Guide: How to start a freight broker business in the US
The freight industry in the US keeps our supply chain moving, getting goods from point A to point B at a rapid pace. Both businesses and individuals rely heavily on ground shipping for important goods, with millions of packages delivered each day.
Freight brokers play a crucial role in this supply chain, negotiating shipments between shippers and carriers. Running your own freight brokerage is a challenging but rewarding job, and with the ubiquity of the shipping industry in the US, there’s plenty of opportunity for success and profit. Here’s what you need to know to start a freight broker business in the US.
How does the US freight industry work?
The trucking industry in the United States starts with shippers, who need to move freight from one place to another. This could mean shipping raw goods to manufacturers, or shipping products from manufacturers to consumers.
Shippers rely on carriers to move these goods to their final destination via truck. While some large companies have their own in-house trucks, most rely on third-party carriers to ship their goods.
Planning and organizing these shipments is a huge undertaking, particularly with so many goods going out each day. This is where freight brokers come in. Freight brokers work as the middleman between shippers and carriers. They connect goods that need to be shipped with trucks available to drive.
Understanding the role of a freight broker
Freight brokers play an essential role in the shipping process. The job goes beyond just pairing shippers and carriers - you’ll need extensive freight expertise to ensure that each shipment runs as smoothly as possible.
Many shippers and carriers prefer to work with freight brokers rather than schedule shipments on their own. Brokers help carriers keep their trucks full and find efficient driving routes, while shippers use brokers to get their shipments out quickly at an affordable price.
Freight brokers do more than just pair shippers and carriers. They also help both parties negotiate fair rates and find the most efficient routes for each shipment. Brokers also facilitate communication between both parties to ensure that the shipment runs smoothly and that there isn’t any confusion.
Necessary skills and qualifications for a freight broker
The first step to becoming a freight broker is getting a license. The requirements to become a freight broker will vary depending on what state you live in, but in most cases, you’ll need at least a high school diploma or GED equivalent.
While not required, most successful freight brokers complete training courses or attend freight broker school before launching their own brokerage. These courses teach the skills necessary to succeed in the industry so you can hit the ground running once your brokerage opens.
To be a successful freight broker, you’ll need to be self-motivated and have the ability to juggle many different tasks at once. You’ll need strong sales and marketing skills to bring in new clients, and you’ll also need strong negotiation and communication skills.
On top of that, you’ll need a comprehensive knowledge of freight regulations both in the United States and in Canada. Previous experience working in the freight industry will go a long way when running your own brokerage. Many people work internships or entry-level positions for existing brokerages before launching their own.
How to start a freight broker business in the US
To get started as a freight broker, you’ll first need to register your company with the government. It’s always helpful to have a lawyer on hand to guide you through this process.
You’ll need to decide on a name and a company structure for your business. Depending on how you want to operate, you might choose to be a sole proprietorship, a partnership, an LLC, or another business structure. You’ll need to register your business both federally and locally.
Freight brokers in the US must complete a very specific registration process before they can operate. The first step is to apply for broker authority, which is done through the US DOT and the Federal Motor Carrier Safety Administration. You’ll also need to complete the Unified Carrier Registration and pay an annual fee.
In order to successfully process and finalize your broker authority, you’ll also need to set up a freight broker bond worth $75,000. Many insurance companies offer these bonds and will help you file the necessary paperwork. On top of that, you’ll need to designate a process agent. If one of your brokers or carriers is involved in any legal proceedings, your process agent will receive the court documents and act as your representative. Both of these steps are intended to protect both your business and the partners you work with.
Operating a successful freight broker business
Once your business is registered, you will be able to start operations. The first step will be to develop a robust business plan laying out your entire growth strategy. A business plan will be essential if you plan to apply for third-party funding, and should detail who your target clients are, your marketing strategy, pricing, and more.
You’ll also need to set up an office space. If you’re operating as a sole proprietor, you may be able to work from home, but if you’re working with a team, you’ll likely need a dedicated workspace. Additionally, you’ll need to set up a system to document your transactions. This should include contracts, receivables and payables, and much more.
Once you have the structure of your business set up, it’s time to find shippers and carriers to work with. This often requires extensive research as well as cold calling and emailing. Over time, you’ll build connections that will make it easier to find loads.
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