Freight and shipping in the USA is almost an $800 billion industry, and a freight broker plays a key role in managing the millions of loads transported each year. Freight brokerage services help connect truckers to consistent work while helping shippers get the best value getting their loads to their destinations. Being a freight broker can be a lucrative and flexible career built on connections and organizational skills.
As demand for carriers grows and the logistics industry becomes more sophisticated, there is a real opportunity to carve out a profitable career as a successful freight broker. If you have a passion for logistics, a knack for solving problems, and have a good mix of people, practical, and organizational skills, then freight brokering could be the right industry for you. Freight brokers can often work from home, set their own hours, and make big money. Read on to find out how to become a freight broker with no experience and for tips on starting a freight broker business.
How do freight brokers make money?
Freight brokerage is the business of connecting shippers and carriers. When a company has a load they need to move they often post that freight job to a load board. From there, carriers looking for their next load to haul will search for, bid on, and accept those loads. The role of a freight broker is to assist in load matching: helping the shipper find the right carrier at the right price. Because shippers generally save money by reaching out to the marketplace for competitive rates, and because carriers earn more money and spend more time on the road by relying on brokers to post loads, the entire process is more efficient and cost-effective for everyone.
Beyond posting, freight brokers manage the legal side of transporting freight across the country, guiding it through municipal, state, and federal regulations. Freight brokers generally receive anywhere from 10% to 35% commission on loads for their role in facilitating this bustling industry. In 2019, the top 50 freight broker companies alone took in almost $40 billion. Even entry-level freight brokers working for a freight brokerage business as a salaried employee can draw impressive salaries. The average freight broker can make $44,000 a year, with some earning more than $100,000 as a base salary. That’s before bonuses and extra commissions.
How to start a freight brokerage
If those numbers sound appealing to you, you may be wondering how to become a freight broker agent. The path to starting a freight broker business is relatively straightforward.
How to become a freight broker for truckers:
1. Start with proper training.
While there are no legally required training programs or qualifications for freight brokers, it is important to have a good knowledge of the industry if you want to succeed. Prior experience in freight and logistics, either as a trucker, logistics manager, or dispatcher is a major asset. If you don’t have that, the first step is to take online training in-person classes to get a foundational understanding of the industry.
Classes usually only take a few weeks to complete and give you the practical and procedural skills you’ll need to guide the transportation process smoothly as a freight broker. These courses educate prospective brokers on transportation types, regulations, and many provide templates for contracts, invoices, and other documents that you will need as you form your own freight brokerage.
One of the best ways to get hands-on experience quickly is with a freight brokering company as an entry-level freight broker. Earning a salary while learning the ropes will set you up well for step two.
2. Register your broker company.
Starting your own business is exciting but also requires strategic thinking and pre-planning up front. You’ll need to decide if you want to register your business as a sole proprietor, partnership, or incorporate as a limited liability corporation (LLC). The primary advantage of an LLC is that it reduces your personal financial risk.
A sole proprietorship is simple to set up, as is a partnership if you’re going into business with other people. However, both of those structures leave you exposed to any financial liability that might come up from operating your business.
After that, you’ll need to choose your business name. Choose something that helps identify what you do and is easy to market. Once you have a short list of names, check them on www.uspto.gov to see if they’re available, and you’re well on your way to applying for broker authority.
3. Apply for broker authority.
Apply for broker authority. Next, contact the Federal Motor Carrier Safety Administration (FMCSA) to apply for a motor carrier authority. Brokers must fill out form OP-1. Separate filing fees are required for truckers transporting household goods and non-household goods.
Each application costs $300. (You can submit both on the same form, but you’ll still need to pay a total of $600.) If you apply online, submitting form OP-1 will get you a grant letter and motor carrier (MC) number immediately. These documents are your notice that a freight broker license application is underway, but they are not an authorization to operate. You must still complete several steps before becoming a freight broker, including getting the required insurance and surety and choosing process agents for each state you plan to operate in. (More on that below.)
