The demand for freight brokerage businesses, both digital and traditional, seems to grow on a nearly daily basis. More and more shippers and carriers are turning to brokers to improve collaboration and capacity management across their supply chains. Digital freight matchers (DFMs) and freight brokerage service providers are becoming increasingly popular, especially in the wake of continued pressure from e-commerce sales and tight capacity restraints. This has opened the door for more people asking questions about how to open a freight broker business.
Arrive Logistics further explained the value of freight factoring and digital load and shipping management in general: “The reason DFMs have become so popular is market opportunity and technological advances. Plus, there are few barriers to entry with relatively few capital risks — making it an attractive place for entrepreneurs to get their start. When there is over $700 billion worth of an industry pie available (and an estimated $50B in brokerage commissions every year), it’s natural that everyone wants a piece of that pie.”
With digital load boards and innovative freight brokerage and logistical services, the entire process has become much more streamlined. Knowing how to start a freight brokerage company will make the process easier right from the start and will help open new doors of opportunity. Let’s dig in and see what you need to make it successful.
What Is a Freight Brokerage?
How to open a freight brokerage requires an in-depth understanding of what a broker does. A freight broker serves as a middleman of sorts that coordinates and helps improve communications between shippers and carriers. Instead of actually accepting the freight and moving it from carrier to shipper, they bring the two parties together so they can handle the transfer of freight themselves. This eliminates delays and expenses and makes the entire process faster and more streamlined. They’re the ones making sure the handoff goes smoothly and also manages and tracks the shipments to ensure the freight gets to its final destination in a timely manner.
As pointed out by DAT Freight & Analytics, many shippers do end up establishing contracts with trucking companies, which sets up terms for long-term relationships; in fact, a significant volume of North America freight transportation is handled by freight brokers. Brokers speed up the entire process by eliminating the messy process of leaving things to the carriers and shippers directly to figure out. And with the pressure of e-commerce and digital shipping the need for faster collaboration is more important than ever before.
Who Can Learn How to Start a Logistics Brokerage Company?
ANYONE! As demand for transportation and shipping services grows, and as capacity constraints become tighter and the logistics industry becomes more sophisticated, the need for innovative and collaborative services becomes more vital than ever. With the need for more freight brokers in the network growing every year, it is a worthwhile question to answer: who can start up their own brokerage business?
There are a number of requirements to start a freight brokerage business and it is important to ensure your startup goes as smoothly as possible. As emphasized by Truckstop.com, if you are passionate about logistics, skilled at analytical thinking, enjoy solving problems, and have good skills working with people and data, then freight brokering could offer a great career opportunity for you. Freight brokers can do the bulk of their work from home, often set their own hours, and have the opportunity to make a lot of money. Read on to find out what steps need to be taken and get the answer to the question of ‘how to start my own freight broker business’.
What’s the Cost of Starting a Freight Brokerage?
A common question that gets asked when the idea of freight brokerages services comes up is: how much to start a freight brokerage? There are a number of things that can contribute to the initial costs involved of starting your own broker company. Cost of training, licensing and certification, and the cost of any equipment and tech that are needed initially are some of the biggest expenses you will need to plan for at the start. Other expenses will depend on the scale of your company, what freight you want to specialize in, what area(s) you are working and operating in, and many other factors that will need detailed planning and attention.
20 Steps to Opening, Launching and Growing a Successful Freight Brokerage
Starting a freight broker business is something that has become more common and routine, but it was not always this way. Entrepreneur points out that: “Brokers aren’t new to the trucking industry; they’ve been around since the industry itself began in the early part of the 20th century. Prior to the 1970s, however, regulations governing brokers were so restrictive that few firms were willing to even try to gain entry into the industry. But with dramatic changes in federal transportation policy during the 1970s, regulatory restrictions have eased, creating new entrepreneurial opportunities in the third-party logistics arena.” This continued growth and expansion of the freight transportation market and the growing demand for brokerage services means now is the time to take action if you are seriously considering starting your own brokerage company.
1. Get to Know the Industry — Train, Train & Train
You have finally decided to pursue a freight brokering career, but what kind of freight are you going to transport? Are you planning to accept anything and everything for the most part or are you more interested in specializing your services? If you limit your freight options, you need to be doubly sure you find carriers who can accommodate those specialized loads. If you choose to accept all types of loads, make sure you have a wide range of capacity options and carriers available to call on when you have tight capacity and high demands during peak shipping periods. There is no right or wrong way to diversify or specialize; you just have to do what is right for you and your long-term brokerage plans.
