Freight Broker Business Startup: Simple guide to starting, growing and running your own freight brokerage company

By Randy Russell

Embark on a transformative journey into the dynamic world of freight brokerage with "Freight Broker Business Startup: A Simple Guide to Starting, Growing, and Running Your Own Freight Brokerage Company." This comprehensive manual is your essential companion, meticulously crafted to empower aspiring entrepreneurs with the knowledge and strategies needed to establish, expand, and successfully manage a thriving freight brokerage business.

Navigating through the intricate landscape of logistics and transportation, this guide provides a step-by-step roadmap for launching your freight brokerage venture. From initial setup to navigating regulatory requirements and fostering growth, no aspect is left unexplored.

Inside the pages of "Freight Broker Business Startup," you'll discover:

- Strategic Business Launch: A detailed guide on setting up your freight brokerage company, from creating a business plan to establishing essential industry connections.

- Navigating Regulatory Landscape: Clear explanations of regulatory requirements, licensing processes, and compliance measures, ensuring you confidently steer through the complex legalities.

- Effective Growth Strategies: Insider insights on growing your business, expanding your client base, and fostering lasting partnerships in the competitive freight brokerage industry.

- Operational Excellence: Tips for efficient day-to-day operations, including load management, negotiation techniques, and leveraging technology to enhance your business processes.

- Risk Mitigation: Proven strategies for mitigating risks and overcoming challenges commonly faced by freight brokers, ensuring a resilient and sustainable business.

Whether you're a novice entrepreneur entering the logistics realm or a seasoned professional looking to establish your own freight brokerage, "Freight Broker Business Startup" is your ultimate guide to success. The user-friendly format simplifies complex concepts, catering to both beginners and experienced professionals.

Empower yourself with the knowledge and skills required to navigate the freight brokerage industry successfully. Your journey toward entrepreneurial success in the world of logistics begins here. Pick up "Freight Broker Business Startup" and set yourself on the path to building and running a thriving freight brokerage company.

• Language: English
• Publisher: Publishdrive
• Release date: Jan 27, 2024

Book preview

Chapter 1 -

Why to grow a freight brokerage company?

If you own a start-up freight brokerage, you’re aware of the risks and rewards that are part of growing your business. All businesses go through four distinct phases: startup, growth, maturity, and transition. In the first two phases, you pay out your time and money to the business. The payback comes in the second two phases, when you can distribute earnings and enjoy a more relaxed lifestyle.

During the growth phase, you’ll invest a large amount of both time and money. At that point, you’ll want to decide whether an agency or organic business model will best fit you and your circumstances. If you choose carefully and commit to the path, you’ll achieve success over the long term.

Model #1: Agency Growth

If you decide to be an agent-based business, your company will provide back-office support to brokers who don’t want to handle billing, accounting, carrier qualifications, insurance, and the like. The agent produces quick revenue growth on a commission-only basis, reducing indirect costs but diluting profit margins.

It helps to think of agents as customers rather than employees: They are generally aggressive, independent business people and you work for them. You need solid systems in place to ensure low costs per transaction and sound financial management to handle cash flow.

GT Worldwide Logistics, a brokerage in Monroe, IN, that specializes in heavy haul, uses agents as well as in-house sales people. GT started in 2006 with just my partner and me, doing about $1 million in business, said Clint Prosperi, service manager. By 2010, Prosperi and partner Rich Francis had grown the brokerage to 22 sales representatives and were on pace to do about $25 million. GT has agents across the country, including Texas, Florida, Saint Louis, Chicago, Los Angeles, and Washington.

We’re always looking for the next best guy out there who wants to get in this and start making some real money, said GT President Rich Francis. Every single one of our agents gets DAT Load Boards and Keypoint Software for free. It’s very easy to help them get set up, put loads in and move freight.

Model #2: Organic Growth

If you’re taking the organic approach to growth, you need to acquire personnel, choose a niche and geography, and determine equipment and mode types.

