How To Become a Freight Broker 101

Want to start freight broker training or are a trucker who wants to get off of the road? Learning how to become a freight broker can lead to you sitting behind a desk, directing freight all over the United States.

If you understand the trucking industry and want to enter a rapidly growing field, there’s always room for additional freight agents.

What is a Freight Broker?

Drivers and shippers need to move products from one destination to another. As an integral part of the economy, these professionals need assistance to optimize the flow of goods. This is where a freight broker business comes into play.

A freight broker is a broker who:

  • Finds reliable carriers
  • Makes sure products reach their destinations
  • Keeps a close eye on shipments
  • Updates customers on their shipments

Truckers often have industry experience that makes them a perfect fit for obtaining a freight broker license and either working for an existing freight brokerage or running their own freight broker business.

A solid business plan, licensing and experience in the industry are often enough to transition into a sole proprietor role or to begin your own brokerage.

Roles a Freight Broker Fills

Business operations won’t change much day-to-day, but a typical day for a broker will include the following duties:

  • Contacting and scheduling with a carrier
  • Preparing for loads
  • Marketing to fill pipelines
  • Researching and vetting freight service carriers
  • Sending quotes and shipping estimates to customers
  • Scheduling orders
  • Updating customers on shipping status
  • Answering questions and requests
  • Negotiating contracts with carriers
  • Tracking and recording business activities

You’ll also work very closely with carriers, dispatchers and shippers to make sure that loads are picked up and dropped off. A successful freight broker will have an intimate understanding of the transportation industry.

Freight Broker Industry Outlook

The Bureau of Labor Statistics classifies freight brokers as “cargo and freight agents.” Brokers have a “bright outlook,” with demand expected to grow. Recent figures have not been provided, but other sources have growth between 15% and 30% over the next five years.

Online retail sales are booming, and the demand has led to a robust field for experienced brokers.

Freight Broker Training & Certifications for Truck Drivers

If you want to become a freight broker, the following steps will help you go from a prospective trucking broker to a career in the field.

Step 1: Attend Training at a Freight Broker School

Your first step into the field should involve attending a training school, although this is not a requirement. Schooling will help you:

  • Gain hands-on experience
  • Explain and teach you about industry trends
  • Provide you with insights into industry best practices
  • Teach you about industry tools

You can choose to attend a traditional freight broker class, or you can pursue a self-study option, which may fit better into your schedule. If you work for a motor carrier already, the self-study option may offer you the flexibility you need to become a broker.

Math skills are vital as a broker, but it’s important to focus on a lot of key skills when becoming a freight broker, including:

  • Math
  • Communication
  • People skills

If you’re already in the industry, you may be able to become a freight broker in the freight industry through the career you’re already in. A lot of truck drivers and dispatchers will transition into the freight industry because it’s a natural step forward.

The experience that you gain in the shipping and transportation industry are invaluable when you become a process broker because you’ll already have a good understanding of how logistics, trucking and shipping work.

And you’ll also be in-the-know about trucking trends, which is a major bonus.

Step 2: Register Your Business and Work on Your Business Plan

You can choose to become a freight broker for another business, or you can run your own limited liability company as one of the newer freight brokers in the industry. Multiple steps need to be taken when starting your business.

Create a Business Plan

It’s easy to overlook the importance of a business plan because, at one time, these plans were used primarily to obtain funding. But when you have a solid plan, it’s a blueprint that you can follow to increase the chances that your business will be a success.

A few of the key elements of your plan will be:

  • Executive summary
  • Company description
  • Competitive analysis
  • Market analysis
  • Product and service breakdown
  • Marketing plan
  • Sales strategy
  • Business legal structure
  • Location
  • Etc.

You can find a lot of great guides online that can help you come up with a business plan, including:

Some of the things that you’ll need to consider include:

Business Structure

You’ll need to choose from one of many business structure options available. Some structures are easier to get started with than others, and others offer better tax benefits or legal protections than others.

A quick rundown on the options you have when becoming a freight broker are:

  • Limited liability company. Also known as an LLC, these entities offer protection to the owner so that they can only be held liable for their investment in the business. Legal liability is passed to the business, and you can avoid double taxation, too. But you will have to pay self-employment taxes as the owner.
  • C corporation. A C Corp is a business that is its own legal entity. Owners are separate from the business, and this entity offers the highest protection against liability. But you will have to pay corporate taxes, which means double taxation for you,
  • Partnership. Are you going to be joining a joint venture with one or more partners? If so, a partnership is similar to a limited liability company.
  • Sole proprietorship. You can also become a sole proprietor, but you don’t need to create a company to do so. While a simple and easy business structure, the main pitfall of this entity is that you’re legally liable for all debts. With personal liability being the burden of the owner, you can be sued and have your personal assets taken as a result.

