Do you want to start a freight brokerage business? If yes, here is a complete guide to starting a freight brokerage business with NO money and no experience .
Okay, so we provide you with an in-depth sample freight brokerage business plan template. We also took it further by analyzing and writing a sample freight brokerage marketing plan backed by actionable guerilla marketing ideas for freight brokerage businesses. In this article, we will consider all the requirements for starting a freight brokerage business. So put on your entrepreneur hat and let’s get going.
Why start a freight brokerage company?
Before the 2050s, railroads were considered the route of commerce in the United States until Interstate highways were created that used trucks as a means by which commerce could be carried out effectively. According to statistics, about 43 million tons of goods worth $ 29 billion are transported daily through roads.
This is what led to the creation of freight brokers who saw an opportunity to ensure that manufacturers, businesses, and shippers find all the trucks and drivers that will help move their products to the desired destination in time for a cutoff.
Freight corridors are part of the trucking industry and have existed since the industry began in the twentieth century th . Before 2070, existing brokers had to face increasingly stringent government regulations, leading to only a few brokers in existence in the industry. However, in the 2070s, restrictive regulations were relaxed, allowing more people to enter the industry and make some money.
While the freight broker business may seem easy enough to start, it’s not that easy – you’ll need an insurance policy and a federal license from the Federal Motor Carrier Safety Administration (FMCSA). In order for you to do business with shippers, you will need a broker authority and a surety bond.
The surety bond not only gives you financial credibility but also professional integrity, as shippers need to be sure that their logistics is being handled by a business that will not fall apart in no time.The industry has recently increased its surety for companies to participate in fair and ethical best practices.
While it is important that you conduct a thorough industry survey before starting your freight brokerage business to get an idea of what to do and expect, the quickest way for you will be to start as an agent for a larger company, as this it would give you all the experience you would need to run your own business.
Also, although there are several online schools that claim to offer courses that can help you become a freight forwarder in no time, they are simply a money-wasting adventure as they cannot help get clients for you and therefore Your best bet is to learn the ropes first as a freight forwarder representative.
There are several things that you therefore need to consider if you are looking to start your own freight brokerage business in the United States and be successful.
Some of the steps you need to follow are; making sure to select a legal structure for your business, obtain the necessary intermediary authority from the FMCSA, appoint a process agent in each state from which you will be running your business, ensure you have the required bond of at least $ 75,000 and also make sure you that your business is properly registered. In addition to deciding on a location for your business, you will also need to develop a comprehensive business plan.
How to Start a Freight Brokerage Company A Complete Guide
- Industry overview
The freight brokerage business industry is one that does not have companies that dominate the industry and have a large market share. The industry according to IBISWorld generates $ 123 billion and between the periods of 2011 and 2016, it experienced a growth of 5.3 percent. There are an estimated 46,500 freight brokerage businesses employing more than 288,000 people.
The industry is fragmented in nature and because of this, there has been an increase in competition, especially in areas such as pricing and efficiency. of services. The industry is expected to grow based on the prominent role that the domestic economy will have to assume.
Between the five-year periods (2011 to 2016), the freight brokerage industry has had a huge demand for its services. . This is because domestically, the volume of demand increased, leading to more freight services.In addition, emerging markets that were considered strong, encouraged trade and caused an increase in demand for trade-related services. in the industry.
However, despite the enormous growth achievements of this industry, the next five years (2016 to 2021) is expected to see a decline in demand for services, especially as there will be fewer emerging markets, leading to limited trade volumes. .
The barriers to entering the freight brokerage industry are very low and have caused an increase in competition that will lead to the consolidation of several companies. While the low barrier to entry can be advantageous for new entrants, it does not favor them once they have established themselves, making growth very difficult.
Also, while it is easier for companies to focus on one or two niches, those that determine industry trends generally settle for niches that operate in domestic and international operations. The main players in the industry have extensive systems that will allow them to compete and have an advantage over other players.
Globally, freight brokerage firms generate revenues of $ 270 billion annually. Countries like China, South Korea, and Singapore are known to have not only the busiest container shipping ports, but also the busiest airports, based on the volume of cargo transported.
Other countries such as France, Dubai, Germany, the United Kingdom, the Netherlands and Japan are also considered important international freight centers. In the United States, there are about 20,000 freight brokerage firms that generate about $ 60 billion annually and this consists of companies that have a single location and those that have multiple locations.