4. Select a process agent for your brokerage.
Brokers must have a process agent in each state they operate. The process agent is the person who will receive legal documents or process documents on behalf of the freight brokerage in any legal proceedings brought against it. Process agents must have a physical location. (P.O. boxes are not acceptable.) Find a list of agents on the FMCSA website.
You can act as your own process agent in the state where you live. You can also hire one to work for your company as a salaried employee, or use one of the many process agent services available. These agents will all charge fees for their service.
5. Acquire a surety bond.
In 2013, the federal government increased the mandatory freight broker bond from $10,000 to $75,000. That $75,000 can be a daunting number for anyone researching how to become a trucking broker.
The good news is some companies will cover the bond for an annual premium of 1% to 10% of the bond cost. The rate you pay depends on your record, personal credit score, and financial security. Your bond company will provide a Form BMC-84 for broker surety bond which needs to be submitted to the FMSCA within 90 days of filing your OP-1.
6. Purchase contingent cargo and general liability insurance.
While these coverages are not required by the FMSCA, most companies will not allow a broker to operate on their behalf without contingent cargo and general liability insurance in place. This coverage protects your clients’ physical property and protects you if something happens during the course of operating your business.
7. Check your state’s corporate and tax regulations.
Even with your freight brokerage operating authority and freight broker license, you still need to make sure your company follows all state regulations. Those might include business registration requirements or taxes. Make sure you understand what records you need to keep and any filing or other requirements in the areas you operate.
8. Develop a business plan.
Step one: Find out how to become a freight broker agent for trucking.
Step two: Become a licensed broker.
Step three: Now what?
On the face of it, freight broking is relatively simple: Contract with company A to organize shipping of their load, contract with company B to haul the cargo, profit on the difference between what A pays and B charges.
Be cognizant of your timelines. How will you manage the gap between money going out and money coming in? How will you float your start-up costs for equipment, insurance, licensing? When and how will you pay those things back? If you have worked in a brokerage or any other aspect of the freight and shipping industry, you might have developed contacts and built a network of shippers and carriers. How will you begin reaching out to them to build your business?
Your business plan should account for all those issues. Set clear targets for growth and revenue and achievable milestones. Set regular check-in points so you can make sure you are on schedule with your plan. The key question for your business plan is: How will you pay the carrier you’re brokering freight to?
1. Set up financing
If you have cash reserves on hand, you may be able to float the cash flow of your new business without help. But not everyone is in that boat, and truckers will need to be paid before the shipper has paid you for your services. Getting a line of credit from a bank can help. With a clear understanding of your first few months of operating costs in place, you can approach financial institutions for a business loan or line of credit. They may secure the funding against your personal assets, or you may need the business plan we detailed above in order to show your company’s viability. With funding in place, you can start operating your business.
2. Finalize your broker contracts.
Now’s when your experience or education comes in handy. If you took a course on how to become a freight broker agent, you might have gotten document kits that you can now use to carry out your business. You will need to set up and maintain contracts with the shippers and carriers, and keep track of your shipping records and proof of your qualifications. It’s good to have a lawyer look over the forms and contract templates you use to make sure they’re appropriate for your company.
3. Find shippers and carriers and set rates
The best way to connect loads to trucks is with a load board. Online load boards like Truckstop.com give you access to thousands of trucks and drivers You can also use the boards to research cargo rates in the shipping lanes you intend to operate in.
Start brokering freight.
So now you’re licensed, your business is set up, your insurance is in place, your documents are ready, and you’re ready to hit the ground running. It’s time to put the rubber to the road, as they say.
You can use a board like Truckstop.com to post loads and to manage your jobs. And, because Truckstop.com updates in real-time, you can see available trucks and drivers the moment they post online and respond quickly. The more hauling jobs you broker, the faster your business grows. As you work with more satisfied customers on both sides of the industry, your ratings will improve. Shippers and carriers also use Truckstop.com to vet and identify quality brokers, giving you an edge for growing your business.