Speaking with an attorney or accountant to discuss which business structure is ideal for your business is recommended. Your accountant may explain that an S corp is more beneficial when becoming a freight broker.

Location

You’ve chosen your structure, but now it’s time to choose location. A lot of brokers are working online, but they also have a physical presence. The good news is that there’s been a major transition to remote working, which leads to:

  • Less overhead
  • Greater reach
  • Easier time selling your business

If you live near a port or in a big city, it may make more sense for you to have a brick-and-mortar location. Otherwise, you can save money by being one of the freight brokers operating online.

Target Customers

Every business has its target customers, and once you are able to narrow these customers down, you’ll have a much easier time marketing to them. Sit down and brainstorm who your:

  • Ideal customers are
  • Ideal partners would be
  • Shippers will be

When you have a firm grasp of your target customer, you can better understand how you’ll make a living.

Step 3: Meet All Legal Freight Broker Requirements

Becoming a freight broker does have a few legal requirements that must be met. A few of the requirements that you’ll need to meet are:

Register for a USDOT Number

Everyone who wants to become a freight broker must register for a USDOT number. When licensing through FMCSA (the motor carrier operating authority), you’ll need a valid USDOT number. The application process goes through the Unified Registration System and is free to obtain.

Broker Authority

FMCSA is a broker authority, and since you’re involved in the transportation of goods, you’ll need to have a broker authority, too. You’ll need a USDOT number to apply, and there’s also a one-time fee that is paid to the authority.

BMC Requirements

Freight brokers will need to meet certain requirements as part of their licensing. You’ll need to obtain one of the following:

  • Surety bond, or BMC-84
  • Trust fund, or BMC-85

If you’re operating in the United States, a freight broker bond is a requirement. The surety bond is a protection, provided to both carriers and shippers, that covers them if a broker isn’t properly licensed. You’ll have to pay for the $75,000 bond, but payment is usually in increments.

You’ll often find payments with the following requirements:

  • Payments of $500 to $2,000 annually
  • Payments based on a percentage of the bond’s total amount

The FMCSA will look at your credit history and financial standing to determine your payment.

If a surety bond isn’t an option, you may be able to create a BMC-85 trust fund, which requires all of the $75,000 to be placed inside of the trust fund at once.

You’ll also want to contact your local business license department to make sure that you have all of the required licenses to operate your business. The licensing and registration process is straightforward.

United Carrier Registration

States require that you have your United Carrier Registration. This is an agreement that states have in place, which requires you to pay fees if you’re one of the following:

  • Freight broker
  • Motor carrier
  • Similar industry professional

You can register and view the current fee schedule right on the United Carrier Registration website.

Working With Process Agents

Every state has what’s known as a “process agent.” These agents will work with you through the entirety of starting a freight brokerage. Your process agents, all of which are registered with the FMCSA, must be hired for the licensing and registration of your brokerage.

These individuals will also be listed on your BOC-3.

File Your BOC-3

A BOC-3 is a blanket insurance coverage that is required by the state that you’re located in. The process agent is listed on this document and will make sure that you meet all of the necessary legal requirements.

Invest in Insurance

Discuss the types of insurance that you need to operate your business with as little risk as possible. We cover the potential insurance options more in-depth later in this article, but you’ll want to make sure that you have the following at a bare minimum:

  • Contingent cargo insurance
  • General liability insurance

Once you’ve met all of the requirements and have your business up and running, it’s time to lure in potential customers. The marketing phase is one of the most important.

Don’t know where to begin? Speak to an insurance company that specializes in the trucking industry.

Step 4: Start Marketing

You’re operating your business legally, you have your surety bonds, have your unified carrier registration, filled out your freight broker application form and purchased office supplies. Everything is going great, but there’s something else that you need to do: market your business.

Working with a marketing specialist is recommended, but if you don’t have the credit score to obtain a business loan, you may need to bootstrap some of your operations at first.

