MISSISSAUGA, Ont. — After selling MSM Transportation to Wheels Group last year, Mike McCarron joined Wheels to oversee mergers and acquisitions in a bid to consolidate the Canadian 3PL space.
To gain a greater understanding of where the freight brokering segment is headed, McCarron called together several leading brokers for a roundtable this week, hosted at Wheels Group’s headquarters. Also on-hand was Level5 Strategy Group, which will be compiling a white paper on the subject. CTL.ca was invited to report on the discussion and will be publishing a three-part series this week.
The participants included:
Manny Speranza, FBI-Freight
John Tittel, Hot Freight International
John Flaherty, HTS Freight Logistics
Ian MacDonald, ShipNorthAmerica Transportation
Larry Cox, Polaris Transport Group
Eric Carusi, Transpro Freight Systems
Consolidation – both in the carrier and freight broker spaces – was a popular topic during the discussion. Freight brokers who took part said they haven’t yet felt the impact of consolidation in the carrier community, but they do worry about how they’ll be affected by a shrinking pool of small carriers.
“If there is a reduction in the number of carriers, that could be construed as good or bad, but the most important thing for our industry is we need good, quality carriers; without that, we’re out of business,” said Flaherty.
Tittel said there will always be a place in the market for small carriers, who can often provide greater attention to detail than the conglomerates.
“It concerns me, the threat of small and medium-sized companies disappearing,” Flaherty added. “I don’t want my only choice of carriers to be the TransForces and Contrans’. As a broker, I need to be able to draw on lots of different choices for my customers. Sometimes my choice is the large carrier and a lot of times it’s not. It’s easier to build good relationships with small to medium-sized carriers.”
However, Cox pointed out the increasingly stringent regulatory environment will force many small companies out of the business.
“Re-regulation is designed to drive the little guys out, because they can’t afford it,” he said of ever-stricter border crossing and hours-of-service rules. “(Smaller) carriers are being winnowed out.”
Polaris runs its own trucks and as such, Cox said he’s often approached by small and mid-sized trucking companies looking to sell. Usually, he said, “the business is worth nothing…a trucking company is worth the firesale value of its equipment.”
A transaction-based freight brokerage, without the assets, could be worth even less, added Speranza.
“We’re going to see broker consolidation happening too,” he said. However, he said brokers who don’t have their customers under contract won’t be salable. “We started contracts about three years ago,” he noted.
Another barrier to selling your freight brokerage is being too involved as an owner, Flaherty added. He said customers must have strong relationships with the company itself – not just the owner. He suggested freight brokers looking to sell should slowly step back from the business so a prospective buyer knows it can function without the owner.
Keys to future growth
Freight brokers included in the roundtable discussion all agreed opportunities exist for further growth. But where exactly are those opportunities? Looking to the US market is one underutilized strategy, according to Speranza, who urged brokers to look beyond their backyards when looking to grow.
However, most of the brokers present also indicated their domestic business is booming.
“There’s a lot of manufacturing movement to the US, but we’re seeing our percentage of revenue locally increase,” Carusi said. “We’re doing more business here. You want to focus on the US market because it’s such a big opportunity, you can sometimes forget your neighbour next door.”
Flaherty advised brokers to be in tune with what their customers are doing. He tells salespeople to take notice if a customer is doing construction in its backyard, which may indicate an expansion that could lead to future opportunities. The key, he said, is to know what your customers’ demands will be before even they do.
“Plant a seed in their head ahead of time that if they are going to see growth, we’re in a position to handle it for you,” he said.
Make sure your customers know what your capabilities include. For example, a printing company that usually ships dense printed material will eventually need to bring in a new printing press. Are they aware your business can provide heavy haul transportation?
MacDonald said versatility is key, including having access to specialized equipment such as heated trailers or trucks with liftgates.
“There’s money to be made in those markets,” he said.
And lastly, don’t be afraid to stray from your comfort zone. Speranza spoke of a time his company designed a specialty trailer for a carrier that was hauling mining equipment. Another company found out about the trailers and asked FBI-Freight to build similar trailers for it.
“We said ‘Absolutely we can do that’,” Speranza recalled. “We never dreamt of this as being a part of our strategy, but we gained other customers…When I hear people say it’s flat out there, I don’t buy it. There are tons of opportunities out there.”
– This marks the conclusion of our three-part series on the future of freight brokering in Canada. To read Part 1, on the outlook for frieght brokers and on building and maintaining relationshps, click here. For Part 2, on the sales evolution and technology, click here.