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Hiring Employees

If your freight brokerage has reached the point where you’re considering hiring employees, you’re not alone. Around 20 million employees in the US, more than 15% of all workers, work at a company with 20 or fewer employees. Hiring that first employee can be a milestone for your business that helps determine your growth prospects for years to come. The decision to hire and the process of making that hire should not be taken lightly.

Should You Hire?

 

If you’re considering hiring, that almost certainly means that you’ve grown your business to the point where you can no longer manage it alone, or you foresee reaching that point very soon. Congratulations on your success so far. The first thing to do is stop and think about whether you need to hire someone, or if you might have better ways of getting help. Hiring an employee is a major, ongoing investment that changes the way your business operates, even if the employee doesn’t work out. Before you hire, check to see if there are services or contractors that can do what you need.

If there’s no service for what you need, or it looks like you’re going to need those services so much that it’s more cost effective to have a full-time employee, that’s when it’s time to move ahead with hiring. Be careful though, just because you’re sure you need to hire doesn’t mean you have all the information you need.

Requirements

 

There are some important details in hiring that can’t be overlooked, and frankly aren’t fun to research. Fortunately, there are resources available to help. The Small Business Association (SBA) has a guide to help hire and manage employees. It’s likely to be an important resource for you, since your area of expertise probably isn’t HR. The SBA’s guide should be able to help you through some administrative requirements, required and optional employee benefits, and other laws you might need to understand. Make sure to look at your state’s laws as well, which the SBA has aggregated in a link on the same page.

A common question for freight broker agents when hiring is whether they can pay their employees commission only. As with most employment questions, the answer is more complicated than a simple yes or no. That said, you’re probably going to be held to federal minimum wage and overtime requirements.

Reading the link above, you’re naturally going to be drawn to the outside sales exemption. It’s possible that someone working in your agency will qualify for that exemption, but it’s a high standard. The Department of Labor defines who qualifies for the outside sales exemption, including that “The employee must be customarily and regularly engaged away from the employer’s place or places of business.” On page two of that same document, you can find that ANY fixed site qualifies as your place of business. The phrase “customarily and regularly” is less clearly defined, but court cases seem to view this as a high standard as well. Bottom line – unless they mostly travel to customer locations, they probably don’t qualify, and will need to be paid at least minimum wage, plus 1.5 times minimum wage for hours worked over 40. They can be commission only, but you’re on the hook for the difference if their commissions are less than minimum wage would have been.

So now we’ve got the scary stuff out of the way. Those requirements are a big part of the reasons we talked about whether you can find support without hiring in the first section. Here’s the good news: if you’re heavily leveraging outside services to get your day-to-day work done, or you’re not growing because you just don’t have the help in the office, then a new employee can be a great investment – as long as you hire a good one.

How to Find and Interview Candidates

Wanted

This… probably won’t work on its own

It’s almost unfair to small business owners that when it’s time to grow, hiring becomes maybe the most important factor in your success. That almost certainly wasn’t the skill that made you decide to start your own business in the first place. For freight brokers, booking loads does very little to prepare you to find and interview potential new employees, so you’re left with a whole new skillset you need to learn.

There are more ways to find candidates than we could ever discuss here, so let’s just talk about what works for small businesses. You need to compete with everyone, so take the advice of baseball great Willie Keeler and “hit them where they ain’t.” Major companies are prevalent on top job sites, so check out sites that serve your specific industry like Jobs in Logistics. Talking to people in your network is also a great idea. In a small business, being linked up with candidates by people who know you and the candidate can help make sure you’ll have a cultural fit. You’re not just asking them for help, you’re looking to potentially give someone they know a great opportunity.

No matter where your candidates come from, it’s important to go into hiring with a plan. You want to make sure that you’re asking relevant questions to help you identify the person who best fits the job and your business. Keep in mind, too, that you are trying to grow, and the person you hire today needs to be a good fit for the organization you want to become. You need to decide ahead of time the skills and temperament that you’re looking for and how you’re going to identify those.

To do that, really stop and think about why you’re hiring. It can be tempting to hire “another you,” someone who reminds you of yourself, has a lot of the same skills, and can back you up on almost anything. Undoubtedly, that person can make your work easier, but is that the best move to help your business grow? After all, your business already has you. Consider what this person needs to be best at. If you’re looking to offload the tasks that you enjoy least or struggle with most, another person like you may feel the same way. If you’re just overwhelmed with volume and need someone to back you up on everything, it could work. Even if that’s the case, though, it might make more sense to let a hire take on administrative work so you have more time to do what you do best.