Marketing, especially when the phones aren’t ringing yet, is one area that you can begin on your own. Some of the marketing opportunities that you may have are:

  • Online directories. While these directories may not be as popular as they once were, directories are still popular for people in the transportation industry.
  • Social media. A form of organic marketing, start building up your social media presence. You’ll want to use this as a form of networking where you network with shippers, receivers and companies that may need your services.
  • PPC ads. If you have the money, purchasing PPC ads on social media and search engines can lead to organic leads calling your business.
  • SEO. A long-term strategy, which also helps reduce PPC expenditures, is to begin search engine optimization. You’ll likely want to work with an SEO team that knows what they’re doing to properly optimize your website.
  • Email. You can cold email prospects and see if they’re interested in your services.
  • Cold calling. Are you a good salesperson? If so, cold calling may be your best bet. This involves calling people in your industry that may need your services.
  • Ad buys. You can purchase ad space on industry websites or even billboards to promote your services.

Marketing is all about who you know, and even if a potential prospect doesn’t need your services today, they may need them in the future. Be sure to use this time to nurture these relationships so that you can, eventually, generate a steady stream of clients and grow your business.

When your business finances are stable and you’re working with a shipping company, or many, it might be time to start working with a professional marketing team. The right marketing team will pay for themselves by generating leads to your business.

Freight Broker Potential Earnings

Potential earnings, or salary data, can vary greatly from one state to another. Key data points from May 2020 from BLS has over 96,000 people employed as a freight broker agent. Salary data is as follows:

  • Bottom 10% earning $27,780
  • Bottom 25% earning $34,400
  • Median earning $43,770
  • Top 25% earning $56,060
  • Top 10% earning $69,890

States offering the highest salaries include:

  • Rhode Island at $57,580
  • Minnesota at $56,250
  • New York at $54,810
  • Maine at $54,420
  • Montana at $52,980

Indeed.com states that the average freight broker will earn $62,000 a year, but they also have some states with salaries as high as $75,000.

ZipRecruiter has the average salary of a freight broker listed at $57,729.

But, if you’re an industry veteran or own your own freight brokerage company, your salary range can be $100,000 to $2000,000 or more per year. When you’re the owner of a freight brokerage business, you’ll take on a lot of overhead and risk if you have employees and your own office space, but you’ll also increase your earning capacity drastically.

Career Paths for a Freight Broker

Once you have your freight broker license, there are really two paths that you can take in the freight industry:

  1. Work as a freight broker for someone else
  2. Open your brokerage business

If you want to be a business owner, you can have your own business up and running in as little as six months. The industry is expected to have a market share of $81+ billion by 2026. There’s a high demand for competent brokers that can get shipments from point A to point B.

While you can technically open your own business once you obtain your freight broker license, it’s highly recommended that you gain industry experience first. The experience that you gain in the industry will allow you to better operate your business so that you understand:

  • Industry trends
  • How to land broker contracts
  • Working with the federal government
  • Freight brokering software
  • Ins and out of the freight brokerage market

Experience can go a long way in ensuring that you can avoid common business problems and lower potential risks as much as possible.

FAQs

What Insurance Does a Freight Broker Need?

If you work for a freight brokerage, they’ll handle most of your insurance needs so that you only need to go to work, clock in and clock out. But if you’re running your own brokerage, you may need multiple forms of insurance, including by not limited to:

  • Errors and omissions
  • Contingent cargo
  • Vicarious auto liability
  • General liability
  • Cargo insurance

The FMCSA will require you to provide proof of insurance, which your insurer will furnish, to ensure that you have the minimum required insurance to operate legally. When in doubt, contact an insurer in your state and talk to an agent that has experience helping freight brokers obtain the insurance that they need.

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What Do I Need to Become a Truck Broker?

A quick and easy answer is that freight broker training takes 30 to 45 days to complete. If you’re working with an existing freight brokerage and joining their team, you can be up and running in a new career within two months or less.

Are There Options on How to Become a Broker for Truck Drivers?

Yes. If you work for a trucking company, you know how rigorous the job can be.

You’re on the road five to seven days a week, and home time is scarce. Your trucking company may pay for you to go to freight broker school, and there are opportunities to learn at your own pace.

Learning at your own pace may mean that freight broker training is longer, or you can condense it into less than the 30+ day courses most people take.

Once you know how to become a freight broker and take all of the necessary classes and obtain your license, you’ll be able to work brokering freight or can become a business owner. The shipping industry is in high demand, and there’s always room for a new freight broker company or agent to ensure goods reach their destination on-time and safely.

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