The freight brokerage business can be a lucrative career choice for those who understand the impact shipping has on the economy. Nearly 85% of all goods are moved from supplier to customer via freight trucking, but to do so successfully, an intermediary is often necessary. Freight brokers do just that by connecting shippers and suppliers to help get the job done on time and in budget. If you’re thinking about joining the nearly 13,000 licensed freight brokers already in the market, consider the following aspects of running your business to ensure you have a successful future.
One of the reasons starting a freight brokerage business is so profitable is the relatively low start-up costs compared to other business models. Freight brokers need very few things in place to get up and running, the most important including a laptop, a smartphone, and a reliable phone and internet connection. Most freight brokers do not start out with a physical office location, but if that is desired, virtual office space which charges on an as-used basis can be an affordable option. The total start-up costs for a new freight broker vary, but the average comes in at just under $400 per month, with an addition $1,000 for one-time expenses.
Although the start-up costs are low for new freight brokers, it is necessary to recognize there are legal requirements that also incur an expense. Freight brokers are required to be licensed by the Federal Motor Carrier Safety Administration (FMCSA) which means paying a filing fee of $300. Additionally, all freight brokers licensed to do business must have a surety bond in place to protect their customers. Freight brokerage bond costs vary depending on your personal credit, business financials, and the bond agency you work with to secure the bond. A minimum $75,000 surety bond is required, which can range from a few hundred to several thousand to start.
Experience in the Business
While you do not need a significant amount of experience in the freight business prior to opening a brokerage, it is helpful to have some relevant work history under your belt. Working with a shipper or carrier before opening a freight broker business offers the opportunity to gain valuable technical expertise that can be used as a marketing tool in securing new customers. Also, working in the industry gives the potential for making essential freight contacts which can be leveraged for future business.
Although it seems simple to get licensed and working as a freight broker, there are many facets of business ownership you should consider. Running a freight brokerage is like any other business in that there are financial records to manage, schedules to coordinate, and legal requirements to ensure you are up to date with. Having the right guidance from the start and appropriate systems in place can make all the difference.
Technology can be your best friend in a freight brokerage business, not only for overall business management but for marketing and tracking customers as well. There are several technology solutions designed specifically for freight brokers that make the most mundane tasks a breeze. Get recommendations from others in the industry or from online resources to find the best technology solutions for various aspects of your business.
Operating a successful business in any industry requires flexibility for when things do not go as planned. Having a contingency plan in place is necessary for freight brokers, especially in the form of a financial back-up. Get to know a local lender who understands your business model, and be sure to work toward the best possible personal credit you can over time. The combination of a strong financial track record and personal relationships with lenders allows you to have access to affordable funding should you need it in the future.
Finally, successful freight brokers understand the ongoing requirements for keeping track of business records and payments. The Code of Federal Regulations has specific guidance on what types of information you are required to maintain as a broker, including transaction details like the name of the shipper and carrier, the freight bill number, the financial information of the transaction, and any non-brokerage services performed along the way. Most records must be kept for at least three years, so have a system in place early on in your business to stay in compliance with these regulations.
Being a freight broker has the potential to be incredibly lucrative, but only when you know what to expect from the beginning.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.