Onboarding

 

It’s easy to overlook the importance of the employee’s first few days in a new job. Before they start, you should have a checklist. They probably need a computer and a phone, but what else? If they’re working from your office, where are they going to sit? If they’re working from home, how’s their internet service? There are probably all kinds of logins, licenses, and software they need in order to do what you do. It’s best to have all of that in a list and even set up ahead of time to make a good impression, but that’s a small part of onboarding.

Your new employee is looking for a paycheck, of course, but the best employees are usually looking to grow and advance. They’re going to want training, not just in a formal setting but from you every day. None of that starts the day they get to the office, but it’s a good idea to make sure they know you’re there to help them learn. Employee retention is tough in an age where people have unlimited access to information and employers can hire in your neighborhood even if they’re a thousand miles away. Ultimately, you can think all you want about compensation, benefits, and titles, but your employees want to feel good about their work.

Making sure your employees find their jobs fulfilling, while also making sure they are a good fit for you, is a tough task. There’s no one way to make sure you hire the right people, but if you make sure you have a clear understanding of your needs and what you’re offering through your hiring process, onboarding, and during their time at your company, you and your employees will be far better off.

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.

How Much Does The Average Freight Broker Earn?

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3 Tips to Becoming a Freight Agency Owner

Running your own business can sound like a daunting task. But with LDI, you can launch a freight agency and start brokering freight for your loyal customers within hours.

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. At LDI, we talk a lot about your book of business’s health, and that means evaluating all those customers.

Why LDI? What Our Freight Agents Say About Us | Russell

LDI is committed to helping entrepreneurs succeed. Learn how Russell’s experience with LDI is taking his business to the next level.

How to Guarantee Profits (Without Really Trying)

If there’s one question we hear from our freight broker agents time and again, it’s “how can I get my profits up?” It’s a good question, and we’re here to provide some resources to help out.

Being a freight brokerage business owner means you’re always learning new ways you could run your business. Not to be confused with implementing each and every new entrepreneurial method into your business; there’s not one perfect way to run a business. But there are really good ideas and tricks out there by others who succeeded in the startup phase, who are willing to share those ideas and tricks, and some of those are worth testing. This is one of them.

Mike Michalowicz was recommended to me years ago. You might not recognize the name, but you’ve probably heard of the book The Toilet Paper Entrepreneur. That book has been mentioned by (what feels like) dozens of entrepreneurs as their favorite helpful book on the Entrepreneur on Fire podcast. That book might be Michalowicz’s most popular work, but his most famous piece should be Profit First.

If you’re an established freight broker, skip The Toilet Paper Entrepreneur. If you’re looking to improve the profit margins in your established business, Profit First should be at the top of your reading list. Much like Dave Ramsey is the mastermind behind The Total Money Makeover (also recommended by Michalowicz for personal finance management, and I personally endorse it, too), Mike Michalowicz just gets how to run a financially healthy business.

Mike Michalowicz repeatedly gives this same advice over and over: it’s not about being cheap; it’s about being frugal. Cheap doesn’t get us anywhere—we can make bad purchasing decisions trying to be cheap. Being frugal assures we’re investing our valuable operating expenses exactly where they need to be to benefit the business and your profits.


Want to learn how LDI can help you increase profits today? Let’s talk.


How To Make a Profit…

According to the book, the Generally Accepted Accounting Principles formula for determining a business’s profit is:

Sales – Expenses = Profit

Michalowicz saw (and personally experienced) that this method has the potential to ruin entrepreneurs.

There’s this thing called Parkinson’s Law. It’s technically a book written by C. Northcote Parkinson, but generally speaking, it’s his theory that a demand for a resource will increase to meet the available supply—“work expands so as to fill the time available for its completion”. If we have 2 weeks to do a project, it’ll take 2 weeks. If we have 8 weeks, it’ll take 8. Michalowicz takes this even further: if we have $1,000 to do something, it will cost $1,000.  But if we only have $800 to do something, we’ll find a way to get it done with just $800. The best way to accomplish this is to reduce the supply for our demand to require.

