Do you want to start a freight forwarding business? If YES, here is a complete guide to starting a freight forwarding business with NO money and no experience.
It is very simple to conclude that Freight forwarders are masters of shipping and logistics from all perspectives. Most freight forwarders in the industry act as both agents and carriers, while others simply arrange for the transportation of goods and shipments from one location to another.
Millions of tons of textile, food, equipment and raw materials are moved across the highways of the united states, and we know that no matter what the current state of the economy, freight will always need to be moved or transported in the United States.
This simply means that starting your own freight business can be a stable and lucrative business. If you plan to start this business, you need diligence, patience and good direction in order to make it in this industry.
You also need to understand that most entrepreneurs in the freight forwarding industry usually have solid backgrounds in transportation and shipping, and are very experienced in importing, exporting and custom requirements in multiple jurisdictions of the world.
Steps to Starting a Freight Forwarding Business
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
Businesses in this industry arrange the transportation of freight between shippers and carriers. They are vastly known as freight forwarders, marine shipping agents or customs brokers, and they offer services for many modes of transportation.
Also because most enterprises in the industry act as agents, the industry does not include cost of arrangement as part of its revenue. It has been estimated that over the past five years, the Freight Forwarding Brokerage and Agencies industry was able to surpass pre-recessionary levels as demand for industry services increased.
This also means that domestic freight volumes increased, which drove demand for industry services. At first, strong emerging markets growth encouraged trade, which increased demand for the industry’s trade-related services.
It has been estimated that over the next five years, emerging market growth is expected to slow, limiting trade volumes and value. It is also believed that competition due to low barriers to entry and commoditization will create consolidation, but the industry is expected to grow over the next five years.
According to analysis, most businesses in this industry are concentrated in states with high levels of manufacturing, trade and other commercial activities, namely the Southeast, West and Mid-Atlantic regions. This we believe is due to its large population and commercial base; the Southeast region has the largest share of industry establishments at about 23.4%.
The Southeast represents 25.4% of the US population and houses major US ports. This same Southeast region is also made up of a large proportion of rail freight employees and rail maintenance and support enterprises. While the second-largest region in terms of industry establishments with 19.7% is the west.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
When starting a Freight Forwarding Business, you need to understand and know what type of customers you are going to serve, and what load volume you will be moving. It is advisable that you research the industry and understand what type of customers or businesses that will add the most value to your service; you will then be able to zero in on where that customer type can be found.
When starting this business, you need to choose what load volume you will haul at first so you can better focus on customers who move that volume without wasting time. This will also give you the chance to plan your equipment purchases to handle your capacity requirements before you start.
It is important that you understand that starting your freight forwarding business is not a complicated process, all it requires is a number of steps and procedures, including obtaining a freight forwarder license and a freight broker bond.
3. Decide Which Niche to Concentrate On
It’s pertinent that you define your target market by deciding what type of freight your business will be moving and what geographic area you will service before you venture into the industry. This will help you know what type of equipment to purchase.
The freight business is a competitive one, so to avoid making the mistake of thinking you are getting into an easy industry, you need to consider everything.
It is true that people often confuse freight forwarders with freight brokers, but these two roles are quite different, but both are certainly important in the industry. Freight brokers are simply the middlemen – they act as the link between shippers of goods/cargo and carriers – the transportation service providers.
In contrast with brokers, freight forwarders take over another part of the freight process. So if you decide to become a freight forwarder, you will be working on the side of importers and exporters, so your focus will be on securing freight.
If you plan to be a freight forwarder, you will have to be an expert on the most appropriate transportation method for moving different kinds of cargo, as well as on booking the transport itself for your clients.
It is advisable that you gain knowledge in the whole array of freight costs: the actual moving, handling, insurance, necessary documents and all possible charges involved in freight forwarding and the entire transport industry. It’s worthwhile to note that there are different types of freight forwarders which can serve as niche ideas in the industry: ocean transportation, airfreight, inter-modal and trucking.
The Level of Competition in the Industry
Let us note that unlike fully integrated carriers that own truck, rail, air, or ocean assets, freight forwarders arrange the transportation of goods without owning any transportation equipment or handling the cargo at all. Also Customs brokers add another layer of expertise by moving the goods through international customs barriers and all.
