If you pulled into any gas station today and saw a sign that read $.21/gallon, you would think you were dreaming. Gasoline has not cost 21 cents per gallon since 1945. In 1945, that would have been a reasonable price especially considering that minimum wage was only $.40 per hour back then. Costs go up and when they do wages have to go up as well otherwise sales for products and goods go down; businesses start to lose money, jobs are lost, the economy begins to spiral, etc.
Conversely, if you walk into the store and a loaf of bread costs a thousand dollars, hardly anyone would be able to afford bread anymore. The business has to bring the price down or else they will never be able to sell their loaves of bread; that is unless you have the last few loaves of bread on earth, then the price keeps going up. That is generally how inflation works. Paying only a thousand dollars or so for a brand new car seems unimaginable in today’s dollars and cents. However, if you only bring in $40 or $50 per week with a good job, it makes more sense.
Freight Agent Tips for Inflation
As a freight agent, how do you account for inflation when setting your rates? Here are 5 tips to help you set your prices where you will make a fair profit while keeping your rates and fees competitive.
#1: Factor in Overlooked Costs
You are an independent freight agent. You are the one responsible for your insurance costs, your employee costs, your medical costs, and taxes. Instead of narrowly focusing on transport and fuel costs, remember to factor in overlooked costs that go into meeting your obligations at the end of each pay period.
#2: When Your Costs Go Up Review Your Rates
Reviewing your cost structure versus your rates schedule is something that you should be doing each month if not every week. When your carrier’s rates go up, you have to reevaluate your rate schedule as well as:
Cost Margins
Financing Structures
Competitive Bidding
In order to stay competitive you have to give yourself wiggle room for negotiations with your highest paying customers and heaviest loads. Going too far below your breakeven point will keep your business floundering financially in the red. Balance your need to retain and attract business with your need to cover your monthly expenses.
#3: Reduce Overhead Not Service
If you are staying ahead of the trends then you know that as an independent freight agent, you have the tools today to compete with national chains without paying the exorbitant overhead costs.One way to combat inflation through overhead reduction is by doing your job well. With a team of carriers with clean driving records as a freight agent you can keep costs down for things like:
Licensing
Bonds
Insurance
Legal Fees
Taxes
Still, the best way to stay on top of inflation is to reduce your overhead costs so that you can be more nimble as a business. Using tools that reduces your overhead greatly by giving you the power to manage shipments like a pro without paying for additional employees or third party services.
#4: Using Advanced Technology to Your Advantage
Advanced technology is your playing field leveler if you are a small or startup freight agent. Transportation Management Software (TMS) and shipping interfaces are making it much easier for brokers and freight agents to build their niche in the industry. You will need to master:
Online Marketing
Social Media Advertising
Mobile to Desktop Interfacing
Mobile Scan Technology
Direct Pay and Invoicing
Many of the biggest names in shipping are doing their best to reduce their competition from firms like yours that are using advanced technology to compete. You can choose to sell them the freight agency that you have built up or you can continue to compete on your own terms as an independent freight agent as long as you please.
#5: Focus on Giving the Best Service
Finally, all of the technology in the world cannot replace good old fashioned business sense and customer service. Even in a digitized world, you need to get to know your customers. You can do that using a high-quality customer relationship management (CRM) program.
A CRM will help you analyze past customer behavior in order to better predict future behavior. You can look back over your sales history and create reports that will help you improve on your sales numbers in the future.