Between January 2014 and September 2016, the authorized freight brokerage firms in the United States increased from 13,565 to 16,932. However, according to the Freight Carrier Security Administration (FMCSA) record, more than 7,000 freight brokers were licensed during the same time period.
The different numbers in the data provided show that while the FMCSA record is for all freight corridors, the other data is for existing freight corridors, and this shows that there are several freight corridors that during this period closed while more people were registering. Therefore, this shows the volatility of the industry.
The industry saw certain regulatory changes starting in 2013 that affected many brokers. One of the regulations was the bond increase by the FMCSA in 2013, which generated a lot of controversy, especially since the bond costs were considered higher.
This led to bankruptcy of many freight forwarders and yet also enhanced the reputation of the industry as customers had more confidence in the industry as companies had to be fair and ethical in their practices. Additionally, this led to increased competition in the industry as gamers began to use technology to try and gain an advantage over their competitors.
Technology has played a huge role for freight brokerage companies as many are focusing on the implementation of electronic recording devices (ELDs) that will enable efficient freight broker services to their clients. Additionally, to keep up with changing trends, freight brokerage firms are looking to improve their hours of service, especially in regards to the truck drivers they will partner with. Freight rates are expected to continue to increase because, although there will be reduced capacity, the demand for services in this industry is expected to increase.
Starting a Freight Brokerage Firm Market Research and Feasibility Studies
- Demography and Psychography
The demographic and psychographic makeup of those who require the services of a freight brokerage is not restricted to just shippers and truck owners, but also to other organizations that need freight services, so if you are looking to define the data demographics of your freight brokerage business, you should be sure to conduct a thorough survey of this market as the internet has opened up many opportunities.
List of Niche Ideas Within Freight Brokerage Company You Can Specialize In
In the freight brokerage industry, companies help organize freight transportation between carriers and truckers. Therefore, a freight forwarder is considered a broker. The environment is one that is considered very competitive as freight brokers have to compete with each other by offering services that will allow them to stand out; This is where niche ideas come in.
Before deciding which niche is best for your business, it is important that you study those available to determine which one will best suit your capabilities and generate the necessary income. for your business.Therefore, below are some of the specific areas that you need to focus on to stand out from your competitors;
- National cargo brokerage services
- International cargo brokerage services
- Common brokerage services that do not operate ships
- Customs brokerage services
The level of competition in the freight brokerage industry
The level of competition in this industry depends entirely on the location of the freight forwarder, which is why most freight forwarders prefer to locate their businesses near shipping ports or airports.
The demand for services in this industry is generally driven by manufacturing production in the country, as well as by the level of international trade. Companies that are considered profitable are typically those with efficient operations, industry experience, as well as extensive relationships with shippers and carriers. Large companies can generally compete based on their existing relationships, as well as access to better technologies, while smaller companies compete by specializing in a niche.
Even though the freight brokerage industry is fragmented with the top 50 generating companies roughly a third of total revenue, competition remains fierce. Therefore, if you are looking to start your freight brokerage business in the United States, you must be prepared to face the competition.
List of well-known brands in the freight brokerage industry
In every industry, there are brands that stand out due to some activities they are involved in and freight brokerage. The business is no different. Despite the fact that there are no dominant companies in this industry, certain brands have performed well on their own and are well known for their advertising and marketing strategies, excellent customer relationships, quality services, and many others.
Below are some of
- CH Robinson Worldwide
- UPS Supply Chain Solutions
- Expeditors International of the recognized freight brokerage brands in the United States of America and even worldwide. Washington
- DHL supply chain
- CEVA logistics
- Nippon express
Starting a freight brokerage business has gotten cheaper and this has allowed freight brokers to rise, especially as the price to get bonuses has dropped. However, with the increasing regulations experienced in the industry, freight brokerage firms have had to maintain a standard that has allowed for a fair and ethical means of doing business, thus increasing clients’ confidence in the business.
that are transported by trucks are still in high demand both inside and outside the United States, especially within NAFTA partner countries. According to statistics, 70 percent of all cargo in the United States is moved by trucks and not shows signs of slowing demand. The only challenge this has posed is that there are few truck drivers available to drive the trucks.
Carriers who have gotten used to the idea of outsourcing their logistics have provided a boom for the freight brokerage business. This has also affected shippers who, in an attempt to make their customers happy, will not mind having to use the services of freight brokerage companies.
