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Freight Brokers: Avoiding Disagreements with Carriers

Every freight broker knows they have to take good care of their customers. It’s the customer’s money that keeps you in business, so naturally you focus a lot on keeping your customers happy. It’s important to be a good partner to your carriers as well, however. After all, without them, you don’t have anything to offer your customer. Having good relationships with trustworthy carriers can set a freight broker apart when it comes to ongoing projects, as well.

Things like rate, equipment type, and lane are easy to keep straight, since those are the most basic details needed to book a truck at all. When carriers and brokers have a disagreement, it’s usually about the finer points of a rate con. Any arguments are usually a result of one of two things: lack of clarity on a finer detail of the contract, or disagreement about the solution when a problem comes up.

Be Proactive

 

I spoke to our own Broker Bro, Joe Adinolfi, about how to prevent disagreements with your carriers. The first thing he said was to make sure, right from the outset, that the carrier knows all the details. Give them the chance to consider those factors when placing the bid. Any risks or special considerations are part of what they are bidding on, and adding details after the fact or failing to communicate them at all is a recipe for disaster. As Joe put it, “if you ever just assume the carrier knows something then you will get burned, count on it.”

Likewise, don’t expect things to “just work out.” As soon you hear about a problem from the carrier or shipper, you need to be engaged. If you don’t start working on the solution until the customer issues a fine or the carrier complains about not receiving full payment, you’re already at a disadvantage. Ideally, you want to work toward a solution everyone can agree to ahead of time. If something has gone wrong, at least one party is getting bad news, and it will only be harder to reach a positive solution if that bad news comes as a surprise.

Of course, your biggest tool for avoiding problems is an accurate and detailed rate con. If there’s a fine you as the broker may need to pay and will want to pass on to the carrier, that needs to be on the rate con. Bottom line – the rate con is the agreement between you and the carrier about how this shipment will be handled. Not only is it the document you’ll rely on to get the delivery done correctly, it’s the one you and the carrier will both refer back to if you’re trying to settle a dispute.

None of this is to say that you need to be, or even can be, perfect. You’re always going to have some disagreements with carriers. If it was easy to keep both sides happy while shipping freight, anyone could be a freight broker, but being able to manage what happens after something goes wrong and making sure the customer and carrier both walk away happy is what sets great brokers apart from the rest. A good reputation and long lasting, positive relationships with carriers

Setting and Meeting Annual Sales Goals

On the last day of 2020, we gave you some pointers on how to measure your success after a year that could politely be called “unusual.” One of the points that we tried to make was that every business is different, your business is different, and judging your business based on what others did wasn’t the way to do it. That blog post was, by necessity, an exercise in judging something in hindsight. While many businesses set goals at or near the beginning of each year, goals set in January 2020 were probably not even useful benchmarks by the time March rolled around. The world had changed too much. So now there’s the question that a lot of us are only getting ready to ask ourselves as January 2021 winds down: where do we go from here? Let’s talk about goals.

 

What Kind of Goal Should You Set?

 

You’ve probably heard of SMART goals, and those are a great place to start. The great thing about SMART goals is that SMART Goals are a helpful framework whether you’re setting a formal goal or just thinking about the future. So as a refresher or to bring anyone up to speed on a what a smart goal is:

  • Specific: vague goals can make it very difficult to say for sure that you’ve reached the goal, or can leave you open to reaching the goal as stated but being unsatisfied with the result.
  • Measurable: in addition to be specific, it’s good to have quantifiable figures for your goal. This lets you measure whether you reached your goal and track your progress along the way.
  • Attainable: if your goal isn’t realistic, you’re not only going to fail to reach it, you’re going to take away your incentive to work toward it.
  • Relevant: your goals, and the goals of any employees you may have, need to be based on what makes your business more successful.
  • Time-based: without a date (or frequency) to achieve something, there’s nothing in your goal to work toward.

What does this mean for sales goals in a freight broker agency? The obvious way to make a goal specific is a dollar figure, but there are other ways to set goals. Let’s look at 3 different ways to build a goal, and how reaching one goal every day can help make sure you’re hitting your overall goals.

