I’ve spent a lot of time dealing with freight brokers, so I figured I knew the business. But as I prepared to moderate two industry events recently, I found this old dog has a lot to learn. At the first event, I invited six industry leaders to sit down for a state of the union. These are all “first generation” freight brokers—baby-boomer entrepreneurs who have been breaking trails for an industry that didn’t exist 30 years ago. For the second event, I moderated a panel for Delta Nu Alpha that featured the next generation of brokers, the under-40, Gen-Y crowd whose companies have been barking up the rears of the lead dogs and starting to make fresh tracks of their own.
I learned a lot from both groups. It’s knowledge worth passing along:
Status quo: Things are quiet on the M&A front. Despite their age, baby-boomer brokers seem content to hang around. They’ve made wheelbarrows of cash in both transportation and real estate, and many are sticking with it simply because they haven’t found a way to get out.
All in the family: More freight brokers are being run by the kids. In one way, this is the owners’ way of deferring the uncertainties of selling the business. In another, it’s a great setup for President Mom and Dad. At the golf course or at the lake house, they can pluck from the nest of the golden goose while Junior gets a well-paying gig. Status quo is A-OK!
The next generation: Was I ever impressed by the next-gen studs. They’re smart, engaging, and confident. They possess skills that old dogs like me will never have. They also got their on-the-job training a few years ago when getting freight was a dogfight. It’s made them formidable competitors for first-generation brokers and carriers alike.
Blurred lines: Ten years ago, a broker was a broker and a carrier was a carrier. Today, hybrid companies have evolved and now use assets and non-assets to build dynamic transportation products. Specialty brokers are exerting themselves, too. They focus on a particular vertical like flatbed, expedited, or chemicals. Research from Carrier Direct shows that LTL freight moving under blanket-wrapped programs by brokers grew from $575 million in 2007 to $2.5 billion in 2012—even though the market shrank by $3 billion.
Culling the herd: The $75,000 surety bond requirement has helped cull the freight broker herd. The Assn. of Independent Property Brokers & Agents reported that in December 2013, there were 21,080 independent brokers. A few months later, there were 12,996. Losing 39% of the industry over a lousy 75-grand entrance fee floored me. It makes you wonder how long small brokers can hang on.
Rise of mega-brokers: One reason the small guys are in trouble is because people with brains and dough are investing in the third-party space. Big brokers are being gobbled up and folded into mega-brokers with scale and technology.
Talking with both generations, one theme was clear: It’s a great time to broker freight, but the dog-eat-dog environment at the top is working its way through the market. Until then, Mom and Pop Broker continue to hang on, Junior has the reins, and his contemporaries are setting a fast pace in a capacity-short freight environment.
Mike McCarron was one of the founding “M”s in MSM Transportation before the company was purchased by the Wheels Group. Based in Toronto, he currently works for Wheels in mergers and acquisitions and can be reached at [email protected]. Follow Mike on Twitter @AceMcC.