The term freight broker actually has a dual definition, the most common being the freight broker company. The freight broker company holds the license, bond, and all other needed documentation to operate as a freight brokerage company.
The second definition of freight broker is that of an individual that is contracted (freight broker agent) or working as an employee of a freight broker company. These individuals have a working title as freight broker, but are not the company.
Regardless, a freight broker obtains shippers/customers, procure loads from these shippers, and obtain trucks to move these loads. When successful the freight broker, company or individual, earn an income. Easy right? Yes, and no. Which is why we normally recommend that one wishing to start a freight broker company begin as a freight broker agent.
The freight broker company and the freight broker agent both will go through a start-up period. This period is the time it takes for the company or agent to begin producing a steady income. Keep in mind that during this time there is overhead. This overhead is the monthly cost of operating the business.
For a freight broker company this overhead includes having the capital available to pay trucks that may have moved loads for the brokerage. More times than not the broker pays the truck before they see any money from the customer.
A new freight broker company will have other challenges the first year, such as trucking companies not wanting to haul their loads. These freight broker companies are just too new, no credit rating, unproven. There are work-arounds, but these work-arounds require capital so that the truck can be advanced a percentage of the agreed rate. Good faith money.
These are just a few of the reasons why we normally recommend that a client begin as a freight broker agent. Little to no overhead, no need for a lot of capital, no worry of a truck not wanting your load because you are too new, and the list goes on.
By starting as a freight broker agent, you are still your own boss, just contracted to an existing freight broker company working under their license and bond. The freight broker company handles the heavy lifting such as billing the shipper, paying the trucks, handling all the administrative while you focus 100% on building your business.
Although you are an agent, the business you build is yours. When I say business, I’m speaking of your Book of Business, your customers. Your customers are your customers. In the future, should you decide to start your own freight broker company, your customers can, and will, follow. You’ll have built relationships with carriers so the “too new” problem spoken of earlier won’t be an overwhelming issue.
We’ve had clients that started as a freight broker agent with the intention of becoming a freight broker company after they had built their business. When they reached the point where they could, they chose not to. Their simple reason was why take on all the added work, responsibility, and expense when they were already making a great income?
Everyone is different, everyone has different goals, needs, and wants. But when you’ve decided to become a freight broker we recommend that you start as a freight broker agent. Get the training, gain the experience, and build your book of business first.
If you have any questions, please feel free to call and speak to one of our consultants.
Thanks, and talk soon.