how to Become a Freight Broker

12 Easy Steps to Become a Freight Broker with No Experience

Author: freight solution providers

You may have heard about the power of a middle-man. In any business transaction, he makes the most money because he facilitates logistics while letting others do the actual work. A freight broker is the most successful kind of middle-man because every workday introduces you to new opportunities. So the longer you do it, the broader your contacts and networks become.

And because this business is all about insider connections, being a freight broker can open up even more doors for you. Plus, you’re moving diverse goods and interacting with key personnel in multiple industries. It’s a dream job for the serial entrepreneur, and because it’s not a desk, you can still hold down other paying positions. So how do you get started in this industry?

How to Become a Freight Broker

Step 1: Understand the Business

When a consumer orders an item, this item goes through several steps before it gets to the customer’s front door. The manufacturer will ship the item to a port that closer to the customer. A truck will pick the item from the port and take it to the store or the distribution outlet. Then a postal worker or private courier might collect the item and deliver it to the buyer’s door.

Freight brokers (sometimes called truck brokers, clearing & forwarding professionals, load brokers, or transportation brokers) connect shipping companies to trucking companies. The shipping companies move cargo by boat or plane while trucking companies move the cargo by trucks and trailers. Freight brokers are the middlemen, they can earn millions in commissions.

Step 2: Know What’s Involved

Freight brokerage is largely a networking job. You’ll liaise between shippers and carriers. The shippers might be manufacturers or it may be the ship owners and port masters. Meanwhile, the carriers are truck fleets, individual drivers, and courier services. You’ll need to be friendly with multiple agents on both sides of your business divide, so it helps to be charming and outgoing.

You need the gift of gab and the ability to negotiate friendly shipping and trucking rates. You need the power to open windows and doors for yourself, your partners, and your clients. Why? Because your commission comes from those pricing differences, so you need to secure discounts without making your clients feel cheated. You also have to be good at keeping records.

Step 3: Think About Your Skillset

Become a Freight Broker
Image: Freight Solution Providers

We’ve already mentioned that freight brokers have to be good at creating networks. It helps if you make friends easily because, in the freight world, every new acquaintance can lead to more money. They could connect you to a cheaper truck, a faster route, or a new line or cargo. Brush up your record-keeping and your basic math, you’ll need both to work out profitable pricing.

You’ll also need some legal knowledge. You want to be familiar with shipping laws, traffic rules for trucks, and local regulations for the states and counties you work with. You need to see where you can cut costs without damaging your work quality or delivery times.

This is crucial because every dollar saved could end up in your pocket as a commission from satisfied clientele. You also need to understand the practicalities of shipping and trucking. Basics like where the door and window are, and how much cargo each vehicle can hold. For example, can your chosen truck carry perishables or delicates? Does it have a freezer? Or a safe?

Step 4: Find a Freight Broking Mentor

The freight broker industry is all about knowing the right people. You need to be friendly with truckers, loaders at the dock, shipping inspectors, wholesale manufacturers, and many other cogs along the chain. So talk to your friends and family, or look around your contact list. Find someone that’s already involved in the shipping sector and ask if you can tail them.

They may want a fee to train you, or they may be happy just to have a ‘shadow’ that makes them feel important. Let your friends and family know you want to get into freight. They’ll help cast out your net for valid mentors. The idea is to follow this person around for a few weeks, maybe even a few months. You want to identify windows of opportunity for your budding business.

Step 5: Go To School

There are lots of training courses for truck brokers. Some have online classes while others require physical attendance. A course typically takes three weeks and you’ll finish by doing an exam that earns you a diploma in freight. Courses can cost $100 or $1,000 so talk to previous students and active brokers to see which brokerage courses they recommend. You don’t want to get scammed.

Supplement your course with online research. You can find lots of good data on everything from shipping container sizes to local trucking laws. Most of this information is available for free, so it’s a precious resource if you use it right. As always, verify your sources and avoid clickbait. Your mentor can help you navigate the waters (pun intended), both online and off.

Step 6: Start a Brokerage Company

Becoming a Freight Broker
Image: Freight Solution Providers

As a freight broker, you can earn anything from 10% to 35% on every deal. And you can book 5 or more deals every day. But you don’t want to look like those shifty guys who sell stuff in their overcoats. You want to look professional and reliable. So start by registering a company. Pick a good name and check online to be sure another company isn’t using that name.

In the US, you can register an LLC, and S-Corp, or a C-Corp. Your brokerage course and mentor can help you work out which option suits you best. Whichever category you select, make sure you get a Tax Identification Number. We all make jokes about the tax status of Chris Tucker, Wesley Snipes, and Donald Trump, but you don’t want to be on the wrong side of the IRS.

Step 7: Get your Brokerage License

Part of being professional and trustworthy is to have all your papers in order. You need MCA (Motor Carrier Operating Authority) verification or formal approval from FMCSA (Federal Motor Carrier Safety Authority). Start by paying a $300 and filling out an OP-1 Form.