In the industry, most companies specialize in either freight forwarding or customs brokering, though companies and individuals can provide both. It’s worthwhile to note that demand in this lucrative industry is moved by domestic manufacturing output and levels of international trade in all locations.
All profitability of individual companies rests on efficient operations, extensive relationships in shipper and carrier networks, and industry expertise. Bigger companies in the industry have upper hands in account relationships and access to advanced logistics technologies more than the small ones.
Little businesses can compete effectively by serving a local market, specializing in cargo transfer with specific countries, and facilitating the transport of unusual goods.
4. Know Your Major Competitors in the Industry
Just like we have stated so many times, Freight is big business. They are in charge of the transportation of goods across the world, with almost everything we use and consume passing through some part of the freight network. All companies need to rely on third parties to deliver their products unless they are big enough to own their own fleet of carriers.
Even the world’s biggest corporations depend on freight services for air, rail, and sea transport no matter how big or small. Major companies in the industry include;
- CH Robinson WORLDWIDE (US)
- Expeditors International of Washington (US)
- UPS Supply Chain Solutions (US)
- CEVA Logistics (France)
- DB Schenker (France)
- DHL Supply Chain (Germany)
- Kuehne + Nagel (Germany)
- Panalpina (Switzerland)
- Nippon Express (Japan)
- Sinotrans (China).
The global freight forwarding market is estimated to have contracted by 1.6% in nominal terms in 2015. This is both in the air and sea freight, all the global metrics point to a year-on-year slowdown in volume growth. But now even Europe’s market share of this is believed to contract whilst emerging regions gain share in its place.
Also it is believed that Intra-regional trade dominates the global picture, with the top three intra-regional trade lanes alone accounting for 52% of global trade. But new trade deals such as the Transpacific Partnership and the Transatlantic Trade and Investment Partnership are likely to boost trade between APAC and North America, and the EU and the US.
Also the first 20 leading forwarders put together are thought to represent almost 58% of the market, but small forwarders continue to effectively compete against the largest in the industry, showing that economies of scale are not the be-all and end-all of the industry.
Indeed for small businesses in this industry to survive, they must exploit the opportunities that the democratization of technology has brought in order to grow and lock in customers.
Also Disintermediation from cloud-based technology start-ups is unlikely, but the technology itself will become increasingly important for freight forwarders. In the industry, the collaborative supply network moved by software and with a scope beyond individual supply chains, could transform the way the industry functions.
It is also believed that mergers and acquisitions in the industry have disrupted the global, air and sea freight rankings, and the systemic impact of low global oil prices has been a double edged sword for freight forwarders; whilst some have been able to increase their profit margin, others have taken a substantial hit to revenues as a result of reducing demand for industrial projects.
Experts believe that with low demand in the market, several companies look to be focusing their efforts on improving profitability rather than growth. All this it is believed have been manifested through rationalization, investments in software, and an emphasis on high value contract opportunities.
5. Decide Whether to Buy a Franchise or Start from Scratch
As you try to venture into the freight forwarding industry, you will quickly discover that a business purchase isn’t completely hassle-free. It is believed that there are no reliable shortcuts in buying a business. If you plan on buying a franchise, which is the best way to start a Freight Forwarding Business, the first step is to contact a business broker.
Although you could buy a freight forwarding business on your own, you’ll save time and money by recruiting a reputable broker with industry experience. Note that your chances being a successful business owner are substantially improved when you opt to franchise in lieu of doing everything yourself.
When trying to decide to open a freight forwarding business, you ought to research whether franchising might help you on your entrepreneurial journey in the industry. After researching the industry, you should try speaking with somebody who is already in the business.
6. Know the Possible Threats and Challenges You Will Face
Before starting your freight forwarding business, you should note that one of the main difficulties of a freight brokerage business is handling supply chain distributions. Transport delays and shipment issues are common, especially when working across international borders.
Though is not always the fault of the broker, late or missing deliveries can seriously harm a company’s reputation—and its income. By taking some of the transporting duties in-house, freight forwarding businesses have far greater control over their services, and are therefore more likely to both attract and satisfy customers in the industry.
It’s important that you note that with increased responsibility comes increased liability. Beware that where freight brokers largely act as salespeople, freight forwarders actually handle shipments and are therefore subjected to many insurance and licensing regulations.
