11 Step Guide to Becoming a Freight Broker
Becoming a Freight Broker
There has probably never been a better time to become a freight broker than now, with the US economy becoming stable and even improving each year, and an increasing need for new brokers in the freight industry. It can be a very rewarding career to be involved in, since freight brokers are critical for maintaining the smooth flow of goods all across the country.
It’s not much of an exaggeration to say that freight brokers play a major role in keeping the economy itself running smoothly and efficiently in this country, and that without them the flow of goods and cargo would come to a screeching halt. To the job satisfaction aspect, you can add the financial rewards of becoming a freight broker, so it’s easy to see why this career holds plenty of appeal for people starting on the business.
If you’re interested in earning close to $100,000 a year, and enjoying the knowledge that you are a critical factor in the smooth operation of our nation’s economy, becoming a cargo broker is something you should consider becoming involved in. As far as a start-up is concerned, freight broker license cost are low compared to other industries.
What they do:
Essentially, they serve as middlemen between the businesses which need to have goods and cargo transported, and the carriers who do the actual transporting. There is a considerable efficiency factor added by the broker in connecting these two groups of business people, by ensuring that carriers of goods maximize their loads before actual transportation occurs.
Once the shipping process is underway, freight brokers also add value by tracking the progress of the carrier, and maintaining detailed records of pickups and drop-offs, as well as other information relative to the whole process. Since freight brokers are required to be well schooled in all shipping regulations throughout the country, they also serve as legal overseers of all shipping procedures.
Every step of the shipping process occurs under the overall supervision of the broker, ensuring that shipments successfully reach their intended destinations. A great deal of responsibility is assumed by the freight forwarder, and that’s why the job is typically so financially rewarding.
How To Get Yours!
The steps necessary for obtaining a license vary from state to state, but the general process is the same for the most part. The first step necessary is to acquire the knowledge and training necessary to become a broker, for which classes are offered by various agencies within the state, as well as online.
Next, it will be necessary to apply for a license with the Federal Motor Carrier Safety Administration (FMCSA). For this, you can download forms from the agency website, and after you’ve filled out those forms, the agency will issue a Motor Carrier number which is necessary to continue the process. It will then be necessary to acquire a surety bond, the amount of which also varies from state to state.
If you’re going into business independently, you’ll have to pay this amount yourself, but if you are going to be employed by a company, that company may pay the cost of the bond for you. Then you’ll have to file a BMC–84 form to complete the process, after which you will have to wait for a period of a month or more before receiving your FMCSA authority certificate.
Freight Broker License Cost
The cost of obtaining a license itself will be around $750, although this will not be the only cost you incur during the entire process of starting up your business. It will also cost you somewhere between $1,000 and $9000 annually to obtain a BMC–84 bond, and probably between $1,000 and $5,000 or more in office equipment.
Each month you’ll also have to pay for a high-speed Internet connection, phone lines, and utility bills. You will most likely need to use special software offered by TurboTax or Microsoft Office Suite to keep your company books organized, and to keep you prepared for each tax season. If you have any employees working for you, they will need licenses as well.
Finally, you’ll need a broker authority license which you’ll have to obtain from the FMCSA, before you actually go into business. This certifies that you are qualified as a broker, and are legally authorized to move cargo from place to place in your area of interest. This FMCSA license will cost you $300 – then you’re ready to go to work. Freight broker license cost are relatively low compared to other industries.
11 STEPS Required for Becoming a Freight Broker
1- Acquire the necessary knowledge – Extensive knowledge and training is required in order to become a good freight broker, but if you’re a determined person, you’ll get through it just fine. Before getting into the actual broker body of knowledge, you should sharpen your math skills, and make sure that your communication skills and people skills are up to snuff as well.
Many would-be freight brokers actually attend a school, and during the process acquire formal training books which can be used as reference material forever after. One of the great benefits of going through some of the really good training programs around the country, is that you become aware of openings in the industry that you may want to pursue.
2- Register your company – Before you can legally conduct business as a broker, you have to establish a company name and get your company registered. It’s a good idea to check with the US Patent and Trademark Office to make sure you have a unique company name. After that, decide which business entity type is appropriate for your business aims and objectives, e.g. sole proprietorship, corporation, or limited liability company.
3- Prepare a business plan – Developing a solid business plan is one of the critical steps towards launching your company, because it is often required by lenders when evaluating your application for a loan or a line of credit. Your business plan will also be a roadmap for your intentions on how you will conduct your business, and what you hope to achieve within the first 3 to 5 years. Include freight broker license cost and requirements.
4- Find carriers to work with – It’s essential for any shipper to find and establish relationships with the right carriers, since they will be the ones transporting the goods for businesses that you work with. These carriers should be very professional and very trustworthy, because their work habits and their reliable performance will be a reflection on yourself.
5- Obtain a USDOT number – Having acquired the background training and knowledge, and having taken the initial steps toward establishing your business, you’ll then need to take care some of the legal requirements. This is when you apply to the FMCSA for your Motor Carrier Operating Authority license. This will get you a USDOT number, and you’ll be able to fill out most of the information on the agency website as described above.
6- Get properly bonded – The bond requirement for freight brokers is now $75,000, but you won’t have to pay that full amount when acquiring your bond. The actual amount you pay will be closely tied to your creditworthiness and business credit history, but you can expect to pay somewhere between $1,000 and $4,000. You may have to pay even more than that, if you have already established bad credit.
7- Get insured – Once you’ve gotten your Motor Carrier number, you can proceed with acquiring insurance and a surety bond. It will be necessary to acquire insurance, because most shipping companies will ask you for it, before they’ll work with you.
8- Choose process agents – Now that you’ve acquired your surety bond and insurance, you’re in a position where you can go ahead and choose process agents for each of the states you intend to do business in. To accomplish this, you’ll need to fill out a form BOC-3, which is entitled Designation of Agents For Service of Process, which you will then have to completely fill out and submit to the FMCSA.
9- Obtain necessary equipment – If you do plan to have a physical office or headquarters which you operate from, you’ll need to startup that office with all the typical equipment necessary to conduct business. This is where you have to purchase all the office supplies like a computer, printer, fax machine, phone system, and Internet connection. Whatever freight brokering software you use will be another expense added to this general area of equipment purchases.
10- Arrange for startup financing – Most beginning freight brokers don’t have the capital to fund their operations at the outset, so you’ll have to have a plan for obtaining a line of credit or a loan before you can go into business as a broker. One of the things you’ll need startup cash for is paying your carriers for the transfer of goods on shipments, because you won’t actually receive payment from shippers until deliveries are actually made. A business line of credit will help you get going, and after that you should establish regular cash flow.
11- Begin marketing and advertising – With everything else set up and in place, the last thing you need to consider is how to conduct marketing and advertising that will gain some attention for your new freight brokerage. It will also be to your advantage to establish a website, and a regular blog which positions you as something of an authority in the field, so you can begin to impress potential new clients.
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