How are Freight Brokers Staying Afloat?

Core Insights - The freight brokerage industry is facing significant challenges despite seemingly healthy volumes and stabilized rates, with many brokers struggling to survive due to fragile unit economics [1][2][10] Financial Metrics - A representative mid-market, non-asset brokerage shows a gross margin of approximately 10%, which appears workable but is not sustainable in practice [3] - The brokerage incurs a fully loaded payroll of about $2.36 million, translating to roughly $150 per load, alongside unavoidable non-payroll costs adding another ~$55 per load [4] - The total cost to move freight reaches about $205 per load, against a gross margin of $189, resulting in a loss of roughly $16 per load before interest expenses [5] Working Capital Dynamics - The brokerage experiences a cash flow timing issue, financing a 10-day cash gap on $30 million in annual revenue, tying up approximately $820,000 in working capital [9] - At a 7% cost of capital, this results in an annual financing cost of about $58,000, or ~$3.70 per load, leading to an overall loss of approximately $19 per load [9] Industry Implications - Scaling these losses across nearly 16,000 loads results in a significant annual loss for the brokerage, highlighting that the pricing environment does not support the existing cost structures [10]