Written By: Freight Waves
AscendTMS has announced that a new partnership with Hubtek, a near-shoring firm that offers back-office staffing solutions in Colombia, will allow its customers to easily flex low-cost staff up and down according to demand from inside the transportation management system (TMS). The partnership comes as asset-based carriers and freight brokerages search for new ways to improve working capital and EBITDA in a freight market where top-line revenue growth is hard to come by.
AscendTMS emerged as a new, lean entrant in cloud-based transportation management services with a strategy focusing on small carriers and brokerages that allows the software company to grow with its clients. The average fleet size of its asset-based customers is five to six trucks, and it targets brokerages with $1 million to $20 million in revenue.
Hubtek, with locations at WeWork facilities in Medellín and Cali, Colombia, has experienced explosive growth, adding 20 U.S.-based customers and 190 employees in less than a year. Its employees are trained on multiple TMS products, and all of the employees sourced through AscendTMS have been specifically trained on AscendTMS and are able to start working on tasks like accounts receivable and payable, track and trace, carrier on-boarding, and other administrative tasks within hours of being requested. Hubtek hires ambitious college graduates who are fluent in English and Spanish at around half the cost of a similar employee in the United States.
“Almost every question I get from our broker and carrier customers today is how they can leverage the best technologies and other industry advancements to quickly lower their operating costs,” said TIm Higham, president and chief executive officer of AscendTMS, in a statement. “A sure-fire way to do that is by combining the proven TMS technology of AscendTMS along with up to 70 percent off labor costs for common logistics staffing positions. By doing this, brokers and carriers can immediately see lower costs and thus much higher profits overnight.”
Higham spoke to FreightWaves by phone. Higham likened the Hubtek offering to Amazon Web Services (AWS), which provides on-demand cloud computing for businesses.
“More and more [transportation professionals] are trained around elastic growth – they grew up with AWS,” Higham said. “You need more computing power you turn the dial to the right; you need less, you turn it to the left.”
Higham pointed out that many commodities transported in North America, including food and beverage, retail goods and fresh produce, are subject to strong seasonal patterns. Volumes of those goods surge in rhythms that are somewhat predictable, but can still leave small companies struggling to handle the demand, whether they’re a small brokerage trying to cover a spike in tendered loads or a small carrier running extra miles and trying to process its paperwork in a timely fashion. A brokerage might need one or two extra people to handle accounts receivable and payable, but only for 30 or 60 days.
“This is horsepower on demand,” Higham said. “Technology like AscendTMS allows individuals to be interchangeable on demand and at a lower cost.”
FreightWaves also spoke by telephone to Mariana Valencia, vice president, strategic opportunity creator at Hubtek, who explained that Hubtek started in order to solve big problems in the United States – a shortage of talent, difficulty in retaining administrative workers and the opportunities and risks inherent in high-growth logistics companies.
Valencia said that getting started with Hubtek is a flexible process based on the client’s needs.
“It’s not one-size-fits-all,” Valencia said. “Some companies don’t have the time to come to Colombia, so they bring our accelerators to the States for on-site training. Our main goal is to adapt and make things very easy for our customers.”
Hubtek sets up its employees with cell phones that have the same area codes as its U.S. clients’ offices to give its clients’ customers a seamless experience, Valencia said. She added that Hubtek’s employees are trained on TMS like Aljex, Revenova and McLeod in addition to AscendTMS.
Freight brokerages are currently selling in the private market for an average of 10x EBITDA. By replacing four U.S.-based administrative employees getting paid an average of $50,000 including benefits with four on-demand staff based in Colombia at half the cost, a brokerage adds $100,000 to EBITDA and could increase the value of the company by $1 million. According to Hubtek, this can be accomplished in less than a day.
Cutting costs to add value to a brokerage is easier than brute-forcing top line revenue. Assume that a sales rep generates $1 million in revenue a year on 15 percent gross margins and the brokerage converts net revenue to earnings at a rate of 25 percent (i.e., its net revenue margin). In that case, each broker will generate $37,500 of EBITDA and it would take approximately three brokers to hit $100,000 in EBITDA. The catch is that those assumptions are based on relatively high-performing, experienced brokers who could take a year or more to get to that revenue run rate, and a brokerage might hire six brokers and churn three to find three who can perform at that level.