You’ll find the form on the FMCSA Website. The form will ask for your USDOT number one of those. This may seem confusing, but it’s simpler than it looks. When you fill the OP-1, you’re technically applying for your USDOT, and you’ll receive it within four to six weeks. Just like wedding banns, the public has 10 days to protest your USDOT. If nobody objects, you’re set.

Step 8: Figure Out Your Business Plan

Many people skip this step while others get stuck on it. You probably have a friend who spent years perfecting their business plan … but never got round to using it. You may have others whose businesses closed their doors because the founder didn’t have a solid strategy written down.

If you’re unsure about the value of a business plan for freight brokers – we have one word for you – capital. When your client’s cargo lands at the port, you need to find a truck, load your freight, and get it delivered safely and on time before you get paid. But in the meantime, you may have to cover the costs of the trucker, road tolls, and more. Out of pocket.

This means you need working capital to run your business before you get paid. And when you’re approaching a bank, crowd-funding, or seeking help from moneyed friends and relatives, you need a business plan. So put enough time and effort to get it right the first time.

Step 9: Get the Other Necessary Documents

Freight Broker
Image: Freight Solution Providers

In addition to a bank loan, credit card, or emergency savings source, you should invest in a freight broker bond. Better known as BMC-84, it provides a payment guarantee to your carriers and a service guarantee to your shippers. With this insurance in place, they know the job will get done even if something goes wrong. The bond will cover unpaid expenses up to $75,000.

To get your $75K bond, you’ll need to fill a BMC-84 form – that’s where it gets its street name. You’ll need to renew your BMC-84 every year and keep the documents on hand, because both clients and quality may ask to review them. Your bond is based on your credit score and your financial history. Due to this, your premiums will be anything from 1.25% to 5%.

In many businesses, insurance is considered advisable. But many business owners work around it. BMC-84 is mandatory for freight brokers because you can’t get your MC Authority without it. But even if your credit is bad, you can qualify for designated bond programs, so look into that.

Step 10: Validate your Insurance and Designate Local Partners

We’ve already confirmed you need BMC-84. You won’t pay the full $75K. Usually, you’ll pay premiums of between $900 and $4,000 according to your credit rating. But you need other types of insurance too. Specifically, you need General Liability and Contingent Cargo Insurance. To access these back-up protections, you need to fill out:

  • Form B-34 for cover against damage and loss.
  • Form B-91 or B-91X for cover against personal injury, property damage, or environmental harm.

Filing for insurance and processing your papers takes roughly two weeks, so plan around that. You also need local agents, because you can’t be everywhere. So it helps to partner with carriers and shippers in various counties, ports, states, and towns. It will widen your client coverage.

Getting these licenses and insurance packages will establish your professional reputation. Use Form BOC-3 to verify your agents with the FMCSA. The process takes 7 days per state, and you’ll need ‘ground agents’ in every state you operate, so schedule your shipping plans accordingly.

Step 11: Identify Shippers and Truckers

Spotting a shipping company to work with is fairly easy. Once you pick a shipping niche, you can stroll along the docks and identify the most important shippers. Your mentor and your dockside crew can help you with this. You can even do an online search for shipping companies that deal in the regions or products you’re interested in. Finding truck companies could be a little trickier.

But the process is the same. Talk to your networks. Find out which truck fleets they trust and why. Go online to check out drivers, coverage, routes, and rates. Then approach the shippers and carriers and work out a deal. You want the fastest, safest, most reliable carriers.

But you want them at prices that fit your preferred profit margin. Or maybe you want the mass-market approach where you punt lower and get more clients, so it becomes a volume-based business. Eventually, you may own a fleet of trucks dedicated to your freight business!

Step 12: Set up the Office

This may seem redundant, but every business needs a physical address. Even online businesses have some type of home base. It could be a home office or a sub-let at the port. Have some basic equipment – a working phone line, email and internet access, a copy machine for all your shipping documents, some accounting software, and some freight brokerage software.

You should also set up a website and possibly some social media accounts. These are the essentials of running a business in today’s economy, so if you’re not familiar, get a crash course from your savvy niece (or hire them to run your socials for you). Websites can cost anything from $10 to $1,000 so start slow and build up if you need to. Don’t overspend.

Don’t Wait Just Freight!

Now that you’ve been bitten the shipping bug, try these tips on how to become a freight broker:

  • Get familiar with freight and update your relevant skills.
  • These include math, people-skills, networking, and record-keeping.
  • Find a mentor to walk you through the basics.
  • Take a freight brokerage course and study shipping resources online.
  • Register your company and apply for your brokerage license.
  • Fill out the right forms including BMC-34, BMC-84, BMC-91, and OP-1.
  • Draft a solid business plan before approaching financiers.
  • Hire reliable agents and carriers.

Have you tried working in freight before? Share your story in the comments!

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