…Without Really Trying

The Profit First Formula to determine business profits is:

Sales – Profit = Expenses

While the entire book is worth the investment and read, here’s a breakdown of how your business can bring in profit every month according to the Profit First Method:

Set Up Multiple Bank Accounts

Much like how you’ve set up a personal checking account and personal savings account, do this for your business as well. Have 3 checking accounts, as some banks might penalize you for withdrawing from saving accounts as often as you will need to touch each one of these accounts. The accounts are nicknamed Income, Owner’s Pay, and Operating Expenses (OpEx).

All revenue will be deposited directly into the Income account.

Next, you’ll have to do something you might not have expected. To avoid the temptation of touching some money altogether, Michalowicz recommends opening two savings accounts at a completely different banks. These accounts are nicknamed Profit and Taxes.

Establish Your Target Allocation Percentages (TAPs)

Now to allocate funds to each of those accounts. Rather than choosing based on monetary numbers, which is probably our first instinct, base allocations on percentages. A recommended TAPs chart is available on Michalowicz’s website, and we’ll use those numbers here.

(But your business might not be in any shape to immediately contribute 5% of the total revenue to the Profit account, what then? That’s where the book will come in handy, as he has an entire section with other numbers and examples of businesses who had to take painful baby steps to get to this point.)

For now, we’ll use the publically available recommended TAPs for this example:

As mentioned before, all revenue goes into the Income checking account.

Regardless of how much your firm makes, the recommended allocation for Taxes is 15 percent across the board. Talk to your accountant to make certain you’re square with taxes, just to be certain.

A Word About Taxes

Setting up a Taxes account and regularly allocating funds to it is crucial—particularly for our agents. Since LDI does not withhold taxes when we pay our agents, every freight broker should be setting aside some revenue for the government come tax time. Tax allocation escapes many entrepreneurs and self-employed contractors attention throughout the year, and panic sets in at tax time as there’s sometimes not enough money in the account to pay the government. Implementing this step alone has turned a lot of business owner’s lives around for the better! So, no matter what allocations you follow below, absolutely prioritize the 15 percent (or what your accountant tells you) to a savings account for taxes.

Back to TAPs

For the remaining percentages, say your freight brokerage firm brings in less than $250,000/year. Twice a month, from your Income account, send 50 percent to Owner’s Pay, 30 percent to OpEx, and then 5 percent to the Profit savings account at the other bank.

If your freight company makes between a quarter to half a million in yearly revenue, the TAPs move to 35 percent Owner’s Pay, 40 percent OpEx, and 10 percent Profit.

Regularly hitting between half a million and a million in yearly revenue? Those percentages switch again to 20 percent Owner’s Pay, 50 percent OpEx, and 15 percent Profit.

Next Steps

See what’s happening here? When you see all the revenue come into the Income account and accumulate, you get excited! Look at all that cash! We have an emotional reaction to those numbers.

Then, twice a month (Michalowicz recommends predetermined days practically written in stone), distribute those funds to the other accounts. Twice a month on the exact same days, you’ll send those allocated percentages into your other accounts.

All bills and expenses are going to come out of the OpEx checking account. When an expense comes up that you “need,” look at the OpEx account, not your Income account. The only money moving out of your Income account is going directly into other accounts.

Here Parkinson’s Law goes into play—you’ve shrunk the available funds for operating expenses. There’s not an arbitrary number to play with anymore, there’s only 30 (or 40 or 50) percent of your total revenue to work with. You’ll now find alternative ways to accomplish the ends, or you’ll realize you didn’t need that expense anyways.

Disclaimer

Now, this is a severely watered down Reader’s Digest version of how to allocate funds. I’m leaving out a lot. For the actual step-by-step process of how to make these TAPs work for you, check out this Profit First Overview available from Michalowicz’s website. Confused as to how to use it? All the info is in the book.

Also, I’m basing this entire write up on the first edition of the audiobook. A second, new and improved edition has been released since I downloaded it from Audible. The second edition is possibly even better and more helpful, so that could be worth checking out! If you read the second edition and the info is a little different, that’s probably why.

And Now You Have Profits Without Really Trying

Hope this brief overview to Profit First has given you enough information to know if you want to purchase it for yourself! The book is engaging, inspiring, and short. The audiobook is narrated by Mike himself, and he loves to go off on side stories about personal experiences and gives extra examples in the moment (you’ll know when this happens because he’ll finish with, “Ok, back to the book”). It’s almost like a podcast rather than an audiobook, which is fun.

