A freight broker acts as an intermediary or middleman between the shipper (the person or company who owns the cargo that needs to be transported) and the carrier (the company contracted to transport the cargo). The freight broker determines the specific services and needs of the shipper and then identifies a carrier that has the perfect freight solution to do the job. The broken then receives compensation (a flat rate or a percentage of the fee) for its role in arranging the transaction.
Starting your own freight brokerage requires thorough preparation. Here are the things you need to do to become a freight broker:
- Gain Industry Experience and Study the Trade – though freight brokering does not require knowledge and experience in the field, it is still in your best interest to have first-hand experience and knowledge if you are planning to start your own brokerage. There are several Freight Broker Training Courses available online that can guide you in your career as a freight broker.
- Choose a Company Name and Register Your Business – If you feel that you have studied enough and that you now have adequate knowledge about the business, select a good company name and register your business. You can check with the US Patent and Trademark Office to check if the name you’ve chosen is still available. Be careful in selecting the kind of entity you’d like to register as – be it as a sole proprietor, a partnership, a limited liability company, or as a corporation.
- Develop a Business Plan – having a solid business plan means that you have a complete strategy for your business. The more you invest and the more you figure out the specifics of the market, the better prepared you are if you have a business plan.
- Find the Right Carriers – Your carriers define your brokerage, so having the right ones will spell success for your business. There are several forum websites that you can go to find the ideal carriers.
- Apply for a USDOT Number – Before you start operating in the field, you need to get a freight broker license from the Federal Motor Carrier Safety Administration (FMCSA). The licensing is also referred to as obtaining your Motor Carrier Operating Authority (MC authority).
- Get a Freight Broker Bond – If you’ve never worked with surety bonds before, it’s important that you understand what they are: in essence, a three-party contract. Your freight brokerage is the principal, the FMCSA is the obligee, and the surety is the one providing the bond. The purpose of the freight broker bond is to guarantee that you will follow all applicable rules and regulations in your brokering.
- Obtain contingent Cargo Insurance and General Liability – Insurance is important in this business, so make sure to fill up forms BMC-91 or BMC01x for bodily injury, property damage and environmental restoration.
- Designate Agents – At this stage, once you’ve obtained your bond and insurance, you’re ready to choose your process agents for each state you do business in. This can be done through Form BOC-3 (Designation of Agents for Service of Process) which you need to fill in and submit to the FMCSA.
- Get Your Equipment – you don’t technically need a physical office at this point of your business, instead invest on a computer, a printer, a copy and fax machine, and a solid internet connection.
- Collect Enough Capital – Unless you have enough cash already at your disposal, you will probably have to consider the line of credit you can secure before you start brokering. Since you will be the intermediary between shippers and carriers, you’ll often have to pay truckers for the shipment before you’ve received the payment from the shipper.
- Market Your Brokerage – Last but not the least, market your business in order to gain potential clients.