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$500K Ain’t What It Used To Be…

Jun 28, 2016 2:16:00 PM / by Fauad Shariff

We’ve been busy. Really busy. So busy, in fact, that we couldn’t get to share with you one of the best things that’s ever happened to us…

CoLoadX is pleased to announce that we’ve been accepted to the Entrepreneur’s Roundtable Accelerator for the summer of 2016. Click to read more here

So what exactly does this mean? What is an accelerator? What does it have to do with the logistics business? More importantly, what does this mean for your business?

Let’s get the definitions out of the way first. Here’s the Wikipedia link to what a startup accelerator is and what it does.

To put it simply, an accelerator is business school for your entire company, all crammed into 2-4 months. Your job during that time is to focus on a few specific goals for your business, make connections with mentors and investors, and prove that your business has what it takes to grow big & fast.

Some famous companies you may have heard of that launched out of accelerators include Air BnB (www.airbnb.com), recently IPO’d Twilio (www.twilio.com) , Dropbox (www.dropbox.com) and several others.

To us this means that the folks at Entrepreneur’s Roundtable (www.eranyc.com) believe our vision of helping freight forwarders and NVOCC’s grow their businesses has real potential and is worth supporting. There’s still a lot of work to do, but we couldn’t be more proud of and grateful for their confidence in CoLoadX.

The icing on the cake came for us when AlleyWatch (www.alleywatch.com) published this article calling us one of “12 NYC Startups That You Need To Know About This Summer…

Enough about us. Let’s talk logistics…

At CoLoadX we’re industry people. We know the freight forwarding and international logistics business inside &amp; out and we’ve actually experienced the challenges that come with running such a business. Let’s look at 2 specific problems that we’ve faced, you’re probably facing right now, and how we’d like to solve them for you:

Problem # 1:

It takes $500,000 just to makes ends meet.

If you’re a freight forwarding business owner, or if you have P&amp;L responsibility at a freight business then you know what we’re talking about. Forget about variable costs because those go up when you’re doing more business. Let’s just look at your fixed costs. Rent, IT systems, phone systems, staff salaries and management salaries for a 3-4 person freight forwarding business or department run $35,000 - $40,000 per month, which barely leaves $2,000 - $7,000 for profits. According to most experts, net profit numbers are typically 5% of gross sales in the freight forwarding business, so that means you need to generate $1,500,000 in gross sales to come up with a profit of about $80,000. Now here’s the kicker, because freight markups are based on a per kilo, per cubic meter or per container basis, there’s very little you can do to increase the top line number. In other words $0.10/kg x 1000 kgs = $100 revenue in 2016 as well as in 2006 or even in 1966. Meanwhile overhead in 2016 is dramatically higher than it was 1, 2 or 5 decades ago.

CoLoadX changes this dynamic in a number of ways. For freight forwarders we not only reduce the cost of procurement, but also improve the speed and efficiency of the quoting process. Some people refer to this as “raising the roof”. What it means is that your ocean freight department can automate rate shopping rather than having it be done by full time or part time employees who have to manually enter their requests through channels such as email, telephone and FAX. Lower prices, increase worker productivity by eliminating price shopping, and win more quote opportunities thanks to competitive and faster pricing – these are the benefits we deliver to freight forwarders.

Problem # 2:

It can take up to 2 years to close a sale!

We know. We’ve seen it happen. All your value propositions are clearly laid out, you’ve covered every single objection that your prospect may have, and yet they may not award you any business. Even worse, they may “give you the opportunity” to participate in a bid or quote process, “next time” they have one. If you keep reading this blog you’ll see just how much we loathe RFP’s/RFQ’s/Bids. Very often they are a “race for second place”. In other cases they may be just be carried out to satisfy audit compliance, which amounts to the logistics department telling the accounting department “see, we shopped the rates like you told us to and still our incumbent won…for the 8th year in a row! (because we neglected to tell the bidders that price is not the main criteria for choosing a vendor)”.

So, if that’s the state of the business, how does CoLoadX get past it? We have a lot of RFP related solutions coming up in the future, but to start with we’re aggregating two very important commodities: opportunity &amp; visibility. By bringing together freight intermediaries into one platform, we provide access (visibility) to new sales opportunities. NVOCC’s based in New Jersey can’t make sales calls in Nebraska so easily, yet very often they can provide all the capabilities as their larger competitors who do have physical presences in many markets. CoLoadX brings together qualified freight forwarders and NVOCC’s to help them access new business that they are absolutely capable of servicing.

Coming back to the accelerator thing…

What allows us to build solutions specifically for the freight markets is scale. As we mentioned in our recent post on business platforms, once you have a website, you’re global. If you have no interest in being global, Google (www.google.com) has a solution for that too as they offer you local search engine visibility which means your small business can scale up from being the biggest brand name on the block to being the biggest brand name in the city. Being a part of the Entrepreneur’s Roundtable and subsequently starting an investment fund raising process is allowing us to build the platform to drive savings to freight forwarders. We had a plan to deliver 15% savings per shipment, and 2 months ago we started realizing 25% savings for our clients. To sustain this performance and deliver it to a wider audience requires the technological tools to build and run a marketplace type operation. That’s what we’re doing for the freight forwarder who has his/her profit potential limited by high procurement costs.

For NVOCC’s we’re creating an environment that allows them to get new business without quoting for the same shipment over & over again. It will be a high quality platform with qualified buyers and not just “rate shoppers” or “rate browsers”. In our first implementation of this platform we were able to deliver $7,500 per month in new revenues to our pilot group of NVOCC customers. To duplicate this success and spread the opportunity over a wider base of NVOCC’s is also going to require technology and expertise which investors can help us acquire.

Lastly, we’re going to bring some fun to the freight business. Thinking and acting like a tech startup is going to allow us to do this. We’re looking at new apps to build for forwarders and NVOCC’s and maybe even a platform that will allow you, our customer, to build something unique for your business or for your clients. That would be a value add that we would really be proud to bring to your business.

We’ll keep updating you on our progress in the accelerator and as our growth plans start to turn into real completed milestones. In the meantime, it’s our honor and pleasure to get back to work in support of the hardest working business services companies in the world: freight forwarders.

Topics: Startups, Technology, ERANYC

Written by Fauad Shariff

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