Trucking company owners often overlook important ways to grow revenues. Yes, it’s great to land a new customer, but don’t overlook two other key things your company can do to dramatically increase the revenue you bring in from existing customers.
Assume that you have 35 shippers and that each averages 300 loads per year with you at $450 per load. You are generating about $4,725,000 per year in gross revenues.
Given these assumptions, what would the impact be of getting (1) a new customer, (2) a few more loads from each existing customer and (3) a slightly higher rate from each existing customer?
In this case, an average customer does $135,000 of business with you (300 shipments at $450). Therefore if you work hard to win a new shipper, you can expect your gross revenue to increase by $135,000.
Experts say that landing a new customer typically takes six times the effort required to obtain increased business or rates from a present customer. And current customers are usually much more approachable than new ones, who often choose to focus on cutting rates to undergo the trouble of making a carrier change.
Suppose you worked with your present customers to increase their number of shipments with you? How much increase in volume would you have to get to equal a new customer? To grow revenues by $135,000, each of your 35 customers must average $3,900 more business with you per year – about nine additional loads per year. This is less than one additional load per month.
Suppose you decided to increase rates from present customers to achieve the same revenue as a new shipper? To obtain $135,000 more in revenue, you’ll need to raise rates across the board by about 2.9 percent. This works out to $12.86 on the average load cost of $450. Can you get $463 per load instead of $450?
I’m hardly advocating not seeking new customers. But don’t overlook your existing customers to achieve the same positive effect on your revenues.
It’s easy to say you are targeting more loads and higher rates. But are you getting the job done? Unless you actively measure and report to your team key performance indicators such as transaction count and average transaction value, you can’t know if you’re advancing or declining in these areas.
Small changes in customer count, average number of transactions per customer and average transaction value can have a huge impact on your revenues and bottom line.
Online ‘Potential for Growth’ Calculator (www.ras-net.com/asp/businessowners/calc.asp)
which works on the basis of three of the four principal ways to grow your business. Enter amounts for customer count, number of transactions and average sale, and the percentage change for each, and the calculator will show potential revenue impact.
Kenneth Dewitt is a CPA and certified financial planner who serves as a part-time chief financial officer for a variety of businesses, including trucking companies. E-mail kdewitt@eTrucker.com.