More people are entering the freight brokerage business and, despite this fact, growth has remained strong, thus allowing freight brokers to make a big profit. The growth of the economy adjusts the carrying capacity, which also leads to higher rates. Freight brokerage companies charge a certain percentage for each cargo that is moved, and therefore the higher fees are definitely good news. p0> When starting a business as an entrepreneur, you are faced with the choice of starting your business from scratch or buying a franchise. While each option has its pros and cons, and you’re likely to go for the one with the most pros, you’d better consider your overall goals and objectives and make sure the one you choose aligns with these goals and objectives.
If you intend to buy a franchise, you will need to study the franchise opportunities available to learn about their capabilities and how much it will cost so that you do not end up spending money on a franchise that would not be a perfect fit for your business.
If, however, you want to be in control of your business from the start and feel like you can handle whatever challenges may arise, then starting your business from scratch is what you should consider. That is why it is highly recommended that you create a comprehensive business plan when you are looking to start your business as this document will be very helpful in allowing you to manage certain parts of your business effectively.
Additionally, you may need to hire other experts in certain areas to help you manage certain aspects of your business so that you can focus on creating policies and moving your organization forward.
Possible Threats and Challenges You Will Face When Starting a Freight Brokerage Business
When starting any business anywhere in the world, you should expect challenges and threats to arise, so be prepared for them. Entrepreneurs who are serious about their business generally have proactive strategies so that they can handle some of these threats and challenges right away. As an entrepreneur, you should be aware that not all threats and challenges can be handled effectively.
Therefore, some of the threats and challenges that you are likely to face when starting your freight brokerage firm include; having to deal with changing industry trends, having to deal with intense competition from existing and successful freight brokerage firms in your location, being an unknown brand in a competitive environment, and having to deal with new competitors establishing businesses in the same location as yourself.
Starting a Freight Brokerage Firm Legal Matters
- The best legal entity to use in this type of business
Although there are five types of legal entities that an entrepreneur should consider when starting his business, each of them has its own pros and cons and that is why it is necessary that you consider obtaining the services of an attorney or accountant to help you with a legal entity that is best suited to your business in accordance with your intended goals and objectives.
The legal entities that are available to you when you start your freight brokerage business are sole proprietorship, partnership, S Corporation, C Corporation, and Limited Liability Company (LLC). Although these legal entities have their basic components, the practice may differ depending on the state from which you operate your business.
While a sole proprietorship and legal entity partnership form might be the easiest to set up, it could limit the growth of your freight brokerage business, especially as you will need to have a bond of at least $ 75,000 before you can be an agent. loading. Now, most entrepreneurs may not have this amount and, due to the type of legal entity they have chosen, they cannot obtain loans with which to start and run the business.
The S Corporation, C Corporation, and LLCs are more formalized than the sole proprietorship and partnership type of legal entity, requiring documentation and the presence of an attorney or accountant. The S Corporation and LLC are a bit more flexible than the C Corporation, so entrepreneurs starting this business generally prefer either of these two. / strong>
When starting your freight brokerage business, it is important that you come up with a unique name for the company, as your name creates an impression about your brand for others within and outside the industry. This is why choosing a business name is not something to be handled trivially because it should not only be unique and attractive, but it should be memorable, easy to pronounce, and also indicative of the industry you are in.
Below are some of the catchy business names to consider when starting your freight brokerage business in the United States of America;
- TTT Logistics
- Messers Freight Brokers, Inc
- Push logistics services
- Tara Freight Brokers
- Carma freights
When running any business in the United States of America, it is mandatory that you have basic insurance policies, as having insurance protects you from any type of liability that arises during the process of starting or managing your freight brokerage business.
It is imperative that you set aside money to purchase the insurance policies that you will need for your business, however you need to know what insurance policies you are getting in advance and so you may need to consult an insurance agent or broker who understands your industry sufficiently. well enough to list the insurance policies you will need for your freight brokerage business.
Some of the basic insurance policies that you should consider purchasing when starting your own freight brokerage business in the United States of America include:
- General insurance
- Liability insurance
- Workers’ compensation insurance
- Business Owners Policy Group Insurance
- Car insurance
- Health insurance
- Errors and omissions insurance
- Property insurance
- Payment protection insurance
Intellectual property / trademark protection
A freight forwarder is regarded as an agent that unites shippers and truckers and is therefore under the service-oriented industry. Applying for intellectual property protection as a service provider is not often considered a priority among most entrepreneurs in this industry.
