Freight Brokerage Business. The Staff of Entrepreneur Media, Inc.
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organizational and interpersonal communication skills.
Clearly, pushing the proverbial envelope when it comes to services and operations has some definite risks, and you’ll want to carefully consider all of your options when setting up your business. If you’re new to the industry, nothing replaces the need for specialized training and real-world experience prior to working in this field as the operator of a freight brokerage. Without proper training and some real-world experience, you’re much more apt to make costly mistakes and destroy business relationships.
Ask a class of first graders what they want to be when they grow up, and you’ll likely hear things like doctor, firefighter, police officer, superhero, or lawyer; it’s highly unlikely anyone will say “freight broker.” So how do successful freight brokers get into the business?
stat fact
Trucks carry 94 percent of all furniture, fixtures, and appliances for the American home.
Bill Tucker’s brokerage in Cherry Hill, New Jersey, has employed three generations of his family. His father founded the firm in 1961 by purchasing one of the few broker’s licenses still operating at the time. Years later, Tucker was working in the computer industry when his father passed away unexpectedly. At first, he and his mother decided to sell the business rather than shut it down, so he helped run it while looking for a buyer. But after several months without a realistic offer, Tucker decided that he wanted the company for himself. He worked out a deal to buy the company from his mother, and now his own sons work for him. “I’ve never regretted it because it has been a great business,” he says.
After holding a variety of jobs in the transportation industry, Cathy Davis started MCD Transportation, Inc. as a consulting and commissioned sales agency in 1986, and obtained brokerage authority in 1991. After she passed away in 2002, her daughters took over the Smyrna, Tennessee-based company.
• Working 9 to 5
While it’s certainly possible to start a freight brokerage as a part-time business and gradually expand it into a full-time operation, this approach is not recommended. This is not a business where problems or issues can wait. You need to be accessible to your customers during regular business hours and often after normal business hours as well. If you’re not available to answer a question, solve a problem, or quote a rate when a shipper needs information, for example, they’ll likely take their business elsewhere.
There’s also the image issue to consider. Whether it’s a valid perception or not, many people view part-time businesses as hobbies, and their operators as less than professional. Many shippers are not going to trust their shipments to a part-time freight broker.
If you need more income than your business will generate in its early days, consider operating a full-time brokerage with a part-time job on the side—but be sure the hours you work at the other job won’t interfere with your brokerage. Try to schedule that work for nights and weekends. Alternatively, consider becoming an agent for a brokerage firm, instead of operating your own freight brokerage.
Chuck Andrews started his business in Indianapolis in 1993. Having spent his entire professional life working for trucking companies and railroads, he found the brokerage business tremendously appealing. “Out of all the transportation operations, a brokerage operation is very clean,” he says. “By that, I mean it’s basically a 7:30 A.M. to 5 P.M. operation. Very seldom do you have problems occur after that. Your operation runs Monday through Friday. When you’re on the trucking side of it, you have all the problems. If a guy blows a tire, he’s calling somebody at one or two o’clock in the morning to get money to fix it. With brokers, it’s our concern—we want the freight moving on schedule—but it’s not our problem, because the driver is going to call his dispatcher or his company.”
For 18 years, Ron Williamson worked as a corporate traffic manager and director of distribution for several major corporations. He also had experience with a railroad and a transportation-consulting firm. Finally, when he could no longer resist the entrepreneurial urge, he started his own brokerage firm in 1981, based in Bloomingdale, Illinois, and has since founded two trucking companies as well.
As a broker, you have the opportunity to handle many types of freight. You may opt to simply handle general commodity freight—materials that are typically easy to handle and don’t require any special attention. However, you might want to develop some expertise in areas such as heavy equipment, oversized loads, perishable commodities, or even hazardous materials. Becoming an expert at coordinating the transportation of specialized goods could easily allow you to charge premium rates for your services and make it easier for you to find clients (shippers).
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If you’re working with a carrier or broker now and are planning to quit in order to start your own brokerage, don’t assume the customers you have a good relationship with will automatically follow you. It may happen, but if you’re counting on that customer for early revenue, you could be in for a rude awakening.
Don’t limit your specialization plan to the commonly accepted areas. Instead, find your own niche. Tucker, for example, does some interesting work for retailers. One major national chain hires his company to handle the distribution of point-of-sale promotional displays that have to be delivered to hundreds of stores on the same day. It’s a move that’s important but not frequent enough for the retailer to maintain the required expertise in-house. Other big businesses use Tucker’s company to manage shipments related to store openings and closings.
Even following deregulation, the transportation industry comes under the regulation of a number of different agencies. The least-regulated cargo is intrastate freight—shipments moving within the borders of a single state. That freight is regulated under the laws of the particular state and is also typically regulated by the state’s department of transportation, department of business and professional regulation, and/or the department of revenue and taxation.
For interstate shipments—shipments moving between states—the key regulatory agency prior to 1995 was the Interstate Commerce Commission (ICC), an independent agency created by Congress in 1887 to regulate commercial activity crossing state lines. The ICC was created in response to turmoil within the railroad industry, and came about after an 1886 Supreme Court ruling that said states could not regulate interstate railroads, which effectively shifted the burden of regulation to the federal government.
The commission initially possessed limited regulatory powers, but by the early 1950s its jurisdiction extended to all types of surface transportation vehicles and channels. The agency was criticized for regulatory excess and setting artificially high transportation and shipping rates. By the early 1980s, deregulation of transportation industries had stripped the ICC of most of its authority to set rates. In 1995, Congress abolished the ICC and created a Surface Transportation Board (STB) within the Department of Transportation (DOT). The responsibility of the DOT is to perform the small number of regulatory tasks that had remained with the ICC. Today, the primary agencies that oversee motor freight transportation are the STB, DOT, and the Federal Motor Carrier Safety Administration (FMCSA).
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