Red Lab Logistics – From Startup to $50 Million in Five Years

eCapital Corp

Last Modified : Aug 15, 2024

Fact-checked by: Bruce Sayer

The transportation industry has experienced significant disruptions since the pandemic, yet despite extreme volatility, resilient trucking companies can reach success through hard work, strategic planning, and robust fiscal management. A prime example of high achievement and adaptability through industry upheaval is Red Lab Logistics. This startup freight brokerage has survived industry highs and lows to emerge as a fifty-million-dollar company and a rising star on the Inc. 5000 list of the fastest-growing private companies in America.

Addison Miles, co-owner and Head of Finance, shares his views on the company’s rapid growth and the strategic partnership with eCapital that led to its financial stability. Addison and the Red Lab team have not only weathered storms to experience success in a volatile industry but have transformed the business from being severely undercapitalized to financial independence within five years.

This success story lays down a roadmap for other transportation companies to navigate the current market and thrive as the industry looks forward to increasing volumes starting in the latter half of 2024.

A journey of rapid growth

In the spring of 2019, two friends, in their final year at the University of South Carolina, were interned at a logistics company in Charleston. The freight market was emerging from an industry boom year when Nick Macuch and Toby Skarke had their initial exposure to the freight brokerage industry. What they witnessed inspired their future together as truckload rates had increased by over ten percent on a year/year basis, and capacity was tight. The industry seemed ripe for new entrants, so the two friends invited Addison Miles to join them in a new venture.

Addison described their experience, “The industry was booming! We all thought it was so easy that we decided to start our own freight broker company – so we did. We soon discovered that we were completely wrong!” Addison acknowledges that the challenges they faced, including the unexpected difficulty and capital intensity of the industry, felt overwhelming in those early days.

As with most startups, the company grappled with building credibility. Gaining trust from customers and carriers was the first obstacle in their path. Amid this challenging start, the onset of the COVID-19 pandemic added further complexity to their journey. However, focusing on solid growth strategies and supported by flexible business financing, Red Lab grew from around 100 loads in its first year to a projection of nearly $50 million in revenue by the end of 2024.

Solid growth strategies

Addison attributes Red Lab’s rapid growth to strategic planning and its partnership with eCapital, an industry leader in transportation financing.

From the beginning, the founders of Red Lab Logistics prioritized a commitment to high-quality service to form strong customer relationships and set carrier standards. Their passion for exceeding expectations fostered loyalty and contributed significantly to the company’s rapid growth. To build a solid network of reliable carriers and supporting services, the brokerage honored service contracts with prompt payments. This commitment to timely compensation was crucial in building industry trust and carrier response times. As the brokerage was based in a state where agriculture is the primary industry, Red Lab focused its growth on transporting high-value produce, capitalizing on the stable demand for food in the volatile freight market. This niche market concentration positioned the company as an industry expert and provided a competitive edge, resulting in steady and reliable freight volumes throughout the post-pandemic era.

However, it was Red Lab’s decision to partner with an experienced leader in transportation financing that gave it the financial stability to withstand economic fluctuations, overcome unforeseen challenges, and implement its strategic initiatives.

Establishing financial stability

“Our first big eye opener as a startup company with no experience was the capital intensity of the industry,” stated Addison, “The daily financial burden of operating is staggering! Establishing financial stability to secure working capital and ensure consistent cash flow became an immediate priority.”

Motivated by an urgent need to establish resources strong enough to meet the financial burdens that lay ahead, Addison began researching business financing solutions. Discovering the liquidity strength of freight factoring to convert accounts receivables into instant cash, Addison went online to find a recognized leader in transportation financing. He quickly identified eCapital as a prominent leader in the space.

Despite the startup company’s lack of credit history, eCapital was able to quickly qualify, onboard, and set up accounts for funding. With this support, Red Lab had the financial stability needed to support operations and fuel growth.

The resulting partnership with eCapital gave Red Lab the liquidity strength to immediately convert freight bills into working capital, accelerating its cash conversion cycle. Leveraging the ability to maximize effective cash management, Red Lab gained the financial flexibility to quickly build a strong brand reputation. However, the success of this partnership runs much deeper than cash flow efficiency.

Close collaboration, trusted expertise, and specialized services added to the value of the relationship.

Close collaboration: Red Lab’s journey to prominence was enhanced by valuable support, including mentorship and counsel from many industry veterans and seasoned professionals. The three principals gathered advice, strategies, and insights to help shape strategic plans by creating friendships with customers and service partners as they conducted business. Chief among these collaborative interactions was the close interaction with eCapital. Dedicated customer service and easy access to the lender’s top-tier management provided quick resolution to emerging challenges and solutions to complex growth opportunities.

Effective credit risk management: Trucking companies must mitigate the impact of potential defaults on accounts receivable to help ensure financial stability. Rob Sloane, eCapital’s Director of Credit, was vital in providing trusted expertise in this capacity. Addison shared a particular instance to illustrate the importance of this relationship, “Red Lab considered committing extensive resources to take on a revenue-boosting new customer, but instead, we heeded Rob’s credit expertise and backed away from the arrangement. This information proved crucial, as the customer soon after went bankrupt.” As the brokerage navigated the complexities of a dynamic transportation market, trusted risk management expertise from eCapital proved essential in creating robust strategies and enduring practices.

Specialized services: eCapital also provided carrier payment services, delivering fast payment to Red Lab’s carriers and took care of its billing and collections. Addison explained the arrangement, “eCapital provided more than cash flow availability, they managed accounts receivable and streamlined carrier payment systems. This behind-the-scenes support was crucial for our growing business.”

Fueling Financial Independence

Fueled by their successful five-year partnership with eCapital, Red Lab achieved financial independence by the end of 2023. Having accomplished this significant milestone, the brokerage decided to graduate to self-funding.

They did note that the move wasn’t without challenges. To maintain efficient accounts receivable management, Red Lab needed to quickly gear up an internal back-office group to replace eCapital’s professional billing and collections team. Similarly, the company needed to build out resources to administer the swift and accurate carrier payments formerly managed by eCapital.

In the end, Red Lab recognized that the financial stability, knowledge, and business acumen gained from the eCapital experience have helped them achieve success in a volatile industry.

Conclusion

Red Lab Logistics’ remarkable journey from a startup to a self-funded fifty-million-dollar company exemplifies resilience and strategic prowess. The company navigated industry challenges by committing to high-quality service, building solid partnerships, niche market specialization, and establishing financial stability. Their partnership with eCapital provided more than cash flow efficiency. For Red Lab, collaborations, expertise, and special services offered by an experienced transportation financing specialist team helped elevate a startup company to be listed as one of the nation’s fastest-growing privately owned companies within five years.

The success of this financial partnership fostered a relationship that ultimately empowered Red Lab Logistics to achieve prominence and financial independence during the industry’s most volatile period. Hard work, strategic planning, and choosing the right lender matters!

Key Takeaways

• Red Lab Logistics, a startup freight brokerage, has reached $50 million in sales and financial independence within five years through hard work, strategic planning, and robust financial management.
• The company navigated industry challenges by committing to high-quality service, building solid partnerships, niche market specialization, and establishing financial stability.
• Red Lab’s partnership with eCapital, an experienced leader in transportation financing, provided the financial stability to withstand economic fluctuations, overcome unforeseen challenges, and implement strategic initiatives.
• Red Lab Logistics is a rising star on the 5000 list of the fastest-growing private companies in America.

eCapital Corp

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.