What does a freight broker do?
Freight brokers are filling in a crucial role in the movement of freight, as the missing link between shippers and carriers. They negotiate good shipping rates and fast deliveries from transportation companies and connect them with the businesses that need to transport goods or cargo, so carriers can maximize their loads.
Besides acting as an intermediary, brokers have an important function in the tracking of freight, as they keep thorough records of pickups and deliveries and other information. They also oversee the legal part of the transportation, as they need to be experts in shipping regulations and procedures.
Brokers are the ones who make sure that each step of the transportation process occurs so that the freight arrives safely to its final destination. To become a freight broker for trucking and transportation means to take responsibility for a vital part of the shipping process.
What do you need to become a freight broker?
1. Gain Industry Experience and Study
While brokering freight does require knowledge and experience in the field, there is nothing you cannot gain with practice and diligence. In other words, a strong will is among the most important qualities you need to have in order to make it.
In terms of skills, it’s a good idea to refresh your math skills because you’ll need to make use of them on a daily basis. Turning on your business know-how is important too, because you need careful analysis and critical thinking to make the best of existing opportunities.
1.2. Take Freight Broker Training
Besides the general skills you need to refresh or develop, you might want to attend a freight broker school in order to get fully prepared for actual requirements of the brokering job. Getting the top freight broker training books is also important, so you can always refer to them when you’re unsure how to go ahead.
2. Choose a Company Name and Register Your Business
In order to legally operate a brokerage, you will also have to choose a company name and register your business. You can check whether the name you’ve chosen is taken at the US Patent and Trademark Office. Part of registering is also carefully selecting the kind of entity you’d like to register as – sole proprietor, partnership, limited liability company or corporation – and then registering your business in your state at your local business license department.
3. Develop a Business Plan
On a more practical note, preparing a solid business plan is very important. With it, you will be able to apply for a line of credit with your bank but even more than that, your business plan is also an exercise in specifying which niche you will be targeting and who your customers are.
Your business plan includes a go-to-strategy and the more you invest in figuring out the specifics and researching the market, the better you will be prepared to meet its challenges.
4. Find the Right Carriers
A freight broker without carriers is like a ship without sails. Part of your go-to-market strategy should also include finding the carriers which work in the field of operations you’ve chosen for yourself. What’s more, the right carriers are also the ones that are trusted, reliable and professional. This makes the task hard but not impossible!
From online directories and direct references by other brokers to networking events, there is a multitude of ways to find the right carriers for yourself, so don’t hesitate to try out a number of them and don’t just go with what feels easiest!
5. Apply For a USDOT Number and Get Your Broker Authority
After you’ve gotten acquainted with the important role of the freight broker, and what you need to get started in terms of education and a business plan, it’s time to delve into the legal side of how to become a freight broker.
6. Get a Freight Broker Bond
As just mentioned in the previous section, to get your MC authority from the FMCSA, you need to obtain a freight broker bond, or a BMC-84 bond. If you’ve been following the freight news, you’re probably aware that back in 2013, the bond requirement was raised to $75,000 to ensure high industry standards and accountability.
7. Obtain Contingent Cargo Insurance and General Liability
With your MC number, you can go ahead with getting insurance (Form BMC-34 for loss and damage and in some cases, Form BMC-91 or BMC-91X for bodily injury, property damage and environmental restoration) and your surety bond, which we detailed in the previous section.
You need these insurances because many, if not most, shipping companies will request that you present these before you begin work together.
8. Designate Agents for Service of Process
At this stage, once you’ve obtained your bond and insurance, you’re ready to choose your process agents for each state you do business in. This can be done through Form BOC-3 (Designation of Agents for Service of Process) which you need to fill in and submit to the FMCSA.
9. Get Your Equipment
When it comes to the material assets you need to start a brokerage, there are a few things to consider – even if you don’t plan to open a physical office in the beginning.
The essential technical gear that you need at first includes a computer, a printer, a copy and fax machine, a landline phone and a mobile one, some office supplies – and a solid internet connection. You might also want to look into freight brokering software, as it can automate a part of your work and boost your productivity. With time, you’ll see what other items or services are necessary and get them as the need arises, but these are the basics.
10. Get Enough Initial Operational Capital
Unless you have enough cash already at your disposal, you will probably have to consider the line of credit you can secure before you start brokering. Since you will be the intermediary between shippers and carriers, you’ll often have to pay truckers for the shipment before you’ve received the payment from the shipper.
Once you’ve settled your business plan and gotten a line of credit, you’re on the safe side financially, and you’ll be able to start brokering for success.
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