Freight Brokerage Business Plan
Silicon Freight Brokers (SFB) is a specialized freight broker service located in Hood River, OR. The company has been set up as an Oregon C Corporation by the owner, Steve Tookarefol. SFB’s objective is to become the premier silicon chip freight broker, increasing their client base by 20% a year.
Freight Brokers and Silicon Chips
The freight broker industry is the middle man of the shipping industry. They are also known as third party transportation providers. Freight brokers provide a service by linking customers with shippers and trucking companies. Their service is indispensable when moving goods throughout this country as there are literally hundreds of different shippers offering thousands of different services. The freight brokers make the process of securing a shipper quite easy with one-stop shopping.
The silicon chip industry is a growing industry that to a large degree has fueled the incredible growth of the late 90’s Internet boom. Silicon chips are the basis of all types of computers as well as hand held devices such as cell phones, PDAs, even watches and some household appliances.
SFB will be occupying a niche within the general freight brokerage market by specializing in the shipment of silicon chips. Silicon chips are very specific, unusual cargo that requires special attention. The chips have a very narrow range of temperature and humidity parameters that must be maintained. In addition to these unusual requirements, there are other specific needs that silicon chip companies have. By specializing on silicon chips as their only cargo, SFB will quickly gain market share and be known as the premier broker for chips.
The industry of chips is comprised of two distinct customers, manufacturers of chips and purchasers of chips. The manufacturers are based in the USA, however some of them produce in the States while others farm out production overseas and them import them. The chip purchasers are primarily Intel, IBM, and Motorola.
SFB is led by a seasoned management team of Steve and Wendy Tookarefol. Steve has over 10 years of freight experience, working for several different companies. This work experience has been instrumental in allowing Steve to accurately determine the market need and meet it. SFB has coupled Steve’s in-depth trucking/ freight brokerage knowledge and insight with his wife’s expertise in the silicon chip industry. For the last seven years Wendy has been an industry consultant, working quite close with companies such as Intel.
SFB’s solid business model is forecasted to reach profitability by month six. SFB will achieve market penetration by remaining laser focused on their market niche, while fully utilizing their strong management team.
Silicon Freight Brokers objectives from the first three years of operation include:
- To create a service-based company whose #1 ambition is to continually exceed the customer’s expectations.
- The utilization of Silicon Freight Brokers in at least four of the top 10 silicon chip producers, as listed in Silicon Industry Journal.
- To increase our number of served clients by 20% per year through superior performance and word of mouth referrals.
- To develop a sustainable, profitable, start-up business.
The Silicon Freight Brokers’ mission is to provide the customer with the most satisfying shipping experience that they have ever experienced. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.
Silicon Freight Brokers, as the name implies, is a freight broker for the silicon chip industry. SFB has two types of customers, buyers and sellers of silicon chips. SFB is establishing relationships with carriers that specialize in this unique cargo. We will offer our customers the highest level of service.
2.1 Start-up Summary
Silicon Freight Brokers’ (SFB) start-up costs include all the equipment needed for an office. Additionally, there will be legal fees, marketing fees, accounting fees, trade association dues, and deposit for the lease. The largest expense for the office is a computer system. The minimum requirements for this system are: 600 mhz Pentium processor, 128 megabytes RAM, 10 gigabyte hard drive, printer, and CD-RW, Microsoft Office, and an accounting suite. The office will also require a DSL broadband connection, two land-line phones, fax machine, copier machine, and some office furniture. The legal fees are for corporate formation, and the generation and review of contracts. The marketing fees are the costs associated with advertisements in industry journals, brochures, and website visibility generation. The accounting fees are for the services necessary for the formation of the business, while the majority of the accounting after start up will be done in-house with an accounting suite on the computer.
Silicon Freight Brokers is a niche freight broker for the silicon chip industry. SFB will provide a brokerage service to link manufacturers of silicon computer chips and the users of the chips such as Intel, Texas Instruments and Motorola with freight companies. Freight brokers are basically the “middle man” between a shipper and trucking company, also referred to as “third party transportation providers.” SFB will work with companies to find a safe, economical way of transporting silicon chips. SFB will have two types of customers:
- Silicon chip manufacturers. These can be further broken down into two categories, those that manufacture overseas, and those that manufacture in the U.S.
