Freight Brokerage Business. The Staff of Entrepreneur Media, Inc.
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it. Don’t worry that you’ll sound rehearsed; the reality is that the better you know your stuff, the more natural and confident you’ll appear.
Another long-time sales training phrase is “handling objections.” That sounds much more frightening than it really is. In most professional sales situations, an “objection” comes in the form of a question, and whether it’s a question or a statement, it is usually a request for more information.
For example, a prospective customer might say something like “How many carriers do you have agreements with?” or “I know you’re new; I’m not sure you have the experience I need.” Both of these statements might be seen as objections, but they really are chances for you to tell the prospect about the benefits he or she will gain by using you.
It’s important to keep in mind that while freight may not appear particularly glamorous, for most companies the efficient and timely movement of cargo is critical to their ongoing operations. Selecting a broker or carrier is not a decision most shippers make lightly or casually. You’ll find your customers very much involved in both the sales process and in the ongoing service. You’ve chosen a highly interactive business, and you can expect your customers to view you and your staff as the service.
One of the most difficult parts of a sales call for most people is the close—but it shouldn’t be. If you’ve been paying attention—if you identified your prospect’s needs and determined that you can satisfy them, if you’ve focused on benefits rather than features—then asking the prospect to make that final commitment should be a natural evolution of the sales call.
• Inward Bound
Beyond talking to the traffic manager or the shipping department, also build a relationship with the purchasing department. As part of the terms of their agreements, many buyers have the right to select the mode and carrier. In many companies, the traffic department gets involved in routing these shipments, but there are still plenty of businesses where purchasing and traffic work independently. If you can make a purchasing agent’s life easier by helping him find the most economical and efficient method of moving inbound freight, you’ll have a steady stream of business.
Here’s one approach that works well: Find out what internal procedure the customer would have to change to give you his or her business. This is a simple matter of asking: “If you were to decide to let us handle your next load to Phoenix, what would you have to do?” When the prospect answers the question, perhaps with something like “I’d have to tell the shipping clerk to call you,” ask if you can have the shipping clerk step in so you can answer any questions that person might have.
If the prospect resists, find out why. Say something like, “We’ve agreed that we have the services you need, that our rates are competitive, and we’re in a position to provide some extras you’re not getting now. Is there any reason why you shouldn’t call the shipping clerk in now to give us a chance to prove ourselves on the next shipment?”
Prospects rarely say no without some sort of an explanation—an objection—that you’ll have a chance to overcome. And even if you don’t get the business—and you won’t get it all—you’ll at least know why.
One of the great things about the freight broker business is that it doesn’t require a tremendous amount of startup cash to purchase facilities and equipment. Theoretically, you can get up and running with just a computer, fax machine, and telephone—but it does require a substantial amount of cash or a significant credit line, virtually from day one (unless you opt to be an agent for another brokerage).
Precisely how much money you need depends, of course, on your business volume, but you need to have sufficient cash on hand to pay your carriers on time, and that will likely be weeks before your shippers pay you.
This fact cannot be stressed enough: Cash-flow management is critical in this business. If you don’t pay your carriers on time, they’ll stop accepting your loads. Although the industry is huge, in many ways, it is also like a small town—everybody knows everybody else’s business.
If you’re not paying your bills on time, it won’t be long before every carrier—and maybe even the shippers—find out about it. In a relationship business like freight brokering, a good reputation is essential, so protect yours by paying your bills on time.
You should monitor your cash flow constantly. Look at your receivables and payables on a daily basis. Cultivate fast-paying customers, and be sure your sales staff is explaining the need for prompt payment to new customers. There are specialized software packages designed for freight brokers that can help you properly manage your company’s cash flow and finances. DAT Solutions, LLC (www.dat.com/solutions) is one company that offers a variety of software and online applications for freight brokers. What’s great about these applications is that they’re modular and expandable, so once you learn how to use the application, it can easily grow with your business.
Successful brokers tend to take a conservative approach to financial management. “We don’t do a lot of borrowing,” said Bill Tucker. “We have a great credit rating and good cash flow, but we don’t want to just borrow and expand for expansion’s sake. We’re focused on service. We have a fiduciary relationship and responsibility to our carriers and to anybody else we owe money to, and to our employees.”
Ideally, you’ll open your doors with enough cash in the bank to pay all your expenses and your carriers until revenue from your customers (shippers) starts coming in. More practically, you may need to look at short-term credit options, such as unsecured commercial bank loans, borrowing against your accounts receivable, or selling your accounts receivable (a process known as “factoring,” which is explained in more detail later in this chapter).
You may have a tough time with conventional loan sources, because by traditional lending standards, most freight brokers would not be considered bankable. Even if you have a record of paying your bills on time, you will likely need a revolving line of credit significantly higher than whatever assets you have to offer for collateral.
Because you are billing your shippers, or sometimes the consignees, you need to set credit policies and procedures. When you extend credit, you do so under the assumption that the customer intends to pay, is capable of paying, and that nothing will prevent him or her from paying. Most of your customers will be honest and dependable when paying their bills, but that doesn’t mean you should blindly extend credit without first gathering and verifying information.
Each new customer should complete a credit application, and you should check the information he or she provides. This is standard practice in business. If a customer objects to completing a credit application, seriously consider whether extending credit to that customer is a safe thing to do. Look at it this way: When you extend credit for a service, you are essentially granting an unsecured, interest-free loan. Once the goods have been moved and delivered, you can’t take back the service—and you (depending, of course, on the terms of your carrier agreement) are responsible for paying the carrier whether or not the shipper pays you.
Thanks in large part to the old Interstate Commerce Commission regulation that required payment of freight bills within seven days, most shippers have systems set up to pay freight bills faster than