How To Become A Freight Broker
March 5, 2019
March 5, 2019
The trucking industry is looking as good as ever, expected to grow by 2.3% per year between 2019-2024. Good brokers are always in demand, and if you manage to get a solid foothold in the industry you can earn yourself a pretty penny along the way, with freight broker salaries topping out around $100k – though higher is always possible.
You may wonder, “how can I become a freight broker with no experience?” – but learning how to be a successful freight broker can be attempted by anyone and doesn’t have to be a
What does a freight broker do?
A freight broker’s primary role is to act as the intermediary between shippers and carriers – those needing something moved, and those who can move it. They build a network of both, and with these contacts are able to procure the best rates and the fastest delivery times for shippers, and a consistent supply of cargo for carriers.
1) Do Your Research
Walking into the industry blindfolded is just about the worst thing you can do. Make sure you know why you’re getting into the trucking industry, and what you can expect from it. If you’re not particularly clued up on the trucking scene, try spending some time with industry media, such as leading websites, and once you’ve established some good fundamental knowledge, you can get into the specifics of brokerage.
2) Make Sure You Have The Right Skillset
Being a truck broker absolutely requires a bunch of interconnected skills, but they’re all perfectly able to be learnt by anyone with the motivation to get stuck in.
The main areas to focus on are:
Your general computer skills – as you’ll need to make use of software and overall keep track of your general administrative procedures on a compute.
Your business and basic math skills – you’ll have to make plenty of business decisions as a freight broker, whether you’re working for yourself or a company. While you’ll likely always have a calculator nearby, having a good grasp of basic mental arithmetic can go a long way to keeping a cool head when making calculations on the fly and throughout phone calls.
Speaking of phone calls, your people and communication skills are vital – much of your work will be done by speaking on the phone or via email with your clients, so make sure you feel comfortable in negotiating deals and keeping the charm on – treating clients as future friends goes a long way in brokerage – freight brokers have plenty of competition, so any edge you have to convince clients that you’re the best choice should be capitalized on!
If a client feels you’re the right person to move their freight for them, you’re already halfway there – while there may be plenty of competition, there are also lots of sub-par brokers and brokerages out there, so stay a cut above.
3) Register Your Brokerage Company, And Pick A Name
Take a look at the US Patent and Trademark Office and see if your name of choice is already taken. Next, do some research into which kind of business entity will be the most beneficial for you. This will vary on a state-by-state basis, so it’s best to do your own research, and preferably consult an attorney before making a firm decision.
4) Put Together A Business Plan
This is important for a few reasons. First off, having a business plan will give you a clear path to pursue, allowing you to play to your strengths, target the right customers, and work out which type of services you will be offering, at which prices.
Having a plan is doubly important if you plan to borrow money, as a bank or other such institution is highly unlikely to lend you a nickel without having a business plan to present to them.
5) Start Building Your Carrier And Shipper Network
Alone and without shippers or carriers, you’re not much of a freight broker.
For carriers, you should firstly (as part of your business plan) have identified which type of customers you are targeting, and use this information to nail down which carriers are right for you. Next, you can use fleet directories, load boards, trade shows, and even simply search engines such as Google, to locate and reach out to carriers in your geographical area and chosen field. Make sure to vet them – carrying out basic risk assessments, possibly meeting them in-person, and ensuring all their certification is above board.
There are many ways to reach out to shippers, and some of the easiest methods can be staring you right in the face. Keep an eye on the goods that surround you on a day-to-day basis, and check how they are moved and made. Checking the competition can give you a good idea on who is moving what, and what gaps may be left in the market. Similar to the fleet directories when searching for carriers, you can take a look at industrial directories such as MacRAE’s BLUE BOOK to do research on manufacturing companies, narrowing down your search to industries that match up with your business plan and what you are already knowledgeable on. Companies these days often source parts for their products from a multitude of suppliers, not all of whom may be able to move their own cargo.
Once you have some contacts lined up, cold calling is the way to go. Emails are far easier to ignore than someone at the end of a phone line, and if you have done your research and have the right information ready to go, you can prove to them from the get-go how much you value their time with a no-BS proposition. Make notes of what is said during these calls, as even if they don’t all work out – and many won’t – you will get some valuable insights into what shippers and carriers appreciate and desire from your service, as well as how they are currently operating.
6) Apply For A USDOT Number And Freight Broker Authority
At this point, your contacts should be starting to fall into place and you should have a much better feel for the brokerage industry. Next, you need to sort out a few more administrative procedures to make sure your company is ready to operate fully legally.
At your local Department of Transportation branch you will be able to apply for a USDOT number. Once you have this, you can apply for an MC Number, which gives you so-called interstate Operating Authority. You can read more on how to do this on the Federal Motor Carrier Safety Administration (FMCSA) website. Be aware that there is a cost of $300 attached to this application.
7) Apply For A Freight Broker Bond (Insurance)
A freight broker bond essentially covers you in scenarios where you are held responsible in cases of financial losses tied to freight shipments you were overseeing. A minimum $75,000 bond is needed, and can be acquired from many insurance agencies. You will need to apply for a BMC-84 or BMC-85, as part of which you will have to pay a percentage of the bond to the agency up front.
Due to the inherent risk in giving you a bond of this size, agencies are likely to take a good look at your financial situation, with your credit score being a primary factor; the lower your score, the higher the percentage you need to pay as a premium.
A different form of insurance is the BMC-34, which covers losses and damages, and there are a variety of other BMC forms which cover a variety of different issues. It is hard to say exactly which insurances you will require, but many shippers will want to take a look at specific types before entering into business with you.
8) Apply for a BOC-3
Yep, the paperwork does drag on a bit at the start. A BOC-3 stands for blanket of coverage, and must be filed for every state you will operate in. You will need to select a process agent for each state, and then submit the filled out BOC-3 form to the FMCSA.
9) Work Out Your Financial Backing
You may already be financially set to cover your own costs, in which case you can skip this step. However, for most it will be necessary to take a line of credit. This is due to you being a go-between, or intermediary, as a broker, meaning that at times you will have to pay carriers for a load before you are paid by the shipper yourself. In terms of administration and finance, this is the final step.
10) Make Sure Your Office Setup Is Complete
As a freight broker, you essentially become many different roles wrapped up into one, and therefore you’ll need a little bit of kit to keep you rolling along.
A computer is the obvious primary piece of equipment, but at the periphery come some others. A fast and stable internet connection is vital, as is a phone with multiple lines (and a headset to give you hands-free abilities), a printer/scanner combo, and potentially even a fax machine – the trucking industry hasn’t modernised quite as fast as many other industries, so some rather more ancient technology hasn’t been eliminated yet.
Brokerage software is a final piece of the puzzle. With our FreightTrust TMS platform, you can guarantee yourself an edge when it comes to the freight brokerage market. While other brokers are still using outdated forms of creating and managing paper-based shipping documents, you could be fully digitized – saving yourself both time and money in the process.
Good luck with starting your journey as a freight broker! It can be a challenging start, but if you manage to get the ball rolling and stick at it, the sky’s the limit.
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