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A Brief Guide to Starting Freight Brokerage Business

Freight brokers are intermediaries tasked with facilitating and organizing by connecting shippers with motor carriers capable of moving that freight. This startup guide will help you decide if freight brokerage is for you. The Freight Broker doesn't necessarily own the trucking assets. In that regard, they are similar to those of real estate agents or travel agencies. It has, however, the expertise in finding the most economical and safest way to get freight from origin to destination.
We’re starting with the skills required to accomplish that task. You should have or learn these skills or be able to hire someone possessing them. Besides to honing your management skills in dealing with every aspect of the business, the following skills are required to build a successful freight brokerage business.
Let’s talk about who a freight broker is and the roles and responsibilities of freight brokers in the industry.
Freight brokers are intermediaries tasked with facilitating and organizing by connecting shippers with motor carriers capable of moving that freight.

Business Skills

People, marketing and negotiation skills
These are essential skills to possess. Your ability to connect and convince shippers and motor carriers to work you is at the heart of the freight brokerage business. You will need to talk to several shippers before finding one that is willing and able to trade their current broker for you. In some cases, they may be outsourcing that part in their logistics chain. You will need to convince a potential shipper the benefits of working with you. We recommend working as a freight agent to try out your skills before jumping into being a full-fledged freight broker. Being an intermediary also means the shipper and motor carrier have you to point fingers at when things go wrong. It could easily be overwhelming to many.
Freight brokerage is a very competitive field. To successfully keep your business in track, flexibility, and ability to negotiate or re-negotiate to complete the delivery of your load.
Strategy and Logistics Planning skills
What does your end to end freight delivery strategy look? The moment a shipper is willing to try to trust you with a shipment, how do you find a reliable motor carrier? How do you ensure shipments honor the right pickup and delivery windows set by the shipper and consignee? How do you manage your documents? How do you communicate shipment status to your shipper? How do you communicate potential issues with the shipper or the carrier? It’s easy for a single load to lead your firm into one of that dysfunctional. With so many things that could fail in the logistics chain, it will be a great benefit down the road to identify potential failure points and address them accordingly.
As part of your strategy, define what type of loads and equipment you want to consider. Narrowing your focus will help you learn and be more reliable to the shippers. Knowing the ins and outs of a smaller part of the market is an excellent way to start and make a name for yourself. That, in turn, helps with knowing what type of motor carrier and set minimum criteria based on safety ratings and length in business.
Technology and Organization Skills
The industries dependence on technology is not new. It has, however, has become critical to remain competitive. Embracing new technologies and ability to harness the benefits of tracking and tracing tools, looking for trucks, invoicing and payments, scheduling and many more. Improving your technology skills in your organization is required to build a successful freight brokerage firm.
If your business entirely relies on the telephone or fax, it makes it that much harder to maintain core work hours. Technology can answer many of the repetitive questions. The most common issues include: Where’s my load? When do I get paid? What’s my delivery window? I’m stuck in traffic, can I change my delivery window? Where’s the BOL?
Besides the office or home office costs with a dedicated phone line and computer, see the subscriptions essential to your business.

Conducting Business

As a freight broker, your day to day tasks includes many of the following:
  • Find and network with freight carriers meeting your minimum criteria. Evaluate thousands of carriers. Brokers perform research to choose the best motor carriers and to match you with carriers seeking freight in your lane.
  • Setting up the motor carrier and collecting a signature on your service agreement
  • Compare rates and negotiate with carriers. It’s a time-consuming chore for shippers, but an ordinary course of business for freight brokers.
  • Negotiate rates on behalf of your shipper
  • Communicating the load details to the motor carrier — including pickup, delivery, weight, and so forth
  • Book pickup and delivery appointments
  • Gathering documents like Bill of Lading (BOL) from the motor carrier
  • Paying the motor carrier
  • Invoicing the shipper for delivered freight
  • Communicating status of load and sending relevant documents to the shipper
  • Freight brokers ensure your delivery arrives on time or, if problems arise on the road, they find alternate strategies.
  • Addressing any issues with the shipment with your shipper and motor carrier and maintain compliance by completing necessary paperwork.

Setup Business

Form a company
Officially register your business with your state. Your options include:
  • Sole Proprietorship: Single owner operating as an extension of oneself
  • Limited Liability Company (LLC): This protects you from the financial and legal liabilities of the company
  • Corporation: Owned by one or more stakeholders and managed by a board of directors
To prevent yourself from liability, we encourage you to go the LLC or Corp route. Talk to your accountant about your options, and ask our customer support for discount coupons registering your business with incfile.
Acquire Authority (MC Number)
The FMCSA requires freight brokers acquire broker authority. Applications are relatively straightforward, costing $300 and are completed online using the form here.
Processing Agent
Process agents receive and forward court papers sent in any legal proceeding brought against your brokerage firm.
Brokers must designate a process agent in each state where they maintain an office or establish contracts. Some companies offer “blanket coverage” that assigns a process agent in every U.S. state. Submit form BOC-3 to the FMCSA.
Surety Bond or Trust Fund
The FMCSA requires a surety bond or trust fund in the amount of $75,000. Insurance companies offer a few payment options to enable freight brokers to maintain an active authority. This bond assures motor carriers that freight contracts are guaranteed to be honored by freight brokers.
Register with Unified Carrier Registration (UCR)
All freight brokers must compete the Unified Carrier Registration form. As of this writing, the UCR is going through significant changes. The current fee is $76 per year, and application can be submitted here.
Software Subscriptions
Besides the office or home office costs with a dedicated phone line and computer, the following software subscriptions are essential.
  • Transportation and Management Software (TMS): The AllyTMS starter package can help you get started in the freight business at no cost.
  • Subscribe to load board: The Truckstop, DAT, and 123Loadboard are some of the most well known in the industry.
  • Accounting Software
  • Dedicated phone and internet lines
  • Office utilities