These regulations increase exponentially when operating overseas, so keeping up-to-date with international customs and transportation laws is of utmost importance.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
For the sake of this article, the LLC and the incorporation are the best legal structures to choose from when starting your freight forwarding business. Many would argue that the LLC is the most suitable but to make it clear and explicit, the incorporation is the best legal entity for your Freight Forwarding business and here are the reasons.
Business incorporation is a loose umbrella term that covers a variety of options for legally structuring your business. Whatever business structure you choose needn’t be set in stone, and can be changed as your business matures.
For example, many small business owners start out as sole proprietorships or partnerships with formal incorporation taking place at a later date. Incorporating your business offers you Tax Benefits, Corporate Identity, Raising Capital, and Unlimited Life.
8. Choose a Catchy Business Name
- Ultrazone Xpresss
- Long Transit
- Big Green Freight
- AP way
- (TOD)Transport On Demand
- integrated Logistics
- Haul shapers
- Flashy logistic
- Leica logistics
- Swipe Surf Transport
- Boxify Spoton Logistic
- Big great Movers
- Bolt logistic
- Sporta packet
- Track n go
- Spep it up
- National Carrier Inc.
- FF(fast forward)
- Land Shipcity Inc
- Estanicha Logistic
- Garven Motion
- Le Logify
- Upfront Movers
- We servicestics
- Ascent Transport Inc.
- Rapid run transpor
9. Discuss with an Agent to Know the Best Insurance Policies for You
Most insurance packages available to forwarders will cover their liabilities both for physical loss or damage to cargo, as well as for the forwarder’s errors and omissions (“E&O”). Beware that the underwriters will always want to know what conditions you are trading under, and will tailor their insurance and their price accordingly.
The important thing to remember is that the policy will only meet the legal liabilities that you incur and then only up to the limits laid down in the trading conditions that you plan to leverage.
- Cargo insurance
- OTI Bonds
- Global claim network
- Professional Liability
- Business insurance
- risk management
- liability insurance
- Freight forwarders insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
We all know by now that Freight forwarding is a service industry that involves moving goods around the world on behalf of importers and exporters.
We also know that Freight forwarders specialize in moving cargo and arranging custom clearance of goods, maintaining all documentation, overseeing cargo packing and will at times deal with the movement of dangerous goods. To protect your intellectual properties like your trademark and ideas, you need to understand the following;
- Import and export regulations
- How to protect your assets
- Be conversant with compliance software
- Create codes of conduct
- Avoid conflict of interest
11. Get the Necessary Professional Certification
- Certified Shipping and Freight Forwarding Professional (CSFFP)
- Freight forwarder – VCC – Vocational Competence Certificate
- IIEI Certification – Certified International Freight Forwarder® (CIFF)
- Canadian International Freight Forwarders Association (CIFFA
- Certified International Trade Professional (CITP)
- Professional Certificate in Clearing and Freight Forwarding
12. Get the Necessary Legal Documents You Need to Operate
In the business world, the benefits of having the necessary documentation in place before starting your business cannot be denied. Sincerely you cannot successfully run any business in the United States without the proper documentations.
If you do, it won’t be too long before the long hand of the law catches up with you. These are some of the basic legal documents that you are expected to have in place if you want to legally run your freight forwarding business without interference and fear;
- Certificate of Incorporation
- FF number
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Freight broker bond
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- VAT registration
- Federal tax identification number
13. Raise the Needed Startup Capital
When planning how to finance your business, one of the first things and perhaps the major factor that you should consider is to write a good business plan.
Having a good business plan can prevent you from labouring yourself before convincing your bank, investors and your friends to invest in your business. Listed below are the means available for you to raise finance for your freight forwarding business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
14. Choose a Suitable Location for your Business
Deciding on a suitable location for your business is an issue most prospective entrepreneurs approach lightly, without knowing that it is a decision that will go a long way to determine how successful your business will be. Some in order to reduce expenditure usually settle for cheap locations, while most people believe that location doesn’t matter provided the product is right.
Do not make the same mistake, understand that getting a good location is very important to the success of your business. Below are things you should consider when choosing a location for your freight forwarding business;
- Supply Chain
- Free trade zone
- Basic infrastructures
- Economic policy
- Closeness to the market
- Industrial Clusters/areas
- Export processing zone
- Distributive channel
15. Hire Employees for your Technical and Manpower Needs
When starting a freight forwarding business, you will surely need a network of connection in every state so that when you move the goods to its destination, somebody will take care of it for you.
