Small Brokerage Companies are Failing at a Record Rate.
This might seem strange to you, that brokerage companies are feeling the pressure from a slow down in the overall transportation sector, but as freight slows, many customers demand reduced rates because of the increase in trucking capacity.
Smaller brokers cannot easily absorb the reduction in margin necessary to get freight moved and still pay their overhead. Their expenses don’t go down, but their revenue does. Let’s face it, the brokerage industry is probably more competitive than the trucking company industry right now.
Large mega brokerages such as TQL, use a boiler room type of training program to bring in new in-house brokers. They are not alone in this aggressive type of training; I am not trying to single them out. In fact, it is probably a good way to build a brokerage company if you have the funds to do it. Train a lot of them and keep the best. The rest, well, they are expendable.
But…that is another topic, the question is how does this affect the small brokers?
Probably the best way to think about is to pretend you are constantly being attacked by pit bulls (sorry pit bull lovers). You fight one of and another relentlessly attacks, the result is you have to be on constant guard as a small broker, protecting your customer base the best you can.
This typically means by reducing rates, reducing your margins or finding carriers that will haul the freight even cheaper. Long term, to all you carriers out there, this means your rates are constantly being driven down making it more difficult for you to stay in business. This is especially true for small trucking companies.
I am saying all this to get to the point, small brokerage companies are being driven out of the industry at a record rate because of mega brokerages and a slow down in the overall economy.
For all you trucking companies saying “Awesome, less brokers”, remember – less brokers does not necessarily mean higher rates for you.
Those mega brokerage companies have a lot of expenses; plus, once they control all the freight why should they pay the carrier more even if the customer will accept higher rates?
So, what should you do as a small brokerage company?
- Make sure you have a great relationship with your customers.
- Make sure you keep your carrier base happy and paid quickly.
- Try to find some small niche or specialized type of freight that the large brokerage might not be interested in pursuing. Or perhaps they don’t have the expertise.
So, you did all this but still can’t afford to stay in business.
Another option (in addition to what I said above) is to become an agent for a larger company. You have a number of options here. Will you go with a company that is just brokerage? Will you go with a company that also runs trucks? Will you go with a company that is 100% agency based or compete with their company terminals?
There are pluses and minuses to all of these. Do your research and pick what suits you and your customers the best.