How To Start A Freight Brokerage
Freight Brokerage: A freight broker, in freight transport (cargo), overland in the United States by good is often used as part of the logistics. This may be part of an overall shipbroking using a cargo broker, a freight forwarder, third party logistics broker (3PL), and even a fourth-party merchant when outsourcing is required (as opposed to in-house) for freight transportation. The brokering can be single mode or by multimodal transportation and can use functional brokers on a permanent basis or as needed to protect timely traffic management.
A load may be posted on a truck load board by shippers, intermediaries, or agents. This may occur with appropriate orders, brokers and/or agents that do not have an established logistics base, or entrepreneurs and agents seeking a backhaul for a truck not in a high-traffic lane. Many brokers specialize in certain freight such as full truckload (FTL) or less than truckload, auto, boat or yacht, volume tanker (liquid or dry goods), oversize, equipment hauling on lowboys, flatbed, drop deck, or any other mode of freight transport with enough loads.
Freight Broker Training
Brokers provide an powerful and valuable service to both motor shippers and shippers. They help carriers fill their trucks and earn a commission for their efforts. They help shippers find reliable motor shippers that they might not have otherwise known about. In fact, some companies use brokers as their traffic division, allowing the broker to harmonize all of their shipping and transport management needs.
Brokers aren’t new to the trucking commerce; they’ve been around since the management itself began in the early part of the 20th century. Prior to the 1970’s, however, regulations governing intermediaries were so restrictive that few firms were willing to even try to gain entry into the industry. But with sensational changes in federal transport policy during the 1970’s, regulatory restrictions have eased, creating new entrepreneurial opportunities in the third party logistics provider arena.
An industry so huge and diverse obliges a wide range of participants to thrive. Some of these participants’ titles may be a bit confusing, and some of their responsibilities may overlap. So who are the key competitors in brokerage and what do they individually do?
Freight Broker License
We recently saw a question on a supply chain forum asking what seemed, at first, like a straightforward question: “What is a freight broker?” We brainstormed a simple answer and thought we might be finished answering the question.
However, we found that conversation easily led to a slew of other questions and trains of thought. The conversation continued for an hour as we went around the table on the topic of freight brokers in today’s supply chain atmosphere.
If you’ve wondered if freight brokerage is the right fit for your supply chain needs, but feel like you don’t quite have a full grasp on the concepts—have no fear.
In today’s “Freight Broker 101” lesson, we’ll break down the basic answer, then take it to the next level by challenging you to determine when the best time is for you to start working with one.
Simply put, a freight broker is a liaison between businesses with shipping requirements and transportation carriers. A shipper has their wants and needs, and a driver or transportation carrier has their needs and agenda; this includes anything from pre-planned routes to the type of deliveries each truck can make.
A freight broker is a person who arranges the deal between the two and ensures they communicate and execute the freight hand-off efficiently. They are your “middle man” between your manufacturer and the transport that will take your product to its destination.
Freight Broker Salary
Whether you’re new to the shipping industry and are eager to learn a new business, or you’re a truck driver looking to get away from those long hauls away from your family, the job of freight broker is an exciting option. As a freight broker, you work for yourself, create your own hours, and depending on your dedication to the job, you can make a great deal of money.
What is a Freight Broker?
When a company has a shipment they need to make, they pay a freight broker to move the freight. The freight broker then pays a carrier to ship the product for less than what the original company paid. This is the freight broker’s “spread” or his profit. This profit, minus the operating costs is the salary of the freight broker. A freight broker is the crucial link between shipppers and carriers, sort of a matchmaker between the two.
Freight brokers are also involved with the logistics of shipping. They negotiate shipping rates, track shipments, and keep track of deliveries and pickups. They must make sure everything goes off without a hitch and is done in accordance with all laws and procedures.
How To Become A Freight Broker
Although many shippers have contracts with trucking companies to transport their goods, a significant amount of truck transport in North America is handled by freight brokers. A freight broker is an intermediary between a shipper who has goods to transport and a carrier who has capacity to move that freight. Below are steps you’ll need to take to successfully launch your freight broker business.
- Freight Broker. A freight broker connects shippers with motor carriers to move their goods.
- Shipper. A shipper is an individual or business that has products or goods to transport.
- Motor Carrier. A motor carrier is a company that provides truck transportation.
- There are two types of motor carriers: “Private” (A company that provides truck transportation of its own cargo) and “For Hire” (A company that is paid to provide truck transportation of cargo belonging to others).