Understand that you’re just starting up as a freight forwarder and unlike UPS or FedEx that have established their own network, you still have to create partnerships with other companies one way or another to make your business easy.
The second connection is actually how you can achieve the first aspect. It is believed that it can be done through the help of your state and or your embassy if you are already forwarding abroad.
Also make sure that your business structure will be designed in such a way that it can accommodate both full-time employees and part-time/contract staff; those who just want to take some time off to generate additional income. It is advisable that you start your business with a handful of full time employees (documentation officers, professional material handlers/yard spotters and back office staff).
You should also make adequate provision for competitive packages for all your employees. You should understand that most players in the freight packaging and logistics services industry are positioning their businesses to maximize profits in the industry.
Research has shown that some of the key factors that will contribute to growth in this industry include growth in the manufacturing sector, consumption, international trade and also increase in technology reliance. These will provide new opportunities for logistics consulting and advisory services, particularly for distribution chain networks and logistics.
The Service Delivery Process of the Business
Businesses in charge of arranging storage and shipping of merchandise on behalf of its shippers usually provide full range of services including: tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims.
It’s the duty of Freight forwarders to ship under their own bills of lading or air waybills (called house bill of lading or house air waybill) and their agents or associates to the destination (overseas freight forwarders) provide document delivery, deconsolidation, and freight collection services.
Those who need the services of a freight forwarder know that a good freight forwarding service can save untold time and potential headaches while providing reliable transportation of products at competitive rates. Here are the few advantages of using a freight forwarders that people understand.
A Freight Forwarder handles ancillary services that are part of the international shipping business
- Customs Documentation etc…
A Freight Forwarder provides to consolidators as well as individual shippers:
- Non-Vessel Operating Common Carrier documentation
- Bills of Lading
- Risk Assessment and Management
- Methods of International Payment
You should note that whether big or small, the weight of the cargo light or heavy, it is your duty to take care of cargo from “dock to door” if requested to do so. This can include the correct filing of export documentation, all arrangements with carriers, packing, crating and storage needs.
Also understand that the small and medium-size exporter need not deal with many of the details involved with the logistics of exporting their goods. Remember to charge modest rates for your services and have access to shipping discounts.
16. Write a Marketing Plan Packed with ideas & Strategies
It’s important to note that a high-quality marketing plan connects your freight forwarding business to your target market. If you do not have a substantial marketing plan, you will quickly find your freight forwarding business cut off from the marketplace.
Try to understand that strategic marketing tactics can help your freight forwarding business scale your visibility with consumers.
Using Marketing Ethics
Indeed most marketing strategies may be worthwhile, but don’t make the grade in the area of ethics. It has been noted that Industry-leading freight forwarding businesses avoid marketing tactics that exploit their clients. Understand that ethics are especially beneficial in direct marketing.
Good Product Knowledge
We all know that there is no better marketing strategy than being able to speak convincingly about your services. Indeed small product details translate into key value propositions which are important for distinguishing a freight forwarding business in the competitive arena.
Believe me if you can’t articulate your products’ unique characteristics, your messaging – and revenue stream – will be trampled upon by your competitors.
Its obvious that individuals like to feel like they’re getting a discount, so not surprisingly freight forwarding business clients fit the pattern and factor discounts into their spending decisions. Take note that the power of a great discount is your ability to convince buyers that they are receiving special treatment, a deal that isn’t ordinarily available in the industry.
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you want your Freight Forwarding Business to be seen, then you would need strategies that will help boost and create a corporate identity for your business. It is all about targeting the right audience and capturing their attention. However, it is important to note that creating strategies are not just for the sake of having one, but ensuring that they are converted into sales.
Below are the platforms that can be used as leverage to improve your branding awareness for your transportation business:
- Optimize your website by ensuring it has the necessary keywords that will drive traffic to your page.
- Use the same logo, color and fonts for all your marketing media, this will allow your brand to be embedded into the consciousness of your audience.
- Send newsletters with helpful information to your clients.
- Make use of social media outlets, especially those that have your target audience.
- Use multiple content platforms such as videos to distribute your branding.
- Let your brand be seen by sponsoring an event, which will ensure that all those in your database as well as other sponsors will see your logo.
- Distribute fliers and handbills in your target areas.
- Promote your business via offline and online directories.