Increase sales by 15% this year1 new customer per month5 new contacts per day
SpecificIncrease salesNew customersNew contacts
Measurable15%15
AttainableCheck against prior performanceCheck against prior performanceCheck your schedule
RelevantIncreases your profitsHelps reach the first goalHelps reach the second goal
Time-basedThis yearMonthlyDaily

 

What Should Your Goal Be?

Specific, Measurable, Relevant, and Time-based are critical parts of the smart goal, but they’re relatively easy. Attainable, on the other hand, can be difficult. No matter how much information you have, there are factors that just can’t be predicted. There’s also no one-size-fits-all solution to forecasting and goalsetting. In the example above, we assumed that your primary focus was adding new customers. However, your business may be better served by maximizing your business with existing customers, reconnecting with customers from before the pandemic, or another goal that is specific to you.

Whatever your goal is, the most important things are to make sure your goal takes your business where you want it to go, and that have a realistic plan to meet that goal. If you’re launching your own freight agency and serving one customer, doubling your number of customers might be too modest of a goal. If you’ve been established for 10 years and are serving 100 customers, that same goal is probably unrealistic.

As you might imagine, that means there’s no magic formula that you can use to set a goal. That said, there are some very important ideas to have in mind when you set your goal.

Guidelines and Suggestions

 

Be analytical. You don’t need a complicated algorithm, but you do probably want to be aware if sources like Freighwaves’s Market Experts think the industry will have a year of growth or contraction and whether you have more or less manpower for prospecting than you had last year.

Be aggressive. This is the easy part. No one ever set a sales goal of the exact same amount as last year. Remember, if you hit this goal at the end of the year, that should mean your business is in the condition you want it to be in. On the other hand…

Be realistic. This is where the first two points meet. You want to set an ambitious goal, but not one that is going to be out of reach. In the first few years your business is operating, you might grow several times over. Businesses mostly grow at the rate the economy grows, but your growth can easily outpace that, especially as a small business.

Be practical. Another of those items that seems obvious, but is critical to keep in mind, is your capacity to meet your orders. Increasing your sales means not only increasing the amount of time you spend selling, but also increasing the resources you put into booking trucks and offering customer support. A good TMS and a support network like the one Logistic Dynamics offers its agents will help, but you need to make sure you’re ready to take on the added work that comes with higher sales.

The Race Against the Clock

 

One of the biggest mistakes that businesses make is to have a goal in mind in December and not realize that they missed that goal in May. If you’re landing customers that have recurring orders, it’s worth 12 times as much to land a customer in January than December. If you want a million dollars in new sales in a year, doing $25,000 a month with one customer starting in January gets you 30% of what you need. In December, it barely makes a dent. If, starting in January, you add $12,821 a month in new sales every month (and all those sales are recurring), you’ll hit your million-dollar goal. By April, that number is over $18,000, and it’s nearly $35,000 by June. Getting 12 bites at the apple each time in January, and 11 in February, is a lot better than 7 in June and 6 in July.

One final point, and maybe the most important one: remember that these goals are about what you want as a business owner. You earned the right to make those decisions for yourself when you started your own freight broker agency. Your goal doesn’t have to be a million dollars, it doesn’t have to be bound to the calendar year, and it doesn’t have to be formalized any more than you need it to be. If you have employees, they should have formal goals and expectations, but the goals for your business should be exactly what you want them to be. The only thing that your goals need to be are detailed measurements to help your business develop into what you want it to be, when you want that to happen.

The Importance of Customer Retention

Let’s face it, landing a customer is hard. We don’t always like to say that out loud, because most of us make our living based on how good we are at landing customers. Being good at it doesn’t necessarily mean it’s easy though. According to sales consulting firm The Brevet Group, it can take 8 cold calls to reach a prospect and 5 follow ups after a meeting to give yourself a good chance of landing a sale. Even then, up to half of all sales go to the first vendor that responds with a workable solution.

Of course, you need new customers to grow and even sustain your business, but it’s important not to overlook the value of customer retention and maximization. Both are exactly what they sound like: customer retention is how many of your customers continue to do business with you over time, and customer maximization means getting the most out of your existing customer relationships. Effectively, we’re talking about selling more to your customers, for longer.

Why is Customer Retention Important?

