Strategic Market Sizing: How to Expand Your Freight Brokerage in 5 steps

Scaling a brokerage isn’t a linear journey. It’s unrealistic to rely on a single market to propel your business from small to top-tier.

While niching down is effective in the early stages, every brokerage eventually reaches a point where expansion becomes necessary. Whether you choose a market similar to your current one or venture into an entirely new area, understanding the size and potential of the market is key—this is where market sizing plays a vital role.

Today, more than ever, knowing your market size is crucial for making informed decisions, minimizing risks, and capitalizing on growth opportunities.

What is Freight Market Sizing?

Freight market sizing is the process of estimating the potential of a new market segment. It includes assessing demand, competition, and revenue opportunities. This analysis helps determine whether it's worth investing time and resources into a new niche.

What Do You Need to Start?

Before diving into market sizing, it’s important to have a solid understanding of your current capabilities. For instance, if you haven’t worked with reefer carriers before, expanding into perishables might present challenges.

Evaluate your resources, expertise, and network, focusing on:

- Carrier Network: Understand the strengths and specializations of your carriers, their regional coverage, and capacity.

- Current Business Strengths: Identify what sets your brokerage apart—whether it’s expertise in certain regions or industries.

- Experience and Expertise: Assess if your team has the knowledge to enter a new market. If not, consider hiring or training to fill these gaps.

Market sizing can largely be accomplished using tools like Google Sheets or Excel to organize and analyze data, allowing you to make well-informed decisions.

Lastly, define your objectives. Are you looking for high revenue potential, low competition, or both? Clear goals will keep your research focused.

Step 1: Identify Your Market Segments

Begin by identifying market segments worth exploring, based on carrier relationships, customer referrals, or industry trends. Look for niches where you already have leverage or unique insights.

Potential industries include:

- Agricultural products

- Automotive parts

- Construction materials

- E-commerce retailers

- Hazardous materials

- Perishable goods

- Pharmaceuticals and medical supplies

Also, remember that niches can be location-based. Freight dynamics in Atlanta differ greatly from Los Angeles. Understanding regional market nuances can give your brokerage a competitive edge.

Step 2: Find Data to Support Your Analysis

Next, gather data to inform your market analysis. Look for information on revenue potential, market size, growth rates, and the competitive landscape. Accurate, up-to-date data (ideally from the last 1-2 years) is critical, particularly in fast-changing industries.

Reliable sources include:

- Industry Reports: From McKinsey, IBISWorld, and Statista, providing market trends and forecasts.

- Government Publications: Such as the U.S. Census Bureau and Department of Transportation, for industry statistics.

- Market Research Firms: Firms like Nielsen and Forrester, though these can be costly.

- Trade Associations: Reports from industry groups like the American Trucking Associations offer valuable benchmarks.

These sources will help you make well-informed decisions about which market segments to pursue.

Step 3: Build Your Spreadsheet

Organize your data into a spreadsheet, with key sections such as:

- Market Segment Description: Types of goods, typical clients, and unique characteristics.

- Potential Revenue: Based on market size and number of potential clients.

- Growth Rate: Estimated using industry reports.

- Key Competitors: Their strengths, weaknesses, and market share.

- Market Share: A realistic estimate based on your capabilities.

This structured approach allows you to systematically compare different segments and identify the best opportunities for your brokerage.

Step 4: Refine Your Assumptions

Assumptions are necessary to fill in data gaps. These might include growth rates, customer acquisition costs, and average revenue per customer. Base your assumptions on industry reports and historical trends. For instance, if e-commerce has been growing at 15% annually, you might expect similar growth moving forward.

Don’t forget to account for factors like customer retention rates, market penetration, and operational costs. These are essential for refining your analysis and ensuring your estimates are realistic.

Regularly revisit these assumptions as you gather more specific data. This continuous refinement will keep your market sizing accurate and adaptable to changing conditions.

Step 5: Draw Conclusions

Finally, analyze your data to draw conclusions about each market segment. Evaluate the profitability and feasibility of entering each one, considering thresholds like minimum market size and revenue potential.

Compare the projected revenue and growth rates to the costs and risks of entering new markets. Focus on segments that align with your brokerage’s strengths and offer the greatest potential for success.

Conclusion

Market sizing is essential for expanding your freight brokerage into new niches. It provides valuable insight into potential opportunities and risks, helping you create solid financial plans.

Expanding into a new market requires strong financial backing. Factoring with Denim can provide the working capital you need to manage increased operational costs and invest in growth.

With the right financial support, you'll be equipped to take on new markets and drive your brokerage’s success. Schedule a demo with Denim today to learn how we can help you scale with confidence.