You want to become a freight broker or freight agent and move loads from a home office. Freight brokering is a real business, but it takes knowledge, startup capital, time to build customers, and careful attention to the rules. Income isn't assured, and many new brokerages struggle in their first year. This guide covers where to begin, what you need to set up a brokerage of your own, and what it costs.
If you haven't had freight training yet, start there. Freight University offers freight broker, agent and dispatcher training.
Where to begin: learn by working loads
Many people learn the business by first working as a freight dispatcher or a freight agent with a licensed brokerage before opening a brokerage of their own. Working real loads for a few trucks that pull the same type of freight teaches you lanes, rates, carriers and paperwork in a way no book can.
Here's the information you need on every load to book loads consistently as a broker or dispatcher:
- Direction of the lane and the rate
- Available backhauls
- Type of commodity and equipment needed
- Weight
- The driver's available Hours of Service time
- Pickup and delivery times
- Shipper contact information
- Carrier onboarding and vetting
Anyone who wants to help carriers find better freight needs to know logistics. Let knowledge guide where and how you start, and understand your duties and responsibilities before you take on a customer.
A good broker understands the trucking business, works well with other brokers, and builds lasting relationships with carriers.
Four starting points
1. Understand the services you offer carriers
Know exactly what services you can legally offer and how to explain them. If you're starting as a dispatcher, build your dispatch skills first. Get training if you don't have a background in dispatching trucks. Starting with a few trucks pulling the same type of freight lets you learn the work well before you take on more.
2. Put a written agreement in place
If you dispatch for a carrier, use a written dispatch agreement that spells out what you do on the carrier's behalf, your fee, and how you're paid. If you arrange freight for shippers as an agent, you'll work with a licensed property broker under that brokerage's authority and a written agent agreement.
Whether a particular arrangement requires broker authority depends on what you do and for whom. FMCSA's broker rules are in 49 CFR Part 371. If you're unsure, review the rules and get advice from a transportation attorney before you start.
Getting paid
If you work with several trucking companies, you need a clear system for getting paid. Many dispatchers arrange, through their dispatch agreement, to be paid by the carrier's factoring company out of each funded load. That keeps billing transparent and lets you focus on moving loads and getting good rates. Read more in partnering with a factoring company.
3. Call brokers and build load information
Spend a couple of weeks calling brokers and learning about their freight. Look for brokers who manage freight in the regions your trucks run and who need reliable capacity. This is how you build the load information you'll offer your carriers.
Many new agents and dispatchers struggle because they never take the time to build these contacts. Aim to build working relationships with a good number of brokers so your carriers have real options. Calling several brokers a day for the first few weeks is a reasonable goal.
Don't get frustrated and rush ahead before you've done this groundwork, or you won't pick up the skills you need. Over time you'll find brokers with steady freight out of the regions your carriers want, and loads that bring your carriers back closer to home.
Learning to dispatch trucks well is a strong foundation for becoming a freight broker. The knowledge you gain about rates and lanes from talking with brokers every day is hard to get any other way.
4. Use social media and online marketing
Let trucking companies know about your services. A clear, professional online presence focused on the services you offer carriers can help you reach trucking companies across the country. There are many resources that teach social media marketing and basic SEO for small businesses. Building a client base this way takes months, not weeks.
Setting up your own freight brokerage
When you're ready to open a brokerage under your own name, here is what's involved:
- Business entity and EIN. Form your company and get a federal tax ID.
- USDOT number and broker operating authority. Apply with FMCSA. The application fee is $300 for each type of authority you request. Check FMCSA's registration pages for the current process.
- Financial security. A property broker must keep $75,000 in financial security on file with FMCSA, either a BMC-84 surety bond or a BMC-85 trust fund (49 CFR 387.307). A surety charges a premium for the bond based largely on your credit and finances, and if the surety pays a claim, you generally have to pay it back. A trust fund ties up the full amount.
- Process agent filing (BOC-3). Names the agents who can accept legal papers for your company.
- Broker rules. Follow FMCSA's broker requirements, including record-keeping, in 49 CFR Part 371.
- Insurance. Many shippers will ask for contingent cargo and general liability coverage, even where it isn't federally required.
- Contracts and systems. Broker-carrier agreements, shipper agreements, carrier vetting procedures, a TMS, load board subscriptions, and credit checks on your customers.
- Working capital. Brokers usually pay carriers before shippers pay them. You need enough cash, or a funding arrangement, to cover carrier payments while you wait for customers to pay.
Costs and uncertainty
Beyond the filing fee, budget for the bond premium or trust, insurance, software, load boards, legal review of your contracts, marketing, and enough cash to carry you through months when revenue is low. Some customers will pay late, some may not pay at all, and rates move with the market. A brokerage can lose money, especially early on. Plan conservatively.
LFS builds freight brokerages for clients, each under its own authority, through freight brokerage setup consulting. For training, see Freight University.
