Freight brokerage is a tough business, but with the right tools and knowledge it is possible to achieve great success. In the wild world of transportation logistics, the freight broker needs to be fast and flexible in order to turn a steady profit. Freight brokers are integral to the shipping industry. Without the intermediate touch point of a freight broker, some shippers may not find the best mode of transportation for goods.
Here are some primary considerations for starting a successful freight brokerage.
- Gain experience – This is true for all entrepreneurs; those who work in the business beforehand have a better understanding of business management and nuanced technical information. Prior experience also provides access to a network of relevant contacts who may be beneficial as future clients or colleagues. Try to work for a shipper or a carrier for a few years before embarking on new freight brokerage venture.
- Decide on an area – Freight brokerages that focus on a market segment can better market their services and provide personalized customer service. Look at factors such as cargo types, amount of goods transported on a regular basis, shipping needs, and logistics information such as locations to serve and travel distance.
- Understand transportation regulation and other legal issues – Freight brokerages have to register with the Federal Motor Carrier Safety Administration (FMCSA). The registration indicates that a company has the financial means to cover claims and other financial requirements that may arise. Freight brokerages are expensive startups and require enough starting capital to cover fees and startup operating costs.
Interstate commerce can be tricky, and brokerages also need to comply with local regulation requirements. Hire an attorney to ensure that all legal requirements are met to avoid consequences like excessive fines and business closure.
- Invest in quality technology – A brokerage’s success is highly dependent on the quality of information provided to shippers and carriers. Technology solutions should provide information on end-to-end supply chain logistics. Companies like GTG Technology Group offer software solutions in the cloud that cover every aspect of brokerage services from flexible order entry and management to scheduling systems, carrier management, and dispatch control among other features. Adequate technology that is regularly used is crucial to providing high quality services to shippers and carriers.
- Keep solid records – A technology system can help with this process. However a brokerage decides to maintain a record system, make sure information for every interaction/transaction is on file and easily searchable.
- Choose a trusted banker – Financial exchanges are a critical aspect of freight brokerage operations. A banker who understands the industry can help a startup company manage money effectively so that payments are swift. Carriers and shippers rely on their freight brokerage to pay on time. Failure to do so can destroy business relationships that may be integral to overall success. A freight brokerage’s banker can also help individuals make smart investments and plans to recoup the cost of credit over time.
There are many moving parts involved in starting a freight brokerage. These tips are some to keep in mind as you get started. Focus on gaining understanding from individuals in the industry to improve your business model and offer superior freight brokerage services.