However, there are certain entrepreneurs who consider protecting any aspect of their business as needed, and so apply for intellectual property protection for their company names, logos, slogans, or any production materials deemed important.
Is professional certification required to operate a freight brokerage company?
When deciding to start a freight brokerage business, you must realize that what your clients expect to see are results and their previous experience, therefore, while it is necessary to have certain legal documents before starting the business, have professional certifications of any kind is not considered a necessity.
If, however, you intend to get professional certification to boost your company profile and have an edge over your competitors, then you should check for reputable organizations and associations offering accredited courses.
List of Legal Documents You Need to Run a Freight Brokerage Business
When starting any business in the United States, it is essential to have legal documentation if you want your business to have no problems during the course of its operation. Therefore, you cannot start and run your freight brokerage business without having any legal documents, because if you try and get caught, you will be penalized by the law and regulatory authorities.
If you are unsure of what legal documents you may need for your freight brokerage firm, you can either enlist the services of an attorney or do your own research to find out what you will need. Some of the legal documents you will need to legally run your brokerage business cargo include:
- Certificate of incorporation
- Operation agreement
- Insurance policies
- Lease agreement
- Contract documents
- Nondisclosure agreement
- Bill of lading
- Carrier ratings
- Employer Identification Number (EIN)
- Business license and permit
- Freight broker license
- Commercial plan
- Broker authority
- Surety bond
- USDOT number
- Form BOC-3
Financing your freight brokerage company
Although you may have a great business idea, if you don’t have the right start-up capital for your business, your business idea is likely still just an idea, which means having up capital is very important. Not all entrepreneurs have all the start-up capital they need and therefore generally have to seek the funds to start the business from private investors and commercial banks.
That is why it is generally important to have a comprehensive business plan as the document convinces those who intend to approach your commitment to the business, the growth potential of the business, how and when you will repay the loan.
Here are some of the options you will need to consider when looking for seed capital for your freight brokerage business;
- Generating part of your initial capital from personal savings and from the sale of shares and properties
- Provisioning soft loans from your friends and family
- Loan application from a commercial bank
- Borrowing from private investors and venture capitalists
Choosing a suitable location for your freight brokerage business
When starting any type of business, one of the central factors that you will need to consider is the proper location. Depending on the type of business you are going to enter, the right location can boost and grow your business to the desired level. An advantage of this type of business is that it can be run from your home or a commercial facility.
Regardless of where you are running your freight brokerage business from, the basics you will need are a computer, phone, and fax. Other services that are essential are utilities and subscription fees.
If, however, you intend to grow a business that can adequately compete in the highly competitive scare brokerage environment, then running your business from home should not be considered at all. Running your business from a commercial facility allows you to employ people to help and also show your clients how official you consider your business.
Your facility should not be located in an area that is not easily accessible or not sufficiently visible, because this would mean that you would have to spend more to get customers to know where you are, which might not be too good for your business.
The best thing to do when searching for a suitable location for your business is to enlist the services of a real estate agent who is experienced with your type of business and therefore will help you choose a suitable location that is within your budget for you.
Start a Freight Brokerage Company Technical and Personnel Details
The freight brokerage industry changed its structure in 2013 when the surety bond was increased, forcing some brokers to close the business and the industry to maintain best practices. Therefore, as someone looking to start a freight brokerage business, you must be aware of the volatility of the industry and be prepared for it.
There are two things you would need to make your business successful and they are finances and location. If you don’t have the finances to start the business, your business may fall apart before it even starts. Another important detail that should not be overlooked is where you intend to locate your business, as proximity and accessibility play a role. vital in the growth of your business.
The freight brokerage business is one that now has to rely on technology to meet trends, and therefore you will need to get the right software that will allow you to keep track of multiple activities at once. Other equipment and tools you will need are; computer, telephone, printer and fax machine.
For your business to be successful, you will need to build the right business structure by employing competent people to help you achieve your intended goals and objectives. Some of the ones you will need to hire are; Executive Director (CEO), Administrator and Human Resources Manager, Accountant, Marketing and Business Development Executive, Customer Service Executive, Security Guard and Cleaner.
From the above analysis, you will need at least 7 key people in order to run your freight brokerage business successfully.
The Freight Brokerage Company Service Delivery Process
A freight brokerage company has a vital role to play in the economy to ensure that manufacturing plants receive their materials and also distribute products once they are finished. Hence, this means that freight brokerage companies act as the connecting party between shippers and freight companies.
