I interviewed Steve Fernlund who discussed Freight Brokering.
It’s good to speak with you today, Steve. I’m looking forward to hearing your views on freight brokering. Can you first provide a brief background of yourself?
Sure. I’ve been in the freight-brokerage business for 40-plus years. I started when I was a young guy, prior to deregulation in the U.S., which took place in 1980. We started a brokerage business back then that we grew quite successfully, and we ended up selling it to an employee stock-ownership plan back in 1995. The employees took over the business and built upon what we had started and did very well for themselves. Since then, I’ve been involved in a couple of different brokerage businesses, both as an owner and as an employee, and spent a brief period of time, about three years, in the publishing industry. That’s my background.
You mentioned that you wrote a book on freight brokering. Why did you write that book?
I wrote the book over the holiday season last winter. A fellow had encouraged me to write a book based on my experiences, and I said, “What do I have to say? I’m just a dumb freight broker from Minneapolis.” Then I started to think about the fact that there were no books out there directed toward people who owned and operated a freight-brokerage business. With roughly 7000 or 8000 different brokers out there, I thought that book might be necessary.
There have been plenty of books written about the mechanics of getting brokers’ licenses and an insurance policy and what kind of forms and documents you use, but there was literally nothing about dealing with the general management issues in running a brokerage and how those impact the lives of the brokers and owners. That’s why I decided to do it. It’s not a lengthy book—it’s not War and Peace—it’s about 80 pages, but I think it covers the broad spectrum of being in business for yourself in the brokerage business.
What are some of the challenges of being in the brokerage business?
In the current marketplace, one of the challenges is cash flow. I guess cash flow has always been an issue, but it’s gotten to be a much bigger challenge as technology has come to the forefront and as information has become much more current, a broker now is much more of a financial institution than they were just a transportation broker back in the day. That’s probably one of the bigger challenges facing every small- to medium-size brokerage right now.
The other challenges are, I kind of plagiarized and created topics around people, process, and product. I think a huge challenge for brokers today is finding people, and, for a lot of folks, it’s knowing how to treat people the right way to get them on your side, to get them engaged in the company, to get them thinking about how what they do will impact the success or struggle of the brokerage business.
Certainly, other challenges include legal challenges. There has been a rash of cases in the past decade of brokers getting involved in personal-injury claims involving vehicle accidents and being charged with negligent hiring of motor carriers. That goes to the heart of the process. Carrier section for a broker is extremely important, not only for their business protection, but for the protection of their customers as well. That’s pretty much the tough stuff.
Are there new opportunities in this business?
Absolutely. I’m glad you asked that. Only recently have I found this out, but there have been about 2000 new broker licenses issued from the FMCSA in the past 18 to 24 months. Depending on whose estimate you believe, there are somewhere between 6000 and 8000 active brokers out there now. That would indicate to me there are a lot of entrepreneurial-type people who’ve decided to get into the brokerage business and provide a service for shippers. The field is full of competitors, obviously with that number of companies participating in the market. The market is extraordinarily large, and there is plenty of opportunity out there for people to start and build a brokerage business.
Do you have any recommendations on how to get started?
Sure, I think that having a knowledge of the transportation industry is absolutely critical. There’s a perception, I think, that brokering is a simple matter of you go to an electronic load board, and you post up a load that you’ve got from some customer and the phone will ring and you’ll find a truck and you’ll cover it and make your margin and everybody will be happy.
One of the key roles that a broker serves is being an expert in transportation. The typical shipper, especially if it’s a small- or midsize enterprise, the shipper, the person making the freight-buying decision has got three or four other jobs. They’re running a warehouse, they’re an accountant, they’re doing something other than just watching transportation. I think having a knowledge of the transportation industry is absolutely critical in making yourself a full-service resource for your customers. I think that’s probably the most important thing.
The second critical factor is financial capability. In my day, when we first started in brokering, it was quite easy to start a brokerage with nothing, zero capital. Today it’s in the mid six figures that someone will need to get started, at least access to that kind of money; primarily because you’re paying the carriers much more quickly than we paid them back in 1980.
Do you have any final recommendations for people in this business?
Yes. My biggest recommendation is: Be proud to be a broker. We’ve gone through a period of time—we’ve been going through it for the past four decades—where the term freight broker has negative connotations. I think it’s an honorable business; it’s a business that wouldn’t exist if there wasn’t a compelling need in the market for it to exist. I urge all kinds of people who are in this industry to take pride in what you do. By doing that, you’re going to be a much better broker.
Thanks for sharing today.
Dustin, thank you very much, sir.
About Steve Fernlund
Customer Care Coordinator at TEAM 10 Logistics LLC