With slim profit margins and intense competition, freight brokers work in a tough industry. Fear not, we’ve compiled a list of the three best ways to improve your freight brokerage’s bottom line!
1. Set a goal for your profit margin and stick to it
You can compromise with a lot of things in life, but not with your business’ bottom line. Draw a clear line in the sand and don’t cross it.
To do this, you should find and build good relationships with carriers that will do the job for you at the right rate. To take it a step further, you can also put restrictions in your freight broker software so a minimum profit level is set. This way, one of your employees can’t accidentally dispatch orders for less than the minimum margin percentage or amount you’ve set
2. Reduce the time between delivery to billing
In freight brokerages, like most businesses, cash flow is king. Unfortunately, many times in the transportation business, your cash inflows don’t match up with your cash outflows.
In order speed up the process of you getting paid, have your drivers ask to use the fax machine at the receiver’s office to send over the POD, or have them snap a picture of it while waiting for a scan – many customers will accept a picture. It’s also good to use a freight broker software that provides you with a database that will allow you to attach POD images automatically to their corresponding orders.
3. Control your costs
Freight brokers often compete on price, that’s no secret. Depending on capacity, customers can virtually dictate what price they will be paying. Since you can’t control that part of the equation, control the part that you can – control your costs!
It is very likely that your highest expense is salaries. You need to find a fine balance between saving money on salaries and keeping your sales people motivated. You can either pay less base and up their commission, or completely eliminate base salaries and go all commission. Whatever you do, make sure you pay them promptly and accurately. Make sure to set sales targets – the more they sell, the more they make with sliding scales in their favor – ie: 1% on the first $10K of sales in a month; 2% on the next $5K generated, 5 % on the next $5K—you get the drift!
With these 3 techniques and through the use of freight broker software, you can give your freight brokerage a competitive edge! We work in a very saturated and low margin industry, so make sure you take advantage of every tool you have at your disposal. If you would like help with optimizing your freight brokerage, give us a call, it’s what we do.
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