I’m running cradle-to-grave — how do I switch to a split model?
We hear this question with some frequency. One brokerage model isn’t inherently better than the other, but depending on your business model, goals, and brokerage maturity, one can be more ideal.
We’re not here to debate the merits of each. For those of you seriously contemplating moving from cradle-to-grave to a split model, though, here are some things to consider.
Let’s define both models first.
Cradle-to-grave (C2G): In C2G, each freight broker is responsible for their own book of business, from finding new business and working with customers to covering their loads and maintaining relationships with carriers.
Split: With this model, the team is divided into customer sales and carrier sales. While the customer sales team focuses on signing new shippers and bringing in more freight, carrier sales reps are responsible for covering loads, negotiating rates, and carrier sourcing and management.
(FreightFriend founder and CEO, Noam Frankel, played an instrumental part in creating this model, as one of the founding executive team members at American Backhaulers, the brokerage that pioneered it.)
Is there a point in a company’s growth that makes one model better than the other?
If your business is <$5 million annually, C2G will likely be more cost-effective than a split model. Smaller brokerages won’t see the cost efficiencies generated by adding talent/personnel to the organization and rather, feel the brunt of the cost of overhead.
Conversely, there might come a point in time when your brokerage has maximized its growth without adding additional reps, because a C2G rep is capped by bandwidth — he or she can only manage and cover so much freight in one day (roughly 20 loads per day is a pretty full responsibility).
The growth of the brokerage might also be stifled by the size of the carrier network. Loads are generally limited to what the C2G reps know their carriers can take, resulting in a smaller carrier network. This can cause a lot of missed opportunities or money left on the table without adding overhead. And without a carrier sales team, it’s tough to build up network density.
Of course, if growth isn’t a primary goal, this might not be an important factor. Maintenance is a perfectly valid business goal!
Although it’s never too late to think about making the switch, it will become increasingly more difficult, the more your brokerage grows and develops deep relationships and operational structure.
3 steps to transitioning from cradle-to-grave to a split model
What are some of the things you should consider if you’re considering an organizational change?
Step 1: Identify if a split model is a fit for your brokerage
For some, it won’t be the right decision. Ask yourself:
What’s your primary mode?
If it’s specialized, it might not be a fit because you might want more responsibility throughout the process. Conversely, if you run mostly full truckload, it’s a lot easier to change, because it doesn’t require as much institutional or personal knowledge about the shipments and the large majority of carriers haul this freight. With standard insurance, similar freight, and fewer variables to worry about, the transition is smoother.
Are your current employees adaptable or will you have to hire a new team?
When dividing your organization into customer and carrier sales, it’s possible — likely, even — that you’ll have to add to the headcount, which requires capital. Even if you don’t add heads, you’ll need to transfer customers from one rep to another.
Or perhaps you’d rather reassign all of your C2G reps as customer reps and hire an entirely new carrier sales team. This could be a good solution, as it maintains the relationship the rep has already built with their customer — they can now focus on winning more business from them.
Are your reps ready to switch to a team dynamic?
Because you’re working together to cover everything, a split model results in more teamwork. This might not be the best fit for C2G reps who prefer the end-to-end structure.
How do you plan to cover loads on a split model?
Although public load boards are an option, it’s not a good idea to build your business by relying on them for efficiency, cost, and risk reasons.
A better strategy is to focus on strategic sourcing and building and managing carrier relationships. One highly effective way to do this is to assign certain carriers to specific reps, creating a one-on-one relationship.
Step 2: Identify new roles and the organizational structure
What are your expectations for a carrier sales team?
How many loads per day do you expect them to move? And don’t forget the logistics of training, hiring, and managing a carrier sales team.
How will you structure the carrier sales team?
How will you divide responsibilities? A smaller brokerage can tag-team all of the loads. But if you have 10 or more reps, you might want to separate them by region, equipment, mode, etc.
At what point will you need to create additional specialized teams?
For example, does your current or expected volume mean that you will need to add a tracking team right away or further down the line to free up the customer sales team?
When will you need to bring in an operations team separate from the sales team?
One way to go about this is to separate out your top performers, once you’ve transitioned away from C2G, and take scheduling, email management, and other operational tasks off of their plate, effectively allowing them to focus fully on customer sales.
Or, if you prefer to create an operations team from the get-go, you can either hire for it or repurpose existing C2G reps that excel in ops.
Step 3: Decide how to handle training and change management
Who will own training?
You need someone to own and champion training, one of the most difficult parts of getting your team on board. You might want to hire for an upper-level management role that has worked in a split model before. This, of course, can be costly.
You could also hire a consulting company, such as Metafora, to help with the training and transition. However you approach this, your existing and new reps will likely need to be trained extensively.
How do you plan to manage the change for your customers?
One of the most difficult parts of the change management process for your customer will be introducing them to their new point of contact on the team. One benefit to transitioning to a split model is that you can mitigate this issue in the future.
Instead of developing a relationship with an individual rep, reposition the relationship with your customer so that they know and trust your team. The customer will always have a single point of contact, but by setting the expectation, it’s easier to manage when the customer rep inevitably changes.
There are many more things to consider when deciding to make an organizational change like moving from C2G to a split model, but this can be a good starting point to begin to decide if making the change is right for you.
Have you switched from C2G to a split model? What were the toughest parts of the transition? What were the easiest?
Want more?
To continue this discussion or to learn more about how to make your brokerage model more effective with technology, reach out to us here.
For more insights on brokerage topics, check out the FreightFriend blog.