For more pointers on how to effectively run your freight brokerage, and tips to help increase your profits, contact our LDI business developers at 1-800-554-3734.

freight agent program - logistic dynamics

The How & Why to Diversify Your Freight Broker Business

The only thing constant is change and in order to build a successful and sustainable freight broker business you need to embrace diversification.

Diversification. The word tends to strike fear in the hearts of entrepreneurs and business owners alike, for two reasons:  To implement, it means that your business must undergo changes and consequently growing pains or choosing not to diversify means you run the risk of going under if you lose one or two or your largest customers. However, if done right, freight brokers and freight agents that choose to diversify can see their freight broker business and income grow as they expand their scope of business and reach out into untapped territories. This helps to add new customers to your client base as well as give you fresh opportunity to service your current customers in new ways!

Without a doubt, the reasons to diversify will always outweigh the reasons not to diversify your freight broker business. The question is how. Here are some options to help you explore ways to diversify:

1.      Grow Your Customer Base:  A good rule of thumb for freight brokers is when your freight broker business gets 10% of business coming from a single company or a certain industry – it’s time to expand your client base. The loss of that customer could be crippling. Focus on getting three new contacts a day and make that your daily challenge. HELPFUL TIP:  Think above your competition by utilizing different/varied ways to grow your business. Try LinkedIn – using the search function in LinkedIn can help you with targeted searches that narrow your results to provide you with more accurate leads to potential customers. Get Referrals – reach out to your vendors, associates and customers to turn a cold-call into a “warm call” and gain an instant conversation opener.

2.      Expand Your Services:  Every freight broker and every freight broker business needs to continually evolve or old habits and routines will cause you to overlook opportunities and potential threats that surround you every day. To expand your freight broker business, try branching out into other business sectors (lumber, bottled water, produce, etc.) and adding additional modes such as LTL, Flatbed, rail, ocean, etc. (note:  margins for a full load are at about 10%-20%, compared to the 20%-35% for a partial truckload) or simply try asking your customer for more lanes. The benefits to expanding your current services would help to offset seasonal setbacks or customer supply fluctuations. HELPFUL TIP:  Some factoring companies can provide you with credit ratings and analysis on shippers that will give you a better idea on whether your freight broker business should take on a potential customer or not.

3.      Utilize Social Media as a TOOL (not a distraction):  The use of social media for your freight broker business, such as LinkedIn, can be a valuable tool to promote your services. You can utilize their search functions to find similar businesses like your top customer. Try to join groups your customers would belong to-NOT other freight brokers-where you can interact and give input that could lead to additional business. A blog is a great platform to showcase your knowledge and experiences, promote your services and even establish yourself as an industry leader! HELPFUL TIP:  Content is always, ALWAYS the most important factor when promoting anything. The second most important factor is contribution. Don’t just post and post and post and post content. People will get tired of your one dimensional activity. Take the time to visit your groups regularly and offer valuable feedback or comments. Don’t forget to respond to any comments or feedback others leave on -your- posts and/or blog. Not just interaction but timelyinteraction speaks to your credibility and genuine connectivity to others and always be professional.

4.      Have a Contingency Plan:  As diversification quickly becomes the latest powerful way to grow and expand your business and proving to be a must for long-term success, it’s a good idea to have a contingency plan in place so that your business can still function during any unexpected turbulence that is especially likely in the volatile world of the transportation industry where a freight broker business is constantly at the mercy of the economy, capacity and the weather. HELPFUL TIP:  When creating a contingency plan, identify your key risks (loss of customer/revenue, weather fluctuations, technical disaster, etc.), prioritize those risks then you can decide what you will do to resume business in case one of the disruptive scenarios takes place. Your plan should basically answer these three questions: What could happen? What will we do in response? What can we do in advance to prepare?

Need a little kick in the pants to help you jump on the diversification wagon? Imagine walking into work tomorrow morning and your phone is flashing. It’s a voice mail from your biggest customer and they’re letting you know that they’re sorry but they’ve decided to switch to another freight broker. Motivated yet? I thought so…Now get growing!

BONUS:  Want to know more techniques that will save you time, increase your income and grow your customer base? Get our free report, “Top 10 Ways Freight Brokers/Agents Can Increase Their Income” that outlines specific ways every truck broker, freight broker or freight agent can implement to INCREASE THEIR INCOME IMMEDIATELY.