Do This Before You Launch Your Own Freight Brokerage
If you don’t have logistic or freight broker experience, you’re in the right place.
You might be asking yourself (or Alexa):
How Do I Become a Freight Broker?
Freight brokering is a hot entrepreneurial subject, particularly when it comes to the earning potential. We could spell out all the projections and forecasts for the industry, but for the sake of brevity, we won’t.
Currently, the average reported salaries for brokering freight (taken from the top salary websites) comes to around $56,000/year. However, someone who hustles can easily break six figures. We know many of these brokers personally.
Before you jump into brokering freight, current brokers and other industry experts agree these following steps are the must-do tasks before you set out on your own:
Gain Industry Experience
Freight Brokering, like most well established jobs, has its own language, customs, and culture. One of the best things to do is immerse yourself before launching your own brokerage. One way to become familiar with the industry is to drive a truck. Depending on the kind of driving you’re interested in, this might require a Commercial Driver’s License (CDL). Truck driving would give you some experience on the carrier’s side, which is extremely valuable. As freight brokers are constantly interacting with drivers, it’s beneficial to have some insight into their day to day tasks and frustrations. When you become a broker, this can help you avoid those problems for carriers, and they’ll want to work with you more.
Another way to gain industry experience is to go to work for an existing brokerage. Calling on trucks for someone else will familiarize you with the industry before venturing out on your own. Using logistic jargon in an office setting will help it integrate more naturally into your daily conversations. For an industry jargon reference, download our Trucking Term Glossary.
If you work for someone else with the intention to launch your own freight business in the near future, be careful of signing a non-compete clause. Our business developer, Nate Cross, has some words of advice on how to navigate this, so read his article To Compete or Non-Compete.
Yes, study. Logistics requires immense skill the two most touted subjects in school: communication and math.
Brokers call anywhere from 5 to 20 carriers to book a load, so exceptional soft skills are key components to being a successful broker. Freight brokers need to sell themselves, their services, and maintain long relationships. Being able to talk to a variety of personalities and members of different cultural identities can make or break a career. These same stellar communication skills you use to book carriers will be needed to secure your own shippers when you go out on your own. Freight industry experience is key, but it won’t do much good unless you can talk potential customers into a phone conversation or meeting.
Brush up on math skills. Calculating margins, miles, capacity, and weight have freight brokers crunching a lot of numbers. Even if you have computer programs doing a lot of the work, being fluent in math contributes to understanding what all the numbers mean in relation to each other. When you understand the formulas clearly, you will calculate easily. It wouldn’t hurt to watch a few YouTube videos on the basics of Excel or Google Sheets so you can easily enter formulas for quick calculations.
Freight Broker Training
If you want to skip working for someone else, it’s possible to enroll in a Freight Broker Training program. There are many broker courses out there, one being the TIA’s New Broker Course. The Transportation Intermediaries Association (TIA) is the most reputable association in the freight industry. It is currently the governing authority in terms of industry ethics, and members must comply to their Code of Conduct. Logistic Dynamics, Inc. (LDI) has been a registered member for several years, and we’ve met their rigorous demands to be a distinguished Diamond Certified Broker We feel comfortable claiming their course will be taught to the highest standards
Another option is to join a Freight Broker Agent Program. Some programs include ongoing freight broker training as part of their partner benefits. Most third party logistic (3PL) companies, such as LDI, who provide these programs require authorized agents to have at least 1 year of logistic experience and an existing book of business. These agent programs almost always require some proof of brokering success before they will align with a freight broker. The 3PL will invest time, money, and resources into the rapid growth of their authorized agents, so they regularly look for validation in a partner first.
Alternatively, if you have one great customer, a couple months of experience, and are looking for mentorship, contact us. LDI has a unique program to help brokers looking for some additional guidance as they work to grow their budding business. If you fit that criteria, call us about our opportunities for agent development programs.
Find A Niche
The logistic industry is vast, so the best approach to launching a successful freight brokerage is to find a specific niche in the industry. A freight brokerage might ship specifically for farm co-ops, construction companies, chemical plants, or equipment manufacturers. Find a particular niche and engross yourself in it; there is always room to expand into different industry expertise later. The more expertise you have in an area, the better you can secure customer’s trust and scout the right carriers.
Build A Business Plan
Get a business plan down on paper. This is the tangible first step to launch your business. This is the anchor for the freight brokerage. It defines its purpose for existing and will guide the direction you want it to grow.
There are many ways to develop a business plan. To get started, find templates and suggestions through an online search engine or business book.
A completed business plan will prove the market viability of your business. Freight brokering can be very capital intense when going out on your own. More than likely, a business line of credit and/or a business loan will be necessary to get started, so organization is going to be key. Presenting a business plan to the bank will help secure those funds.
Lines of credit or business loans are often necessary, so good credit is essential. Since you’ll take on financial risks, do a credit check. If there are any personal debts, pay them off. Get 6 months of savings in the bank account. Launching your own business takes time and resources to ramp up, so a healthy credit score is a key to success.
Secure Initial Operating Capital
Have enough initial operation capital to launch. There will be several expenses associated with starting a freight brokerage: registration fees, surety bond payments, office expenses, and load board subscription fees, just to name a few. From the beginning, have cash in the bank to pay your carriers on time, as shippers might be late paying you. Not having enough operational capital on hand at launch is one of the main reasons brokerages fail in their first year of running under their own authority. Make sure you are comfortably padded.
If you have a year of logistic experience and a book of business, it’s possible to avoid these initial expenses through the previously mentioned Freight Broker Agent Program. The authorized agent works under the operating authority (MC number) of the 3PL, so there’s no need to pay the fee for the agent’s own MC number. The agent is also backed by the 3PL’s surety bond, insurance, software, and back office staff, saving on long term operating expenses.
Find More Customers
Get a book of business together. This will take time and patience. If you have existing connections to suppliers, this will be easier. For example, if you’re a beer aficionado, you might be friendly with a few brewery owners. You know some of them are expanding their own books of business, so they could be your first shipping customers. Shippers regularly work with a few brokers, so even if they already work with one, they might want another broker for back up. When you provide outstanding service for the first few loads, then you become their broker of choice.
Don’t Give Up
Being a freight broker is hard work, but the risk of launching your own brokerage can be worth the reward. These skills, habits, and hard work will pay off! Take the time to plan out your path, speak with mentors, present your business plan to your financial advisor (find a financial advisor if you don’t have one), and pursue your dreams of entrepreneurship.
Don’t say good luck; say don’t give up!
For more information on freight brokering, follow LDI’s blog and subscribe to our social media channels. We always post the most relevant industry news for freight broker agents and owner operators. For more information on the Agent Program, contact our business developers.