The freight brokerage business is a very interesting industry. A lot of people have asked me questions like “how hard is the work?” or “how much do I earn?” But among those questions, the most interesting one I have encountered is this, “How do you make money as a freight broker?”
source link Before I discuss how a freight broker or a freight agent makes money, I want to take this time to correct this misconception. The freight brokerage business is not an instant path to riches. I agree, there are a lot of different opportunities available for freight brokers and agents, but rather than a get-rich-quick scheme, it’s an opportunity to slowly get rich, and stay rich, if you are willing to pour the effort, skills, planning, and resources necessary to achieve success in this field.
source url In this business, you are well to learn early that even though the revenue is great, it is the profit that remains the key to success in this field. It is estimated that most freight brokers operate in the realm of 12-20% gross margins. It means that these brokers had an estimated 5 million USD in revenue with a gross margin contribution that would fall in between 600,000 USD to 1 million USD.
As for agents, most small freight agents who are new to the industry conservatively earn 30,000 USD to 50,000 USD per year in commissions from working at home while the more experienced ones can earn as much as 100,000 USD to 400,000 USD or more per year.
So how do they make this kind of money?
source site The process of making money for many in the business is pretty simple. Whenever a company wants to move freight from one place to another, be it to supply shopping centers or deliver overseas, they will pay for the cost of transportation. They pay a broker to move the freight. However, it is not the broker who moves the freight by himself, rather, he uses his contacts in the logistics industry to find the right person to transport the goods. In this process, the broker pays the transporter, or the carrier, a lesser amount than what was paid to him by the shipper, and the difference then becomes a spread, which is a broker’s term for profit,
How about a freight agent then?
http://stjohns.lambdaphiepsilon.com/iskysoft-itube-studio-2-mac/ A freight broker agent is a professional who works for freight brokers. They do not carry any liability with any freight movement they close. Liability is shouldered by the broker. Typically, an agent has lesser experience and fewer resources than that of a freight broker and is going through a learning curve. Most of their clients are shippers with a small business that only requires a small volume in terms of freight.
One of the reasons why they earn less than brokers is due to the fact that first, most of their clients come from the broker themselves, and since they are the ones who will be held responsible, they are eligible to earn a cut of the profits. Another reason is that they are the ones who handle the bigger and high risk clients, and thus earn greater profits on those transactions.