 

Okay, we all have a pretty good grasp on this on an intuitive level. It’s not like anyone reading the first section stood up and shouted “why should I keep my customers?” Still, it’s important to take this to the next level and quantify what we’re talking about, so you can make educated decisions on how to focus your efforts.

It’s an old adage in sales and marketing that it costs 5x as much to replace a customer as it does to retain one. Depending on who you ask, that number can be almost anything, but it’s always at least a few times more. Of course, if you’re a freight broker agent, you’re really looking for how you can make more money, more reliably. Simply put, it’s easier to run a business if you have a baseline of recurring or relatively easy to close sales each month. As an example, picture this: you reach out and try to make a sale with 20 contacts, 10 are existing customers, 10 are new leads – how many sales do you make to each group? If you’re an average company, you make 6 or 7 sales to the existing customers and 1 or 2 at best to the new leads. New leads are critically important, but when you’re planning out your day, you may want to focus a little more on deals that are very likely to land. There’s no better lead than a prior sale.

More reliable business is nice, but how much does this really hit the bottom line? One study showed that “increasing customer retention rates by 5% increases profits by 25% to 95%.” If you own your own business, that’s probably all you needed to hear.

How to Retain Customers

Business meeting in a booth

Develop a relationship with your customer

You’re going to find a lot of overlap between retaining and maximizing customers, and for good reason. Retaining a customer without maximizing them means that you’ve landed a recurring deal, and now you’re leaving a lot of money on the table by failing to do anything more with that customer. Maximizing a customer without retaining them means you’re either got great profit margins or a high percentage of the customer’s business, and now they no longer do business with you. Either way, you and your customer probably don’t interact much, and are indifferent toward each other at best.

We would all love to discuss a brilliant new strategy for this, but the bottom line is that you need to build a relationship with your customers. If you run a Google search any time for how to retain customers, you’ll get article after article full of great ideas. Honestly, it’s a great idea to run a search and read new articles often. Each of those articles is going to give you ideas on how to build and maintain relationships. In freight brokering, your customer stays with you because they’re confident that you know their needs, you’re reliable, and they’re comfortable working with you. Bottom line: handle their shipments well, and then make sure they know you can do that for more of their shipments.

That last part is also huge when we are discussing automation and technology companies that are working to get some space in the freight brokerage market. No matter how good their technology gets, there’s one thing they can never offer your customers: you. If your customer feels a sense of confidence knowing that you are available to them, then there’s nothing anyone else can offer that replaces that.

Maximizing Customers

Online shopper

Maximizing sales to a customer doesn’t have to look like this.

Just like retention, there’s no magic formula or big secret to maximizing your sales to each customer. Maybe the most important thing is that you keep this fact in mind: you should be maximizing sales to your existing customers. That has to be one of your goals. It’s a shame not to do it, but it’s easy to get so caught up in prospecting for new clients and handling customer service for existing ones that we forget that a current customer is also a sales opportunity. When it comes down to it, the best lead you’ll ever have is a prior sale.

There are a lot of great ways for any small business to maximize customers. This article breaks them down into three categories: increasing penetration, developing a plan of action, and building credibility and trust. So, what does that mean for a freight broker? It’s a good idea to read the article and think about that for yourself, but let’s quickly summarize each part.

  • Increasing Penetration: Are you currently handling a small part of your customer’s freight, or most of it? Talk to your main contact at your customer’s company and see if you can find out if they have any lanes or types of freight you’re not currently handling. See if you can find out if there is anyone else at the company that purchases logistics services, and if you can make contact with that person.
  • Developing a Plan of Action: Work with your customer to make sure you know exactly how they want their freight handled and make it clear to them that you understand. Consider combining this step with LDI’s CRM blog to give yourself an advantage in tracking and executing that plan.
  • Building Credibility and Trust: Do what you’re going to do, when you say you’re going to do it, and when that goes wrong, make sure your customer hears from you that you know it went wrong and you’re on it. The last thing you want is your customer hearing from their customer that there was a problem with their shipment. Do your best to be in front of any problems and honest with your customer.

If you take nothing else away from this post, just take some time to think about whether you focus enough of your time and energy on retaining your customers and maximizing your sales to them. There are a lot of ways to do that, but the first and most important step is to make it a priority.

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