2. Select a Structure & Register Your Business
Be aware of timelines and other delivery constraints that the market may be placing upon you as a broker. How will you manage delays between money being paid and when money is received? How will you cover initial operating expenses and fund the first year of operations as you get established with clients and carriers and vendors? You will need to carefully plan and structure your business to fit your niche market, your target customer base, and your initial size and capabilities. Growing from there will depend on your planning and execution once your freight broker company is registered, licensed, insured, and operational.
3. Get Your FMCSA Number
One of the early steps that needs to be taken when setting up brokerage services in the United States is to contact the Federal Motor Carrier Safety Administration (FMCSA) to apply for a motor carrier authority. This document certifies you are starting a freight factoring brokerage company and serves as a statement of intent and proof of ownership and recording of the company.
4. Obtain DOT Insurance and a Surety Bond
Insurance and security bonds are also required for starting a trucking brokerage company. They help ensure the broker is prepared for the tasks ahead and helps provide some initial protection against losses and damages. Awhile ago the federal government increased the mandatory freight broker bond and now it comes in at around $75,000. It is quite a daunting number for anyone interested in this line of work, but there are assistance programs, grants, and other ways to fund this expense to make it easier for more people to acquire the DOT insurance and freight broker security bonds.
5. Select a Process Agent for Each State
Essentially, a process agent is a representative to whom court papers may be served should there be any legal action or lawsuit brought against a broker or carrier that you are working with. Brokers must designate a process agent in each state where they offer services, so for many brokerage companies it becomes easier and ultimately more affordable to get blanket coverage for the entire U.S. or for entire regions of the country rather than going state by state.
6. Get Cargo Insurance to Protect Freight Under Management
While specified cargo insurance policies are not typically required by the FMCSA, most companies look for this coverage when searching for a broker to handle their freight and transportation needs. Many shippers and carriers will not allow a broker to represent them and assist with their business practices without reliant cargo and general liability insurance.
7. Evaluate Your Financing Before Starting a Trucking Brokerage Company
Cash flow and lines or credit will be very important as you set up and grow your brokerage company. Most brokers do not have large cash reserves when starting, so other forms of finance options are critical to getting things up and running as quickly as possible. Getting a line of credit from a bank can help and they can give you access to funds while also providing reputable backing and support when negotiating early on with customers and partners. Once the funding is in place, you can officially begin operating as a freight broker.
8. Also Sign up for a Freight Factoring Solution That’s Fee-Lite and Built for Brokerages
Brokerage management and transportation management systems (TMS) and similar platforms and tools can make freight brokerage easier, especially for beginners. Having a collaborative platform that can handle data collection, analysis, and distribution can make a world of difference for freight brokerages. Often, a low-cost cloud-based system, while more limited, is sufficient to build the business. As the business grows and expands, and customer loyalty improves, and profits increase additional tools can be brought into the mix. And the option to upgrade the entire network when necessary is also an option that is worth keeping in mind when building your freight factoring platform initially.
9. Purchase Trucking Equipment, If Asset-Based
All brokerage companies need some level of equipment. For some it might be simply computers, electronics, and organizational tools. For others it might also include trucking equipment, vehicles, and more tangible items that get used out on the road. Ensuring you have the right tools and equipment to handle your specific niche market within freight transportation can help give you a competitive edge and also help you stand out as a leader among shippers and carriers alike. Setting yourself up as a broker for trucking business requires having the right equipment and tools and there is no getting around this critical step in the setup.
10. Purchase Office Equipment and Upgrade Your Internet
Along the same lines, wherever you set up your base of operations needs to be furnished and adequate for your needs. There should be ample space and equipment for every team member you have working under you. New office equipment and tools need to be set up and utilized to ensure smooth onboarding and efficient training occurs. Likewise, you must ensure you have fast and reliable internet.
11. Find Shippers and Carriers
The best way to connect loads to trucks is through a load board. Online load boards like Truckstop.com provide access to thousands of trucks and drivers You can also use the boards to research cargo rates in the shipping lanes where you intend to operate. The more hauling jobs you broker, the faster your business grows. As you work with more satisfied customers on both sides of the industry, your ratings will improve. Shippers and carriers also use Truckstop.com to vet and identify quality brokers, giving you an edge for growing your business.
12. Choose a Freight Analytics Solution
Data collection and analysis is vital for any brokerage company, especially when first starting out. Taking the time to plan out viable freight analytics solutions is a necessary investment you will need to make for your brokerage company. Ensuring you can collect, analyze, review, and apply data as efficiently and quickly as possible will help you gain a competitive edge, especially in volatile markets.