- Freight Forwarder. Often confused with freight brokers, freight forwarders are significantly different. Forwarders typically take possession of the goods, consolidate numerous smaller shipments into one large shipment, then arrange for transport of that larger shipment using various shipping methods, including land, air and water carriers.
- Import-Export Broker. They are facilitators for importers and exporters. Import-Export Brokers interface with U.S. Customs, other government agencies, international carriers, and other companies and organizations that are involved in international freight transportation.
- Agricultural Truck Broker. Generally small and operating in one area of the country, unregulated agricultural truck brokers arrange motor carrier service for exempt agricultural products.
- Shipper’s Associations. Shipper’s associations are exempt, nonprofit, cooperative organizations formed by shippers to reduce transportation costs by pooling shipments. Shipper’s associations operate in a manner very similar to that of freight forwarders, but their service is limited to their members and is not available to the general public.
Freight Broker School
In a perfect world, of course, each entity in the industry would handle its traditional role and that’s all. However, the transportation industry is changing so rapidly that once-distinctive lines are always blurring. Also, it’s quite common for a successful freight broker to expand his or her business by creating subsidiaries or additional companies that offer other freight services.
Some brokers also may opt to use agents to develop a wider scope of operations. In this context, agents are independent contractors who represent a freight broker in a given area. This gives the broker a local presence while giving the agent access to the broker’s services for their own customers. An agent’s work is very similar to what a broker does, but the agent functions under the auspices of the broker and the broker is the one responsible for such issues as paying carriers and maintaining the required surety bond.
1.Select a legal structure for your business
Decide if you want to operate as a sole proprietorship, a partnership, a limited liability corporation, or a number of other options. Speak with an attorney or accountant to discuss the pros and cons of each option.
2. Apply for operating authority
Freight brokers involved in interstate commerce must apply for broker authority from the Federal Motor Carrier Safety Administration (FMCSA) using the Unified Registration System. The FMCSA is the division of the U.S. Department of Transportation that regulates interstate commerce and enforces safety rules. There is an application processing fee and it takes 4 to 6 weeks for processing. DAT Solutions can help you get your authority.
3. Designate a process agent
A process agent is a representative to whom court papers may be served in a legal proceeding brought against a broker or carrier. Brokers must designate a process agent in each state where they maintain an office or establish contracts. Some companies offer “blanket coverage” that designates a process agent in every U.S. state. Submit form BOC-3 to the FMCSA.
4. Arrange for a surety bond or trust fund
All freight brokers are required to have a $75,000 surety bond or trust fund. If a freight broker does not live up to contracts with the shipper or carrier, this bond assures that the broker has the cash or assets to cover the amount. Surety bonds can be obtained from an insurance company, which will file the appropriate paperwork with the FMCSA. DAT partners with an insurance company that offers a broker bond with a special rate for DAT customers.
5. Register your business
All brokers, freight forwarders and carriers must complete the Unified Carrier Registration and pay an annual fee. The fee varies a little each year, but generally runs around $60-$80 per year.
6. Check your state’s requirements
Be sure to check with your state regarding requirements to establish and operate a business in your state.
7. Set up your office
- This can be a home office or commercial office space. At minimum, you’ll need a phone, fax and computer. Be sure to budget for recurring costs, such as:
- Utilities (heat, electricity, water)
- Phone and internet charges
- Insurance & Taxes
- Rent (if not a home office)
- Payroll and benefits (if you have employees)
- Subscription fees for load matching, rate benchmarking, and transportation management software
What exactly does a freight broker do?
A freight broker is someone who assists shippers with freight ready to haul by finding carriers who are qualified to haul the load. … Freight brokers can run their own business or work for a freight broker company. They are responsible for arranging the transportation and tracking of a load hauled by a freight carrier.
How much does it cost to be a freight broker?
Freight broker licenses are issued federally and are handled by the Federal Motor Carrier Safety Association. They require a one-time non-refundable fee of $300, and if, like many brokers, you want to register as both a motor carrier and freight broker, you will need to pay this fee twice.
How do you become a freight broker?
- Gain Industry Experience and Study.
- Choose a Company Name and Register Your Business.
- Develop a Business Plan.
- Find the Right Carriers.
- Apply For a USDOT Number and Get Your Broker Authority.
- Get a Freight Broker Bond.
- Obtain Contingent Cargo Insurance and General Liability.