1. Hire personnel. You may think that hiring experienced transportation personnel is your best bet. These pros may cost more, but they can hit the ground running and bring a book of business and expanded knowledge. You may be able to expand into new segments or regions quickly. Of course, they may jump to another opportunity just as quickly, taking business with them.

The other choice is to hire employees new to transportation. Even with quality people, the learning curve will be steeper. You can make it easier by using a solid business model, with set procedures and formal training and promotion paths. Be careful, however: If you don’t handle this smoothly, you may be training your competitor’s next team.

2. Find your niche. Many start-up brokers haul truckload dry van freight, because it’s the simplest and most available freight. But it’s also price-driven, with large players and small margins. As a small, nimble brokerage, you should focus on a niche you’re uniquely suited for. Differentiators could include a high level of customer service, flexibility, and responsiveness or a particular type of cargo.

Byrne Transportation Services in Warrenville, IL, started up in 2008. Being veteran-owned gave Byrne a foothold supplying transportation solutions for Department of Defense contractors.

We handle big and ugly freight—the bigger and uglier, the better, said John Byrne, vice president of Byrne Transportation. We move tanks, helicopters, personnel carriers, propeller shafts, and propellers. Byrne also does heavy haul commercially for large chemical companies.

3. Choose a region. Regional markets can offer tremendous opportunities for growth, so choose one you know well. As you expand, you can smooth your transition by hiring regional experts or deploying a robust ratings tool, like DAT RateView™.

4. Decide on equipment and modes. You can also grow your business by moving similar freight using different equipment. You’ll need staff members with the expertise to expand into a new segment. Even better, you can hire personnel with a book of business. Get the right staff and you can move into flatbed, reefer, over-sized, or specialized freight.

GT Worldwide Logistics brought on a partner whose main focus was heavy haul. Prosperi said that he and Francis started learning and growing in that industry; now it’s GT’s specialty.

Various modes are available too. Less-than-truckload (LTL) fills space on a contract carrier’s trailer and can be profitable if you match freight and truck availability.

Less-than-truckload (LTL) consolidation combines several LTL shipments on a contract carrier. In this case, the sum of the parts is greater than the whole, creating a built-in margin. But you need consistent sources of freight and a way to store it until you ship.

Intermodal sounds like what it is: You put a trailer or container on the rail. You need unique knowledge, volumes, and systems to handle the freight. Subcontracting to a specialty company may be a good way to start.

Third Party Logistics (3PL) generally isn’t a growth area for a small company. But as you expand into all market segments, you move closer to providing 3PL services that move all types of freight.

Behind the scenes

No matter which model you choose, you need a quality Transportation Management System (TMS).

In the agency model, your agents will reap the benefits of a full-featured TMS with all the tools of a large brokerage, including integrated load boards, load tracking, and web services for the shipper.

In the organic model, you need systems in place that can handle growth. You may start out running your business with spreadsheets, word processing, and simple accounting software, but you’ll reach a point where those tools will hamper you more than they help. At that point, a TMS like Keypoint Software can support operations and accounting together, introducing efficiencies and controls into your workflow. Successful brokers find that with the right TMS, they can grow their company 10-fold without adding to the back office staff that ran their old manual systems.

When we did $2 million, we had four people on the administrative side, said GT’s Francis. Now we’re doing $25 million and still have four people on the administrative side. There’s no reason for us to add anyone.

As you guide your business through the growth stage, continue to resolve your customers’ transportation challenges efficiently and cheerfully, and you’ll build the two most important assets for your brokerage’s future: sustainable profits and a reputation for excellent service.

What differentiates Byrne from our competition is attention to detail, said John Byrne. That’s critical in the kind of environment the company works. We don’t take anything lightly.

