How to Start a Freight Brokerage Business

Operations

The basic concept of freight brokering is pretty simple: A shipper (or consignor, as they're sometimes referred to) calls you with a load. You complete your own internal paperwork and check with your carriers to see who has a vehicle available. If you already have a relationship with a carrier, you fax it an addendum to your basic contract that describes this particular load and the rate. If the carrier agrees, the company's representative signs the document and faxes it back. (If you don't already have a relationship with the carrier, you'll need to set up a carrier/broker agreement before you finalize the deal on the first shipment.)

Next, the carrier dispatches the driver. It's a good idea to require that the driver call you to confirm that the load has been picked up and again when it's been delivered.

After the shipment has been delivered, the carrier will send you an invoice and the original bill of lading. You invoice your customer (the shipper), pay the trucker and then, ideally, do the whole thing again with another shipment.

Record-Keeping Requirements

The Code of Federal Regulations is very specific about what types of records you must maintain. While you may keep a master list of shippers and carriers to avoid repeating the information, you're required to keep a record of each transaction. That record must show:

  • the name and address of the consignor (shipper);
  • the name, address and registration number of the originating motor carrier;
  • the bill of lading or freight bill number;
  • the amount of compensation received by the broker for the brokerage service performed and the name of the payer;
  • a description of any nonbrokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer; and
  • the amount of any freight charges collected by the broker and the date of payment to the carrier.

You must keep these records for a period of three years, and each party to a particular transaction has a right to review the records relating to that transaction.

Location

One of the most appealing aspects of a freight brokerage business is that your physical startup requirements are relatively small. Unlike a carrier or freight forwarder, you don't need a warehouse or loading dock. Your customers aren't likely to come to your location, so you don't need to worry about an impressive reception area or elegant offices. In fact, while there are some definite advantages to a commercial location, a freight brokerage is an ideal business to start and run from home.

Where you operate depends on your resources and goals for your company. Many brokers start from home with the goal of moving into commercial space as soon as they're established with a few clients, an excellent strategy.

The major benefit of starting a homebased business is the fact that it significantly reduces the amount of startup and initial operating capital you'll need. But there's more to consider than simply the upfront cash you'll need. Do you have a separate room for an office, or will you have to work at the dining room table? Can you set up a comfortable workstation with all the tools and equipment you'll need? Can you separate your work area from the rest of the house so you can have privacy when you're working--and get away from "the office" when you're not?

By contrast, starting in a commercial location requires more initial cash than starting from home. If you decide to do this, your range of options is fairly broad, and your choice should be guided largely by the goals you've set for your business in terms of market and growth. Consider office buildings, light industrial parks and executive suites.

Unless you have an extremely large home, you'll find that a commercial location allows you to create a setup that's more efficient and practical than what you might be able to do in a spare bedroom.

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