13. Set Rates Based on Actual Market Dynamics
Markets are volatile and always changing, so it is important for freight brokers and logistics managers to be flexible with rates and service offerings. RFPs, bids, transactions, and collaborations must be up to date and reflect actual market dynamics and trends. FreightWaves points out that “freight forecasting is the skill of analyzing current and future freight market conditions. Knowing how much capacity is available in the market now and will be available in the future is important for winning rate bids and maximizing margins.”
14. Create and Finalize Carrier Contracts
Knowing what is and is not working is critical at any time for freight brokers and managers, but especially so when money is tight. Customers may still be leery of the new guy in town and the cash flow may not be where it needs to be quite yet. Simply matching loads to trucks will get the job done on paper, but in reality, it is going to take a more personal touch to truly be successful as a freight broker. Personal relationships, tailored contracts, and optimized freight management isn’t just about price; it is about building a team of shippers and carriers that can be brought together to satisfy capacity requirements.
15. Sign up for Free Load Boards
With everything going digital these days with freight brokerage management and services, you cannot afford to lose capacity and customers because you cut corners and try to get by with cheap internet services. It is always a worthwhile investment. With good internet services you can quickly and easily access load boards and platforms that can help you locate capacity and match carriers and shippers right away from day one. You can always expand and add on new load boards, dashboards, and management systems as you grow your customer base and profit margins.
16. Automate Your Quoting Process
Different freight transportation specializations may require separate certification and filings, so be sure to check and ensure you are covered legally for the load types you want to manage. Automating the process of managing and tracking RFPs and bids can help save time and free up team members to handle more vital services for the brokerage company. Automating processes can also save money, reduce the number of claims received, speed up invoice factoring and payments and ensure rates stay fair yet profitable.
17. Choose an Accounting Software
With digital freight brokerage and management practices, it is vital to have a firm understanding of accounting processes. Knowing how to start brokering freight loads accounting backing is a critical piece of the freight transport puzzle. Embracing technology and automation can help streamline this process to save time and money by reducing errors, speeding up routine processes, and removing human oversight for a smoother and more efficient accounting process. From invoicing and freight payment processing to ROI reviews and profit-loss analysis, accounting software makes it all faster and easier.
18. Leverage Analytics to Understand Your Performance and Needs
The opportunities to mechanize workflows in a freight broker business have never been as diverse and applicable as they are today. From technology that is specially designed for administrative tasks, like Robotics Process Automation, all the way to dashboard and matching tools that bring carriers and shippers together, there are analytical tools that can help with every aspect of freight management. Industry experts have highlighted one key freight brokerage service that impacts every aspect of internal growth and performance and that is real time data analytics and application.
19. Track Your Pay Cycles to Improve Cash Flow
Broker managers and logistics directors at DFM Data Corp highlight the importance of tracking pay cycles and cash flow when someone is becoming a freight broker: “Every transaction will bring in some revenue and if the load is priced for margin, you will make money on paper. Unfortunately, this won’t turn into cash overnight… While traditional banks offer these lines, they have little experience in freight.” It is recommended by most freight brokerage professionals to take the time to find a financial provider and adviser that is familiar with financing and working capital management in terms of trucking and freight transportation.
20. Market Your Brokerage Business With Blogs, Social Media, and Downloadable Content
Marketing yourself and your company in an effective and digitally-minded manner can help expand your market reach and can get your freight broker startup in front of more shippers and carriers. Connecting with potential customers and staying engaged online with current clients will be easier with effective, informative, and tailored media content. Embrace digital processes and tools, outsource content creation, utilize marketing services, and social media professionals to maximize the digital footprint of your company.
Get on the Path Toward Success With the Right Tech
The increasing popularity and request for freight brokerage amenities has grown at an amazing rate over recent years. This unprecedented growth and expansion has put extreme levels of pressure on the freight transportation market as well as shippers and carriers and brokers. The growing demand for brokerage services means more people are considering taking steps to set up their own brokerage company.
Choose ComFreight’s HaulPay to Help Answer How Do I Start a Freight Broker Business in Today’s Market
Brokers help improve supply chain logistics and speed up the freight transportation process by facilitating fast and easy partnerships between shippers and carriers. With the pressure of e-commerce and digital shipping, freight brokers are becoming more important than ever! Find out how to start a freight brokerage business today with a reliable partnership with industry pros. Make your brokerage successful by surrounding yourself with the right solutions and talent, including ComFreight’s HaulPay. Request a demo of HaulPay today to start the process of becoming a truck broker.