Another Ways for Freight Brokers to Grow Their Business

Our growth-focused brokerage customers have started trying to win all their customers’ freight versus focusing solely on truckload (TL) brokerage. These brokerages begin by talking to their existing shippers and identifying gaps where the brokerage could help. For companies trying to grow quickly, it’s easier to offer more services to current customers than finding net new accounts. However, in an industry with 17,000 players, how do brokerages stand out and avoid becoming a commodity?

Brokerages get ahead by expanding their carrier network, simplifying carrier onboarding, delivering shipment visibility, and improving process management across the entire operation. It’s also important for brokerages to simplify, centralize, and consolidate the technologies that they use. Ideally, having everything available on one screen so that an entire book of business can be executed without jumping between platforms. This is the best way for brokers to use technology as a force multiplier, allowing load planners to increase the number of loads they can manage exponentially.

Other than standard process and technology changes, what other specific ways can brokers grow their business? The first is by expanding from TL brokerage to less-than-truckload (LTL). Technologies today can help make this a seamless transition, but there are still pitfalls that brokers should avoid. The second is to expand from brokerage into managed transportation services, also known as a 3PL. This step occurs when a broker introduces technology to shippers and uses that technology to manage freight on behalf of the shipper.

The TMS Decision

The trick to growing efficiently is implementing a technology platform that grows with the brokerage business. One that executes TL loads now, grows to LTL brokerage options, and then expands into managed transportation services. A software system like this helps brokers avoid the need to implement a new transportation management system (TMS) when they grow, saving large amounts of time and money.

The TMS decision is one of the biggest that brokers will make. This technology operates as a system-of-record, execution platform, and central command center for day-to-day operations. There are many items to consider, but at the core, broker technology needs to handle the basics like rating, tendering, automated communications, and freight auditing. However, brokers growing the fastest use a system that goes a step further and easily lets them expand into LTL and managed transportation services. In a supply chain that isn’t slowing down, it’s time for brokers to take advantage of the many opportunities, identify their goals, and grow as fast as possible.

Ron Lee is the Co-Founder of Pacejet and Chief Product and Technology Officer at 3Gtms; JP Wiggins is the Co-Founder and Vice President of Corporate Development at 3Gtms. If you want to learn more, please register for the latest webinar from 3Gtms titled, Loads of Perspective: Tips to Accelerate Growth in Freight Brokerage. Two career brokers now working for 3Gtms will chat for 30 minutes about their secrets to winning the most loads and delivering a brag-worthy customer experience.

Understanding the ongoing changes in the freight industry

Growing your freight brokerage business is a multilayer process that we will elaborate on in the following passage. But before we do, it is important to give you a perspective of what the current shipping industry is like. Even before COVID-19 hit, the shipping industry as a whole was experiencing some significant changes. So, while we will go over the most notable aspects, keep in mind that these are just some broad strokes. Technological advancements, both in logistics and in shipping capabilities, came as quite a surprise

Developments in AI allow for a much greater sense of efficiency and safety, which is why future freight companies won’t be able to stay competitive without it. Eco-friendliness is also a significant concern as fossil fuels tend to be the least-favorite choice among the current companies. We are still far from relying solely on renewable energy sources, but energy development is going in an eco-friendly direction. The final point to keep in mind is that modern customers’ demands are higher than ever. Due to offers like overnight shipping, customers have grown to expect a high degree of service. So, if you are going to stay competitive, you need to ensure top efficiency.

Grow your freight brokerage business – step by step

Seeing how big the freight shipping industry is and how many emerging technologies there are, you shouldn’t try to tackle all of it. The safest way to grow your freight brokerage business is to outline a particular aspect of freight shipping and excel at it.

Step 1: Identify your target audience

Who your target audience depends on numerous factors. Your location, which services you have available, which industries are predominant in your area, etc. If you wish to grow your freight brokerage company, your primary job is to first outline your target audience. The clearer you can pinpoint to whom you can cater your freight brokerage service, the better. Seeing that finding new customers will likely be an ongoing task, we suggest that you outline the Ideal customer. That way, your employees can more easily identify potential customers.

