Do you want to become a licensed freight broker and you want to know the requirement? If YES, here are 7 steps to become a truck broker with no experience.
There has never been a better time to be in the freight brokerage business and there are a lot of reasons to consider starting your own brokerage firm now. With the economy of the United States of America on a steady improvement, an increasingly stable and growing industry and increasing demand for new brokers, you have all the right external conditions you need to be a successful freight broker.
Freight brokers run their own businesses or may be part of a company that is owned by another person. In the United States alone, the logistics and transportation industry totaled over $1.48 trillion in 2015. However, there are only about 15,000 licensed freight brokers in the country. A lot of these brokers are not very active or totally inactive and thus there is always room for an aspiring freight broker.
Just like real estate brokers and insurance brokers, a freight broker must possess a license in order to be able to run his or her business. In order to get this license, they are required to meet some requirements including purchasing a surety bond, purchasing insurance among other things.
Becoming a freight broker and succeeding in that line of business is a lot easier if the person in question has a background in the trucking industry. Truckers do not only have the experience, they also have the contacts that are required to become successful freight brokers.
Rail, water, pipeline et al are some of the means by which goods are transported across the country, yet using trucks is by far the most popular method of transporting goods in America. This just goes to show that this industry is a very lucrative one and that being a freight broker presents a plethora of opportunities.
On July 6th 2016, the then President of the United States, Barack Obama, signed a transportation law, that was called Moving Ahead Progress (MAP-21) and it brought a significant change to the freight sector, most notable being that it increased the barrier for people who wanted to become freight brokers.
The MAP-21 did this by raising the price of bonding requirements and this consequently resulted in a lot of brokers and carriers leaving the industry. This is a good news for people who wish to become professional freight brokers in the sense that there is a reduction in competition in that industry as at now.
What is a Freight Broker?
A freight broker, also known as a truck broker, logistic consultant, transportation intermediary or transportation broker, is someone who is tasked with the duty of acting as an intermediary or middleman between shippers and carriers. The job entails negotiating better shipping rates and fast delivery times with the transportation company.
The freight broker works directly with shippers of the goods to negotiate a favorable rate with them. When he has accomplished this task, he then has to negotiate a rate with a carrier and make arrangements for the load to be picked up by the transportation company in order to be dispatched to its appropriate destination.
It is the duty of a freight broker to ensure the right status, pickup, delivery, invoice, receipt and safety and compliance records are kept. Some freight brokers choose to make use of freight broker software in the documentation of the papers that are involved in the movement of goods while some opt for the use of the good old fashioned pen and paper.
In order to function effectively in freight brokering you will need to use a telephone, fax machine, computer and other basic office equipment. Freight brokering does not require riding a real truck; it is an office job that is done from the comfort of an office.
What is the Average Salary or Income of a Truck Broker?
The amount of money you will earn as a freight broker differs from person to person depending on their situation. Brokers who are affiliated and work with a company earn an average of $30,000 to $80,000 on a yearly basis. Some companies opt to pay their brokers’ commissions based on their performance while others choose to pay them a fix salary.
Freight brokers who are managing their own freight business have a vaster earning potential when compared to their employee counterparts. A self-employed freight broker can generate a yearly income in the six figure range ($100,000 plus).
7 Steps to Become a Licensed Freight Broker With No Experience
1. Create a business plan: it is said that anyone who fails to plan has already planned to fail. Although some people may argue that the creation of a business plan is not an absolute necessity in order to become a freight broker, it is undeniable that it has a lot of benefits.
A business plan will allow you to be able to make an intelligent estimate of how much you will need to startup your brokerage business and set a road map that can be followed to bring the business to life. Also, a business plan is quite important if you want to seek for startup funds from lenders such as banks.
Your business plan should contain among other things a summary of your business goals, an overview of the freight brokerage industry, an overview of your potential customer base, potential competitors, a marketing plan, potential costs involved in the setting up of the business et al.
2. Get the necessary training: legally, freight brokers are not required to get formal training in other to operate. Many freight brokers today have been truckers, or agents that have worked for other brokerages in the past. If you can get the hands on experience, then you should go for it.
However, if you do not have the time to spend on de facto apprenticeship, then you can go for freight broker training programs. These programs are however not accredited and so it is difficult to gauge the potential quality they can give you.
3. Pick a name and a business form: next, you will have to choose a unique and eye catching name for your business and also decide on what type of business form you will like your business to assume. The main types of business forms that are available are Sole Proprietorship, Corporation and a Limited Liability Company (LLC).
4. Register with the Secretary of State’s Office and file for an employer’s identification number (EIN): when you have chosen a company name and the form that you wish you businesses to take, you will then have to register with the Secretary of State’s Office.
They will go through it to ensure that you are not using a name that has already been used by another business and they will also check through your articles of incorporation among other things. Next you will have to apply for an Employers identification number.
5. Find a reliable carrier and try to network with them: before you start your business proper, it is advisable to seek out reliable carriers whom you will do business with and try to network with them. If you are already experienced in the trucking business, this will not be much of a hassle for you, but if you are inexperienced, you will find this a lot more challenging.
One of the ways newbies can network with carriers is to join the Transportation Intermediaries Association (TIA). As a member, you will be able to access a directory that has the list of carriers and their rates as well.
6. Apply for a USDOT number: registering with the Department of Transportation is the first step to getting a license. All you will need is your EIN, the names and addresses of the company’s officers and your DUN and Bradstreet (DUNS) number if you have any.
7. Pay for a broker bond: a broker bond is a type of surety bond, which is basically a financial agreement that functions like an insurance for job completion. For instance, if one of your carrier truck breaks down and they cannot deliver a shipper’s goods, this is where the bond comes in because the good still has to be delivered. The bonding company will step in to pay for another carrier to deliver the shippers goods so as to complete the job.
In order to set up shop, you will need a broker bond that is valued at not less than $75,000 which will cost between $1,500 and $4,000 on a yearly basis depending on your credit. Surety bonds can be purchased from numerous companies that sell them but you should endeavor to make your purchase from financially strong companies.
8. Get insured: in order to act as a broker for a lot of large carriers, you will need to have an insurance policy.
9. Apply for a freight broker’s license: finally, you will have to apply for a license or the MC authority to become a freight broker.
Getting your Truck Brokerage Business Off the Ground
Just like any other business, it is expected that you will have a certain amount of money in other to start it off and get it running before the profit starts to come in. If you have a business plan, you will have a rough estimate of how much it will cost you to set up your brokerage business. Startup cost for a freight brokerage business can range from $10,000 to $250,000. You can have this amount in cash or as a line of credit.
A new freight brokerage business will require assets just like an ordinary office. You will need computers, printers, fax machines, copiers, a landline phone, a cell phone, high speed internet, and freight brokerage software. The software is not a necessity, but it will allow you to automate a lot of functions, track your drivers and make your work easier in general. Some of these software are Tailwind, Broker PRO, Freightview et al.
Last but not least, you will need to let the world know about your freight brokerage business by the way of effective marketing. You will now have to implement the marketing strategies that you have conceptualized in your business plan and modify it in line with the realities on ground.