How Much Can You Earn as a Freight Broker?
In October 2016, Otto, a self-driving truck, made the world’s first autonomous truck delivery. The future is here, folks.
It won’t be long before all truck deliveries are made by self-driving vehicles.
If you’re considering a career as a trucker, you may want to rethink those plans.
But what if you like the trucking industry? A career as a freight broker may be the better option.
What Is a Freight Broker?
A freight broker is the middle man between a trucker and a customer in need of shipping services. As a broker, you connect drivers with companies or individuals that need their goods shipped to a specific location.
Brokers are not shippers or carriers. They work with shippers to find a carrier willing to haul the goods at an acceptable rate.
A freight broker’s services benefit both the driver and the customer. They ensure individuals and companies find reliable carriers. They also help carriers earn more money by ensuring their trucks are full.
Brokers do not work on salary, but rather earn a commission for their services.
Aside from arranging shipments, brokers are also involved in the logistics end of things. They track shipments, and keep records of deliveries and pickups. They must also be familiar with shipping procedure and regulations to ensure shipments are made in accordance to laws.
Freight Broker Career Outlook
Every economy in the world is dependent on the shipping industry. Even if automation took away every single trucking job, there would still be a need to arrange shipments. In other words, we’d still need freight brokers.
The career outlook for freight brokers is bright.
The U.S. Bureau of Labor Statistics reported in 2010 that the freight broker industry will grow by 29% by the end of the decade. That’s faster than the 14% growth expected for other jobs.
What’s the Average Freight Broker Salary?
The most important question on everyone’s mind: how much do freight brokers make?
Calculating the average freight broker annual income can be tricky simply because brokers rely on commission to earn a living. For this reason, salaries can range from near-nothing to $167,000 or more.
Here’s what the top three salary sites have to say:
- PayScale: Median salary of $41,571. On the low-end, brokers earn $30,177. On the high end, they earn around $73,500. Brokers in big cities, such as Dallas, Kansas City, Houston and Portland, earn higher salaries.
- Glassdoor: National average salary is $37,592. Minimum salary is around $31,000, while high-end salary is around $49,000.
- Indeed: Transportation brokers earn on average $80,562 per year.
While the averages vary, we do know that brokers make at least as much as most company drivers. And because you’re working for yourself, you can earn as little or as much as you want.
I would take the above averages with a grain of salt. I know many freight brokers who earn six figures working from their home offices. If you take your brokerage business seriously and know which shipments to go after, you’ll have little trouble earning this type of salary.
Not all brokers are successful. Those who are successful earn salaries of $100,000 or more. Some also have agents working for them that bring in even more money. While commission rates can vary, most work for 12% to 15% commission.
How to Become a Freight Broker
Freight brokers are a lot like owner operators in the sense that they work for themselves. Freight agents are independent contractor salespeople for freight brokers. Agents split the commission with the broker.
Because you’re going to be working for yourself, getting started in this career won’t be as simple as getting training and searching for job openings. While it will take a little more work, the payoff is that you’ll be in complete control of how much money you make.
Register Your Business
The first step in the process is to register your company or file a doing business as form.
If filing a “doing business as” form (DBA), you’ll be operating as a sole proprietor under a different name rather than your legal name (i.e. The Best Freight Broker in Town vs. Joe Smith).
If you choose to register a company, you’ll need to think carefully about what type of entity you want to form: LLC (limited liability company), partnership or corporation. I won’t get into the logistics of each entity type.
Draft a Business Plan
Every successful business starts with a plan. A plan acts as a roadmap and serves as a tool to help you secure financing if necessary.
When drafting your plan, determine which niche you want to target, and define who your customers are.
Your final plan will act as your guide, helping you move forward toward your business goals.
Obtain a USDOT Number and Broker Authority
To legally operate as a freight broker, you need a USDOT number and broker authority. A USDOT number will be required when filling out your application for broker authority with the FMCSA.
Broker authority is the license you’ll need to work as a freight broker. The FMCSA authorizes companies or individuals to act as freight brokers.
To apply, you’ll need to fill out MCFSA form OP-1, and you’ll need to select the “broker of property” option.
When filling out the OP-1 form, you’ll need to input your company’s contact information, name filed on the DBA form (if applicable), and your USDOT number. You will also need to pay a fee (usually around $300) to submit the application.
Obtain a Surety Bond
In addition to broker authority and a USDOT number, you’ll also need a surety bond. A surety bond is a type of insurance that guarantees carrier companies will be compensated for the space on their trucks.
If the shipper fails to pay for the carrier’s service, the freight broker (i.e. you) will be responsible for covering the cost. If the broker can’t cover the cost, the surety bond will.
Brokers are required to have a surety bond worth at least $10,000.
Before bond companies can issue a surety bond, thorough background and credit checks will be required. The bond does not need to be paid upfront – you’ll only need to pay a percentage of it. However, your premium will be dependent on your credit score. The better your credit, the lower the premium will be.
While you can still get bonded with bad credit (there are special programs available), you will pay a much higher rate. If you have less-than-perfect credit, consider improving your score before moving forward.
The FMSCA will require proof of a surety bond through form BMC-85 or BMC-84.
Designate a Legal Process Agent
The FMSCA also requires freight brokers to have a legal process agent for every state they work in. The agent will provide legal representation in their respective state. Brokers who operate in multiple states may retain law firms with members in multiple states.
To register a process agent, you will need to fill out form BOC-3. Spaces are provided for every state. To file form BOC-3, you’ll need to pay a $50 fee.
Get Insured
Once you have your Motor Carrier number, you can obtain general liability and cargo insurance. These insurances are required, as most carriers will ask for proof of coverage before agreeing to work with you.
Know and Understand the Industry
To succeed in this business, you must know the ins and outs of the industry. Shippers looking for freight brokers want to work with someone who knows what they’re doing.
While it helps to have some experience in the trucking industry, books and the right training course can educate you on everything you need to know.
The right course will also teach you how to get the most money out of each shipment you arrange, and how to find the highest-paying shippers. This information can mean the difference between earning $36,000 per year and $100,000 per year.
The best place to start a successful career and succeed as a freight broker is your local technical and community colleges. They have dedicated programs to help you understand the industry and unique operation requirements for freight careers
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