The following list will give you an idea of the necessary startup expenses for a freight brokerage. Where your operation falls within the ranges depends on whether you start as a homebased business or in a commercial location, and whether you hire employees right away or do everything yourself in the beginning. The suggested operating capital should be enough to cover the first three months of operation and must be sufficient to cover what it will cost to pay the carriers before the shippers pay you.
Licenses/tax deposits: $200-$400
Professional services: $200-$750
Insurance (first quarter): $700-$1,400
Suggested operating capital: $5,000-$250,000 (cash or line of credit)
Basic Office Equipment
As tempting as it may be to fill up your office with an abundance of clever gadgets designed to make your working life easier and more fun, you're better off buying only what you need at first. Consider these basic items:
- Typewriter - for filling out pre-printed and mutlipart forms
- Computer and printer
- Software - including accounting, customer information management and other administrative programs, and programs designed specifically for freight brokers
- Copy machine
- Fax machine
- Postage scale
- Postage meter
- Paper shredder
- Telecommunications equipment - including a telephone, voice mail, cell phone, pager, toll-free number and e-mail
Banking On Your Banker
Solid banking relationships are critical for brokers. Chuck A. says it's not unusual for a new broker to need a line of credit in the range of $250,000 to $300,000 to be able to pay carriers before being paid by the shippers. "If you don't pay the trucks in a timely fashion, they won't haul your freight. If you have nobody to haul your freight, you have no business," Chuck says. "Other than getting your licensing and insurance, setting up [a relationship] with a good banker is probably at the top of the list."
Of course, you don't want to walk empty-handed into a bank you've never done business with and ask for a major line of credit. "You have to know your banker really well. Go in with a business plan. It also helps if you have been doing business with that bank and they know you," Chuck says. "You have to have an excellent credit record, because [as a broker,] you have no assets for them to come after."
Put together a package that clearly demonstrates to the bank that you're not a credit risk and that they'll benefit by establishing a line of credit for you.