Step 2: Outline their needs and requirements

The second step you need to take is to clearly outline the needs of your target audience. You will likely have an idea of what they need. But you won’t have the complete picture until you start doing research and asking questions. Most agents will be more than happy to outline their needs and whether the current provides are satisfactory. Some might even give you ideas on which services are most lacking and where you can easily get ahead of your competition.

Step 3: Improve your technology so that it can facilitate the needs of your customers

Once you understand the needs of your audience, you need to alter your company so that it can best fulfill them. By this, we mean implementing new technologies that allow for more efficiency. Apart from logistics technologies, you can look into CRM solutions and communication technologies to help your customers more expediently.

Step 4: Tackle marketing with due care

One of the common mistakes people make in the freight industry is not tackling marketing with enough vigor. Believing that having a simple website or running a social media profile is enough for a serious company is something you ought to avoid. To draw in and keep your audience, you need to run an active website. This not only means tackling your SEO and posting the necessary blogs. But also managing your social media and ensuring that you have the proper brand recognition. Good freight brokers know that projecting an idea of efficiency and stability is essential to drawing in new customers. And the only way to make that possible is to adapt your online presence to your needs and ensure that your marketing is on point

Step 5: Set up performance metrics and keep track of your endeavors

Finally, to ensure that your effort produces results, you need to set up performance metrics. Besides measuring how many new customers you get each month, you also need to track how effective your marketing is. Even in B2B marketing, you need to invest substantial funds to develop an online presence. So, do yourself a favor and ensure that your investments are paying off. By setting up clear performance metrics, you can see how your business decisions impact your revenue and whether you need to make any alterations.

Final thoughts

The main point to keep in mind to grow your freight brokerage business is to stay within your niche. The better you can outline what your target audience needs, the easier it will be to make cost-effective business decisions. If you manage to become the top local freight brokerage business within an area, we are sure that you will have no problem spreading your business out to other areas. But, it is essential to develop a healthy base and a firm understanding of what your customers need. Modern industry requirements don’t allow you to spread yourself too thin. Doing so is not only ineffective but is likely to cause you substantial loss in revenue. And seeing how fierce the competition is, it has become more important than ever to excel within a relatively small niche.

Overview over the Freight brokerage industry -

Freight brokers arrange for the transportation of cargo between shippers and motor carriers. Nearly everything you touch throughout a given day has been transported by a motor carrier. The industry is enormous. Most cargo is shipped with either a dry van, a refrigerated unit (reefer) or a flat bed. Cargo is shipped both within local markets as well as long distance and coast to coast.

Freight brokers, then, seek, identify and get set-up with shippers, manufacturers, growers and distributors who have cargo to transport and who rely upon freight brokers to provide trucks.

Motor carriers may be either large trucking companies who hire their own employee drivers; or carriers may be independent drivers (Owner Operators).

Freight brokers earn commissions for their matchmaking skills. Freight brokers are also known as truck brokers, transportation brokers and property brokers. And the brokerage industry can span not only trucks but air, rail and ocean liners.

Brokers are governed by the Federal Motor Carrier Safety Administration (FMCSA) of the Department of Transportation (DOT). There is no governing body other than these. There are no tests or exams given to pre-qualify freight brokers.

What shippers are looking for:

Shippers are working within cost constraints. They often set the rate as to how much they will pay. Supply and demand sometimes dictate how much particular loads are paying. Shippers are looking for carriers who will move their cargo safely, efficiently and cost-effectively. And they are looking for brokers who conduct business honestly, reliably and with an excellent service-oriented mentality.

What carriers are looking for:

Carriers are looking for good rates. They also work within cost constraints. If motor carriers are knowledgeable about what their operating costs are it helps them remain competitive. Knowing what is needed to maintain equipment, pay personnel and make a profit can make the difference of making it or breaking it.

Consequently, a freight broker is required to use good negotiating skills to complete a competitive transaction whereby everyone is satisfied - shipper, carrier and broker.

What brokers