- Manufacturers of processors that utilize silicon chips.
Market Analysis Summary
Silicon Freight Brokers will be concentrating on the freight brokerage of silicon chips. This is a small, specialized, niche of the general freight brokerage industry. SFB is concentrating on this space for several reasons:
- SFB has extensive industry knowledge and insight regarding freight brokerage and silicon chips.
- The silicon chip industry is continuing to grow as our dependence on technology increases.
- There is plenty of space for a new specialty freight brokerage company. SFB’s extensive knowledge of both the freight and chip industry provides for valuable insights that can add significant value to SFB’s customers.
4.1 Market Segmentation
Silicon Freight Brokers will be focusing solely on the freight brokerage of silicon chips. There are two distinct customers in this niche market, manufacturers of the chips, and the buyers of the chips who are processor manufacturers. The manufacturers of the chips can be further broken down into two groups, those that have manufacturing facilities abroad and those in the U.S. Those that have facilities abroad will generally ship them to a United States ocean port, and from there they travel via truck to a processor manufacturer. The second group of chip manufacturers, those that have facilities in the U.S., transport chips via truck from their facility to the processor manufacturer. Although, in general, silicon chip production has shifted overseas, there are a collection of chip manufacturers still located in the States. The difference between the two types is not very significant, SFB arranges for the carrier to pick up the chips either off the boat or from the manufacturing facility. Whether SFB deals with the manufacturer or the seller is a function of the contractual terms that the buyer and seller agree to. Sometimes it is the manufacturer’s obligation to ship, other times it is the buyer’s obligation to arrange pick up of the chips. The chip buyers are manufacturers that use the chips in their processors. The largest processor manufacturers, Intel, Texas Instruments and Motorola, are located in the U.S.
4.2 Target Market Segment Strategy
Silicon Freight Brokers is concentrating on the silicon chips niche as it is a very specialized, thriving market. By focusing in this market space, SFB will be able to offer superior service. Shipping of silicon chips requires special types of trucks that are humidity and temperature controlled. SFB will form intimate relationships with the unique carriers because this relationship will provide SFB with special insight, which will allow SFB to meet any need a customer might have. Shipping silicon chips has special requirements and SFB will be more familiar with these requirements because it will not be distracted by offering other services. Specialization also allows SFB to develop close relationships to the limited number of carriers that are equiped to transport chips. Lastly, the growth of processor manufacturing, which requires silicon chips, has far outpaced most other industries in this country. This growth rate makes this niche especially attractive. In the freight broker market, there are general brokers that offer a wide range of services. There are a few companies that specialize, but no one is as niche focused as SFB. Because most all of the silicon chips are transported through the U.S. via trucks, there is considerable growth in the specialty freight brokerage business. SFB will be marketing our business through several different outlets. The first is the Internet. A lot of the industry has moved to the Web as means for communication regarding freight quotes. SFB will be developing a website where a customer can go to find out an estimate for freight rates. The website would key for finding the requisite information like weight, pick up and destination, and SFB would work with our carriers to find them the most safe and economical solution. Because SFB is only working with silicon chips, the complexity of the number and type of trucks to be used (non-temperature controlled, etc.) is reduced. SFB will also be running advertisements in silicon chip trade journals. The ads in the silicon chip journals will provide visibility for SFB to the manufacturers and buyers of the chips.
4.3 Service Business Analysis
There are many different freight brokerage services. This market is broken up into generalists, handling all types of freight brokerage, and specialists, handling materials ranging from heavy equipment, oversized loads, perishable commodities, or hazardous materials. The chip buyers and sellers make the shipping decision based on service (defined by many variables including customer service, speed, safety of the product) and price. Most business is repeat business, 70-80% according to industry statistics. Once a customer finds someone who they are happy with, they typically stay with them.