Make more money. Be your own boss. Spend less time on the road, and more time with your family. There are many reasons why you may want to start your own freight brokerage, and the payoff can be huge. However, according to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. If you want to go the distance in the trucking industry, follow these 5 steps to start your own freight brokerage the right way, so you can make it in the long haul.
1) Get experience.
One of the best ways to learn how to operate your own business effectively is to work in someone else’s for a while. Whether you spend time as a shipper, carrier, agent, or in another capacity, your experience in the field will help you understand the business, and build your network.
2) Create a business plan.
When you put your goals on paper, you’re more likely to achieve them, so take the time to create a detailed business plan. Include your financial goals, mission and vision, and unique market position. Then, describe your action plan for achieving your objectives. Include strategic aspects, like how you will find carriers and shippers, and what special value you bring to both parties, as well as financial details, including rates you will pay carriers, your commission, a budget for expenses, and your projected profitability after paying business costs. This part of your plan is especially important if you intend to apply for funding from a bank. If you need help writing a business plan, there are many online resources available, such as this one from the Small Business Administration.
3) Take care of legal issues.
There are a number of legal requirements by which freight brokers must abide. Here are the most important ones:
- Apply for operating authority with the Federal Motor Carrier Safety Administration (FMCSA). You’ll need to file an application (form OP-1), pay a $300 filing fee, and arrange for a surety bond or trust fund in the amount of $75,000. You can obtain these bonds using your own resources or a bonding company.
- Obtain insurance coverage. Obtain liability insurance, and secure bonding in the amount required for your location.
- Complete the Unified Carrier Registration and pay an annual fee, currently $76 per year.
- Abide by state and local requirements. Check with your state and local government for any other requirements to establish and operate a business in your state.
- Follow recordkeeping requirements.
Freight brokers must keep accurate records of each transaction for three years, and make records available to all parties. Records must include:
Shipper’s name and address
Carrier’s name, address, and registration/USDOT number
Bill of lading/freight bill number
Freight brokering rates and the name of the person who paid for the brokering service
Other non-brokerage services you performed, how much you were paid, and the person who settled the obligation
Freight charges you collected and the date the motor carrier was paid
4) Get finances and banking relationships in place.
Create a business banking account, and establish a relationship with a commercial banker. Invoice factoring companies like Triumph, formerly known as Triumph Business Capital can also help you access working capital.
5) Open your office and get started.
Whether you’re establishing a home office, or setting up a commercial space, you’ll need a phone, desk or other workspace, filing system, and computer. Now is also the time to start marketing your company, if you haven’t already. You can create a website, purchase ads in industry publications or websites, and use direct mail to advertise to potential clients.
Triumph, formerly known as Triumph Business Capital specializes in helping freight brokerages succeed, so let them know if they can help with working capital for your new business.