get back to you ASAP.
Diversify Your Customer Base
Second, look at those segments and make a plan.
“One customer can’t account for most of your business.” Tom said. “If your one supporting customer account suddenly goes away—maybe goes out of business, moves to another broker, brings logistics in-house, etc.–you need to be able to take that hit and keep your doors open.”
The best way to prevent this is to diversify your book of business. Tom doesn’t have a problem with brokers sticking to what they know, so if you’re comfortable with food and beverage, it’s ok to stick to food and beverage. But brokerages need to expand their customer base in that niche. “If they ship lumber, that’s fine, but they need to find more lumber to move to diversify that customer base.”
Go After Higher Margins
Another way Tom recommends diversifying a book of business is to go after higher margin freight. If you’re comfortable shipping lumber and steel, look around to other opportunities, such as expedited or heavy haul. Research those niches and familiarize yourself with what they entail.
If you’re looking to get into specialized freight, Tom recommends asking other brokers/agents for guidance. “Reach out and ask for advice,” Tom said, “LDI is a team-focused company, and everyone wants to see everyone else succeed. Whether you talk to me or agent development or even another agent, you can learn something you didn’t know before.”
If You’re Not Growing, You’re Shrinking
Even if your book of business is pulling in more money than you ever imagined, Tom says don’t get comfortable: “Always stay in a prospect state of mind.” Stay in front of current customers, but don’t ignore consistent prospecting.
Look at your segmented book of business. It’s possible some of your margins have atrophied or some of your shippers aren’t moving as much freight as they had. You’ll need to maintain your book by regularly adding new shippers. By always prospecting, you’re not only replacing that gross, but you’re growing your earnings.
Tom points out this might be the time to grow your brokerage in terms of human resources. “Maybe you want to hire people to hand operations while you go out and sell, or maybe you want to hire a strong sales person and you run your office. Either way, don’t settle. Always prospect, because if you’re not actively growing your business, your business is shrinking.”
More Freight Brokering Tips
For more advice from Tom and our other logistic experts here at LDI, follow us on our social media channels (we’re especially active on LinkedIn) or reach out to us at https://www.logisticdynamics.com/contact/
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