What is a Freight Broker?
A Transportation Intermediary acts as a broker of freight between two companies, a Shipper (i.e. Manufacturer) and Carrier (i.e. Trucking Service). He or She arranges for the safe and reliable transport of cargo from one location to another. Once a transportation agreement has been reached between the broker, shipper, and carrier, a shipping confirmation agreement is signed between the parties and pick-up and delivery arraignments can be made. The broker bills the shipper when services are rendered. The shipper pays the broker who receives a small percentage of the total fee before forwarding payment to the carrier. The process is then repeated several times per day/week/year.
How much do freight brokers make?
This question often comes up in online forums and on message boards. While certainly a valid question it’s a rather difficult one to answer. Like any opportunity in life freight brokering is and will be what ever you make of it. A hard working brokerage owner could net six-figure earnings while a laid-back broker can just as easily earn nothing at all. If however, you are willing to work hard towards achieving your business goals, owning a brokerage can be a rather pleasing and profitable experience. Fact: The Fortune 5000 (500 inc’s annual list of the 5000 most profitable small businesses of the year) named 3 brokerages in its 2011 issue.
Is this going to cost a lot of money?
Start-up cost can vary from state to state and are often dependant upon local taxes, fees, and operation cost. For example, in Salt Lake City, Utah, one is required by law to receive the permission of any neighbor within 1000 ft of his/her front door before starting-up or operating a small business inside his/her home. This particular regulation could set you back quite a bit should you be required to purchase or lease office space from a retail location.
Won’t I need a staff?
Depending on how you decide to form your company, (i.e. incorporate, LLC, sole proprietor, etc.) you may need a small staff to form a corporate board, for example, President, Secretary, Chief Financial Officer, etc.). Keep in mind you may choose to appoint these position to just one person, meaning you won’t necessarily need a business partner or chief-staff if you decide to incorporate. Agents however, are a different beast altogether. It is possible and perfectly acceptable to hire a staff of freight agents as independent contractors to work under your motor carrier authority. Hiring independent contractors frees a business owner from many legal obligations he/she would otherwise have to a staffed employee, thereby lowering operation and start-up cost.
Can I start-up my brokerage on a part-time basis?
It is possible to start up your operation on a part-time basis. For example, you could hire independent contractors to work as Freight Agents on behalf of your Motor Carrier Authority, and any one of them could represent your company as an office manager when you are otherwise unavailable. He or she might desire extra compensation for performing this task. You might increase the commission rates for an agent that you trust to this position. You might otherwise achieve a part-time operation status by simply ending operations by noon every day. However the latter is less advisable in some cases. If you plan to be the chief operations officer of your company it’s often difficult to become unavailable every day at noon. The transportation industry motors through 24 hours a day and your services may be requested during unconventional hours, your inability to be available to drivers and dispatchers who may need your services, may be the downfall of your operation.