Jason: What have you both learned over the years that led you to come up with the idea for Partage?
Sean: There are a few lessons that drove the design of Partage:
- There is nothing better than a big, underserved, existing market. Most people mistakenly think that LTL is for all shipments that can't fit into a full truckload. But, the truth is more so that LTL is for shipments that are too big for a package carrier. The networks and pricing models are built for smaller freight, and don't provide a dependable solution for five to twenty-five thousand pound shipments. We believe that this partial truckload market is nearly as big as the LTL market ($20-30B in annual spend), but requires a non-asset specialist to navigate the day-to-day changes in the supply market in order to provide shippers with consistently smart savings.
- The secret to staying in control is to have low variable costs and low working capital requirements. You can keep working capital requirements low usually by giving up operating leverage by accepting higher variable costs due to inefficient processes or high commission-based sales costs. That may make it easier to start and grow the top line of the business, but it drains the profit out of the growth and makes the business increasingly difficult to manage at scale. You can usually solve that problem by investing in assets and paying employees salaries, but that requires significant cash -- which causes you to either take too much risk or lose control of the business by relying on outside sources of capital. John and I realized that if we found a model that kept both variable costs and working capital requirements low, we could provide a really great solution to customers that also made a profit.
- When you choose to be everything to everybody, you also choose to be nothing special. It's trite, but you just can't be all things to all people. If you try, you'll lose control one way or another. It seems hard to say "no" to the various opportunities that come along each day, but focus is the only way that we can build a great business that delivers unique value to its customers.
Stay tuned for the last post in this series, where we'll talk to Sean about the specific procurement mindset he took in setting up his new business.