Freight Brokerage Business. The Staff of Entrepreneur Media, Inc.
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Why can’t shippers simply find and hire their own carriers in order to transport their cargo? The simple answer is because it isn’t practical or realistic for them to become intimately familiar with the service and rate structures of hundreds of different motor freight companies.
Even if they build in the cost of the broker’s commission—which the carrier, not the shipper, often pays—most shippers save time and money, plus receive better service by using a freight broker rather than shopping around for freight services on their own.
From the carrier’s perspective, the broker brings in business that the carrier might not have been able to find on its own. Unlike an in-house salesperson, the broker is only paid when the carrier hauls a load. In today’s business world, carriers have come to respect, appreciate, and heavily rely on the role brokers play in keeping the transportation industry moving. What this potentially means for you is opportunity!
tip
Someone who owns and operates a freight brokerage business is considered a freight broker. Someone who has the training to be a freight broker but opts to work as an independent contractor for a freight brokerage business is called an agent.
A freight broker must handle the day-to-day responsibilities of being a freight broker, and take on the management, licensing, insurance (bond), and financial responsibilities of operating their own business. An agent has the same job-related responsibilities, without the management, licensing, and financial responsibilities of owning the business.
Of course, for freight brokers, there’s much more to the process than making an introduction and then quickly collecting a commission. Brokers work hard in a fast-paced, demanding environment. They thrive on stress, enjoy challenges, and have strong social skills (e.g., the ability to communicate with other people in person, by phone, in writing, and via email). If your ideal business includes a predictable routine and a limited amount of human contact, stop reading the book right now, because operating a freight brokerage business or working as an agent for an established freight broker, isn’t for you.
However, if you want minute-by-minute change, unexpected crises, and daily opportunities to stretch your creativity and problem-solving abilities to the maximum, you’ll probably make a great freight broker or agent.
This book will take you through the process of starting a freight brokerage business (or becoming an agent), beginning with a general overview of the freight industry and the role brokers play. It will explain basic requirements and start-up costs. You’ll learn about day-to-day operations when things are going well—and when they’re going wrong. You’ll also discover strategies for finding, hiring, and retaining good employees—as well as what to do when you lose them. You’ll gain a solid understanding of the sales and marketing process, as well as how to track and manage the financial side of your business. Throughout the book, you’ll hear from freight brokers and industry experts who have built successful companies and who are eager to share what they’ve learned from their own first-hand, real-world experience.
By turning the page, you’re about to take the next step of your journey into learning more about one of the most fundamentally necessary businesses in today’s business world—the freight brokerage.
Introduction to the Freight Brokerage Business
The transportation industry in general, and the trucking industry specifically, are critical to the economic and social survival of local communities, the country, and, indeed, the entire world. Think about the times major transportation systems have failed because of mechanical problems, natural disasters, or labor conflicts. When cargo can’t move, the repercussions are serious and widespread. For example, store shelves are emptied, perishable goods spoil, factories are shut down, workers become idled, and the economic repercussions quickly become catastrophic.
fun fact
According to a recent survey in Transportation Journal magazine, the aspects brokers enjoy most about their work are solving problems for customers and the fast-paced environment.
The United States may be shifting from a manufacturing to an information-based economy, and technology is certainly impacting every business, but there will never be a time when goods do not have to move. Thus, the freight transportation needs of manufacturers, distributors, wholesalers, retailers, online merchants, and many other types of businesses is growing rapidly within the United States. Furthermore, the need for shippers to transport their cargo in a timely, efficient, and cost-effective manner can mean the difference between profitability and significant financial loss. This presents a tremendous and potentially lucrative opportunity for knowledgeable and skilled freight brokers.
“Logistics professionals in the United States—shippers, intermediaries, and carriers—have transformed the way we do business,” says Robert A. Voltmann, president and CEO of the Transportation Intermediaries Association (TIA) in Alexandria, Virginia (www.tianet.org). “In the process, our national economy has been transformed as well. Transportation has become a strategic asset. Inventory is now stored in motion, as we have been able to move to just-in-time delivery. More goods are being moved with more efficiency and reliability than ever before.”
• Terminology Explained
Broker means a person who, for compensation, arranges or offers to arrange the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee. Non-brokerage service is all other service performed by a broker on behalf of a motor carrier, consignor, or consignee.
Take a look around your home or office. It’s highly unlikely that you have much—if anything at all—that didn’t reach you either entirely or partially by truck. The size and scope of the motor freight industry can be overwhelming. This is not something most people think about on a day-to-day basis, as long as what’s needed shows up at their door (or at their local store) when it’s expected.
fun fact
According to U.S. Freight Brokers, “70 percent of all manufactured and retail goods transported within the United States on an annual basis are via truck.” However, research conducted and published within Logistics Today in March 2016, suggests that during the past decade, larger freight brokers have done significantly better than small, independent brokers because these larger organizations are able to better leverage technology, hire larger and more experienced teams of salespeople, keep prices low, plus use their size, financial stability, and experience as a selling point with potential customers and clients.
The good news for you