Occasionally I have the opportunity to work with #logistics companies’ owners who have just started the business and are looking for ways to scale it. Some started the business after working in logistics, gathered enough experience, and decided to become entrepreneurs. This type of founder usually has lesser problems with scaling and needs some advice on how to do this faster and cheaper. And there is the second type of founder. Usually, this type has read an ad on their social, saying that logistics is an easy-to-start business, the money falls from the sky there, and you just need to catch it. So, after being intrigued by this easy money-making machine scheme, and who wouldn’t, we all want to become wealthy, they started spending thousands on various training and eventually lunch a road brokerage, freight forwarding, or dispatch service business (these are the most popular ones, as no upfront investments are needed). And then, after a year in such an operation, they realize that this is a complex business and that supposed to be a money-making machine becomes a money-sucking machine.
All this happens because of wrong expectations. In some cases, those who provide consulting services for the above entrepreneurs are the ones to blame because they do not inform their customers what to accept from this business.
So we thought to dedicate this newsletter to those who have just started a logistics business or are thinking about starting one and share some insights about what kind of pitfalls to avoid and what to expect.
#1 You will become a sales manager, not a business owner
You first need to understand that to succeed in this business, you will have to do a lot of #selling.
I had a call with a lovely lady from the USA a few weeks ago, and she told a familiar story of struggling to scale her road brokerage business. When I asked her if she had a sales process, I received the answer no. When I asked how many #sales calls to the potential customers, she makes per week. She answered maybe twenty-six.
All of you who are starting this kind of logistics intermediary business, please note that you will not get any positive results with 26 calls a week. Likewise, you will not get results doing 26 calls daily. Therefore, if you do not have the dedication to do 100+ calls a day in the beginning, then it’s better not to start this venture. Otherwise, you will burn money and have many financial problems.
Please understand that this business asks for dedication, and most of the time, you will not have free time on weekends, as the logistics business never sleeps.
You can read more about logistics sales here and here.
#2 Logistics is all about trust
The other mistake is related to the absence of a sales process. Many beginners lack the understanding of how should the #salesprocess look, what they need to achieve at each step, how to deal with objections, and how to make a good discovery, follow up and close. This misunderstanding leads to the biggest mistake of selling the price or feature on the first call.
When you call a prospect, do not start by saying: Please advise what prices you have now. I will look at what I can get for you. Really, stop saying this because most of the shippers will provide you with unreal answers. They are doing this for two main reasons: 1st – brush you off; 2nd – Get a lower price and get back to an existing logistics partner to lower the cost.
Shippers are doing so because they do not trust you. To succeed, you need to build relationships and build trust with shippers. Therefore you need to move away from the transactional sales process and start working on a value-creation sales process.
You need to prove to your prospect that you are not just another sir/madam who has recently opened a brokerage business and will leave the business in a year or so. And for this to happen, you need to gain commitments. You can read more about building #trust here.
The first improvement you need to make is to skip the part of selling right away within the first call with a decision maker. Instead, you need to invite the prospect to a meeting. Then, with the help of proper discovery, you will prove that you understand their business. Later, with consistent follow-ups proving that you can build value for the prospect, you will build relationships and get the sale.
And lastly, you need to understand that selling logistics services and building trust takes time. Getting a customer involves many meetings and follow-up calls, usually taking 3-15 months. Building a subcontractor’s base also takes time. So you need to be prepared financially to sustain yourself during this period. Please reconsider if you don’t have the resources to maintain yourself for a year and a half.
#3 Too wide range of services.
When someone starts a business, there is a huge temptation to become a master of everything. In such a way, many startup owners become masters of disaster by burning cash until they have nothing in the bank account. To avoid this, you need to plan your time and resources. As the resources, at the beginning, of your venture are scarce, choose wisely what to prioritize.
To succeed, you need to take the opposite way and niche down. Choose wisely one service and/or geography you want to operate. Then, when you become good in this area, move to another geography or add other types of services.
I know starting small is painful for many of us, but you need to put yourself together, find all the required grids and become better each day. And go further when you start thinking I’m stuck, others are doing just great, and I’m failing. The best advice here is not to look at others but look at your previous and present self. If you are evolving every day, you’re on the right path.
#4 Too little knowledge about customers and industry
Another pitfall is related to the lack of knowledge. As I mentioned before, this business is all about trust. And it’s hard to build trust with your potential if you do not have needed business acumen. And here, you have a lot to learn about general logistics knowledge and law acts that apply to the country you operate. Additionally, you need to have a good sense of pricing and what impacts the freight prices. And, of course, you need to become good at operations.
The best way to learn about the above things is from real-life experiences by working for someone else. But you can fasten this process by reading books, industry journals, podcasts, and webinars or lectures.
As webinars and live lessons cost a lot, I advise reading books before attending any class. First, understand your knowledge gaps, and only then take courses. In such a way, you will spend your hard-earned money more wisely. Also, choose your trainers wisely, as many have read few books and become trainers. Such gurus can’t provide any real value. Instead, look for those with the right set of knowledge and experience.
#5 Not building awareness about your brand from the first day
#Marketing and #branding activities are super important when building a logistics business from scratch because it helps to speed up your sales development process.
Let’s face it: most logistics services are similar, without any key differentiators. You can only differentiate from the competition in two places: sales process and marketing activities.
The other thing you need to understand is that those in business for a longer time have a competitive advantage compared to the new ones. Therefore, building professional brand awareness and sticking in your potential customer’s heads with your marketing activities can help you deal with existing competition, as many of them do not invest in marketing and P&R.
Additionally, P&R and marketing activities can help you to build trust. The likelihood of getting business increases a few times if your potential customers constantly see your content that drives interest.
I’ve seen this many times with my services. My potential customer often didn’t agree to a meeting or do business with me initially. Still, after interacting with my content for a few months, everything goes well the next time I reach out. In fact, I haven’t got any customers from the first conversation; the combination of sales, marketing, and P&R activities does the job later on. You can read more about marketing here, here, here and here.
Ultimately, I haven’t had the intention to scare my readers. I just wanted to ensure that my readers understood all the risks and had real expectations instead of having dreams about ultra profitable and easy business.
Of course, this business is rewarding as you can do this with minimum investments, and I know many success stories. But success follows only those who have needed knowledge and are good at sales and marketing. And most importantly, who has the grid and proper mindset to put in 12 hours a day.
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