When looking to start a freight brokerage business, it is essential that you apply for a USDOT number, as this will be used when applying to become a broker with the Federal Motor Carrier Safety Administration (FMCSA). Once you have been able to successfully complete the form, you will be granted an agent authority which is a license that authorizes you to become a freight forwarder.
A basic requirement that you will need is a surety, as this is a requirement for brokers who want to start their business in this industry. A surety is insurance that is used as a guarantee for shipping companies to receive their cargo space.
This allows for a background and credit check to be performed prior to the bond that must not be less than $ 75,000 can be issued. Also, in order to do business in any state, you will need to work with a process agent in each state.
Starting a Freight Brokerage Company The Marketing Plan
- Marketing ideas and strategies
When making plans to start a business, an entrepreneur must be very particular about how to generate targeted funds for the business and the main way this can be done is through marketing. Marketing involves many processes, as you will have to know what it is that your intended customers want and then ensure that you meet this need. Marketing is generally seen as a double-edged sword, as it not only allows you to generate the income that you will need for your business, but also, through that measure, you will increase the necessary publicity for your business.
However, before you can create effective marketing strategies for your business, you need to conduct a thorough market survey regarding the business you intend to enter. A market survey will allow you to have all the necessary information about the business. It will also let you know who your target market is, what your identifiable characteristics are, what they expect from you, and who your competitors are.
The freight brokerage business depends on the provision of the service and because it will compete against brands that have been in business for a very long period of time and have all their networks and clients in place; You may need to enlist the services of an experienced marketing consultant who understands the industry you are targeting and how your business can compete and stand out from your competitors. Using this method, you can compete fairly against your competitors.
Hiring marketing executives is another good idea as well, as they are more likely to understand your overall corporate goals and strategies and create marketing strategies that are not only effective but align with your overall goals and objectives. Your marketing executives can also modify or eliminate strategies that have not had the desired impact that they intend.
Therefore, some of the marketing ideas and strategies that you will need for your freight brokerage business include;
- Introducing your freight brokerage business to potential corporate clients by sending you a brochure that includes your services, fees, and contact information
- Empower your marketing and business development executives to directly market your freight brokerage business to your intended target market
- Make sure your freight brokerage business is listed in the yellow pages and online directories
- Be sure to place ads in local and national newspapers and magazines, as well as on radio and television stations
- Use your social media platforms like Facebook, Twitter, Google Plus, and Linkedin to market your freight brokerage business services
- Distribute brochures and flyers in various strategic locations
Strategies to Increase Your Freight Brokerage Brand Awareness and Create Your Corporate Identity
Whatever business you want to start, without the right amount of business advertising, your business might not generate the income you need to be successful. You should not forget that freight brokerage business can be quite competitive, and if you don’t take the proper steps to increase your brand awareness and create a corporate identity, your business may not survive for long. Advertising your business allows you to not only create awareness for your business, but also generate income that will grow and sustain your business.
If your intention when starting your freight brokerage business is to know beyond the limits of your business location and region, then it is very necessary to increase your brand awareness. The benefits that advertising brings is the reason why large-scale companies don’t mind spending a certain amount of money annually to increase their brand awareness and create a positive corporate identity for their businesses.
Your advertising strategies must be very well designed.If you want it to be effective and for this to be the case, you need to first study your target market to know which advertising strategies will attract their attention and turn this attention into sales that will generate income for your business. .
Because you will be promoting your business to gain awareness in a market that is very competitive and has big brands, you may need to enlist the services of an experienced advertising consultant who has knowledge of the industry you are in. Get in there and help design advertising strategies that are not only in line with your corporate goals and objectives, but will also be highly effective.
Below are some of the platforms that can be used to increase your brand awareness and create a corporate identity for your freight brokerage business as well;
- Be sure to place ads in local and national newspapers and related magazines, as well as on radio and television stations
- Install highly attractive and unique billboards in strategic and visible locations throughout the area where your business operates
- Attend related seminars, events and conferences in order to spread the word about your freight brokerage business and your network with others as well
- Use social media platforms like Facebook, Twitter, Linkedin, and Google Plus, to create the right awareness for your freight brokerage business.
- Create a unique and distinctive website and promote your activities, services and your brand in general to your target market
- Ask your loyal and satisfied customers to help spread the word about your services to others to help create greater awareness of your freight brokerage business.