Pigs Get Fat, Hogs Get Slaughtered
“Pigs get fat, hogs get slaughtered.”
Everyone knows this old saying about greed, right? If you don’t, the gist is that you shouldn’t be greedy because it will lead to negative consequences.
As applied to business, people who make reasonable profits (the pigs) are successful (get fat).
People who are greedy and make excessive profits (the hogs) have negative consequences (get slaughtered).
Brokerage Application
Why does this matter in brokerage? Because this is one of the most common ways that brokers lose business.
Everyone has been in a scenario where you’re making an excessively high margin on a lane. This can come up in a lot of ways, but the most common one is changing market conditions. The market shifts, your customer doesn’t update their rates, and now you’re making 30% margins on a lane that should reasonably give you 12% margins.
Sounds great, right?
Well, it might be nice right now, but you’re setting your future self up for a huge problem.
What’s the Problem?
The problem is that your customer is eventually going to find out. One way or another, a different broker is going to submit pricing on that lane and your customer will see that you’re charging them several hundred dollars more than the market rate.
How do you think they’re going to react to this realization?
I’ll tell you exactly how they’ll react:
- Best Case Scenario – You lose that specific lane, your customer revisits your pricing on every other lane you’re moving, you lose some of those lanes, and have to reduce your pricing on several others.
- Worst Case Scenario – You lose that specific lane and your customer pulls your other business without even asking you to revisit your rates.
Lost Trust = Lost Business
The mistake you made was being too short-sighted about your business and breaking your customer’s trust in the process.
You got greedy and got slaughtered.
While it’s tempting to take the money while you can, successful brokers understand that the long-term value of an account by far outweighs the short-term benefit of making huge rips. If they’re making an unjustifiably high margin, they’ll approach their customer with a price adjustment before their customer finds out from another provider. In the process, they build trust and solidify themselves as a valuable partner.
So, as you look at your business, I’d suggest you ask yourself if you’re really setting yourself up for long-term success or just chasing quick wins.
Sync Logistics Training
If you found this interesting, check out what we’re building at Sync Logistics Training. We cover this topic and more in our coursework on Account Management.
Reach out to nick@synclogisticstraining.com for more information.
