The Value of Diversity
During the economic meltdown of 2009, we were wounded like every other trucker. Our proﬁtable company was bleeding customers and we had to ﬁgure out how to stop the hemorrhaging before it stopped us. Many carriers from Western Canada know exactly how we were feeling.
After looking at different options we decided the best way to turn things around was to diversify.
The plan was to leverage our existing relationships, creating the scale we needed to develop new services and lanes that would complement our core trucking business. Simply put, having all our eggs in one basket was a risky strategy.
Guess what? Customers started biting at our new product offerings. Within six months, revenue from ocean freight, trailer storage, and domestic U.S. lanes was outperforming our core cross-border LTL business.
If you want opportunities for growth, you have to gather new eggs. For a smaller ﬂeet, adding services is usu- ally a safer bet than spending more money on crazy-priced equipment.
Here are some things to leverage if you’re worried about having too many in eggs in the trucking basket.
1. Beta test
We knew existing customers were our best source of new business. That said, we were pleasantly surprised how easy it was to secure revenue for the new services we were beta testing.
By leveraging the fact that our loyal customers enjoyed doing business with us, we generated a much-needed margin. As more customers signed on we started to build the foundation to scale these new services before we “ofﬁcially” took them to market.
Trucking is complicated. Investing a few days to get into the warehousing business is not.
2. Retail vs. wholesale
If existing customers are the first stop in a diversiﬁcation strategy, suppliers and industry contacts are the next. Before you start working the phones to drum up partners, consider your end game.
Brokering a deal between a trailer supplier and your customer for renting storage cans is the equivalent of selling retail. Once there’s a deal, the only work left to do is cash the monthly commission cheque. Marking up suppliers’ services is a risk-free way to secure a low-hanging commission.
But if you want to ramp up a diversification strategy, you need to move up the supply chain and become a wholesaler. Buying the storage trailers – owning the assets – makes the service more scalable and proﬁtable. It also makes it riskier and complex.
3. Establish your own Phantom Express
Your employees are smart, experienced and connected. You can leverage this human capital to start a new business: Phantom Express.
Phantom Express is not a physical carrier. It’s an attitude that empowers staff to recognize and embrace opportunities to grow with existing customers. It’s the “can-do” mentality that makes staff believe there is no distribution issue the team cannot collectively address. Phantom Express can handle any business that customers throw at you.
At our company, “Phantom Express” was the foundation for our Special Projects and Company Relocations business. Our philosophy was simple: “Say yes and ﬁgure it out later.”
4. Diversify complementary operations
The more complementary services you can offer customers, the more they will spend with you. Price also becomes less of a factor when you’re doing more than just hauling truck- loads to Texas. This will insulate you from the ﬂuctuations that impact trucking.
At the same time, new lanes and services can feed your core business. I can’t tell you how many times we generated trucking revenue by leveraging ocean shipments to Italy.
When it’s time to sell the business, a diversiﬁed set of complementary operations and customers will pay. Potential buyers will pay higher multipliers once they realize your customers are sustainable because of Phantom Express’ on-time performance.