Frequently Asked Questions about Becoming a Freight Broker

What Does a Freight Broker Do

Freight brokers provide a direct link between shippers and carriers. Any good freight broker will be able to connect shippers with the proper means of transportation to ship their goods on time.

The main tasks for which a freight broker will be responsible include:

• Negotiating pricing and contracts
• Choosing safe freight carriers
• Scheduling orders with carriers
• Acquiring new shippers
• Keeping shippers up-to-date about freight progress
• Recording key actions to track business
• Prepping carriers for loading
• Marketing to attract new leads
• Quoting estimates

Freight brokers directly negotiate pricing and delivery times with carriers in the shipping industry. A successful freight broker will provide consistent loads for carriers along their ideal routes and destinations. Brokers receive pay in the form of commissions from carriers and shippers.

While you may think of a broker as an individual who negotiates a deal, that’s not the only thing that freight brokers do. They oversee the entire shipping process from the initial order to the product reaching its final destination. This can include many steps like tracking freight, recording pickups and deliveries, and so forth.

Apart from being intermediaries for shippers and carriers, freight brokers need to have specific knowledge about legal regulations for shipping different products. It’s part of their job to have that legal shipping industry knowledge so that carriers and shippers know they’re legally cleared to transport products.

Some freight brokers will even have their own business for truck transportation. These brokers must obtain two different operating licenses from the Federal Motor Carrier Safety Administration (FMCSA).

What are the pros of becoming a freight broker

Probably the most significant pro of becoming a freight broker is that it’s a constantly in-demand market. With over 70% of all freight being transported on trucks, there’s more than enough business to go around. As an active salesperson, you can cultivate some rewarding, long-lasting relationships.

Another key advantage of operating your own freight broker business is that your income potential is great. Since your income is based on sales, you can work to get as many sales as you want. There are no external limitations on your ability to earn money.

Technology makes the freight brokerage business much easier to enter these days. With software for finding shippers and carriers, it is simple to get the contact information you need to get started with creating contracts. Additionally, since you won’t have customers coming into your office, you don’t need one. You can enjoy a home office setup where you can work when you want to.

What are the cons of becoming a freight broker

A big con to becoming a freight broker is that it’s costly. The upfront expenses of obtaining licensing, having the cash flow to pay carriers, purchasing necessary software, marketing your new business, and obtaining new insurance coverage can be brutal.

Another disadvantage to becoming a freight broker is that it takes a lot of time and effort to cultivate a list of clients. It’s not uncommon to deal with a shipper who doesn’t pay on time or a carrier who damages the freight. These can be risky clients that should be replaced with quality shippers and carriers. Unfortunately, you won’t always know who is or isn’t a great connection until after you’ve done business with them.

How much does a freight broker make?

A hot topic when it comes to thinking about starting a new business as a freight broker is what you can expect to receive for your income. The U.S. Bureau of Labor Statistics reports that, as of May 2021, the median wage for a freight broker was $46,910 annually.

It’s important to realize that this data is an average for all freight brokers across the country. Many brokers report making $90,000 or more a year. Your income will vary according to many factors like the type of freight you’re dealing with, your experience and skill level, and the amount of business that you regularly do.

How long does it take to become a freight broker?

Most working in the industry suggest that you can get your freight broker business up and running in three to six months. While it takes as little as 10 days to obtain licensing, you first need to gather all the documentation and obtain the necessary insurance coverage. If you opt for a training program, expect that to take an additional 30 to 45 days to complete.

What skills does a freight broker need?

While becoming a freight broker can be a lucrative career choice, you’ll need to have some essential skills. These include:

• Excellent communication
• Multitasking
• Time management
• Organization
• Negotiation
• Ability to network consistently
• Attention to analytic details

How much does it cost to become a freight broker?

The cost of opening a brokerage is not a fixed sum but will depend on your particular situation. Altogether, to get started as a broker, you can expect to pay somewhere between $3,800 and $5,300. This includes the costs for your registration, your freight broker bond, your equipment and software, your operating authority, and others.

For an overview of the most important costs you can expect to have and how you can lower them, check out our breakdown of the top costs of becoming a freight broker.

What makes a freight broker successful?

The qualities that make a freight broker successful are related to how you deal with clients (carriers and shippers alike), how you handle stressful situations, and whether you have an attitude of wanting to learn more every day and providing the best possible service.

Since the broker is the middleman between shippers and carriers, he or she must be a reliable and trustworthy person. Honesty, transparency, being proactive, and being customer-oriented are all important keys to becoming a successful broker and pay off on a daily basis.

Of course, developing the right professional competencies and capacities is just as important but those are only one part of the story!

Is a freight broker the same as a freight forwarder?

The short answer is no. Freight forwarders perform different activities than freight brokers, and each requires its own license. Freight brokers are all about helping shippers connect with viable carriers. On the other hand, freight forwarders are concerned with the actual freight, transportation, documentation, and other legal requirements.

See our guide on how to get a freight forwarder license to learn more about the latter.

Are freight broker licenses available at the state level?

No. Freight broker licenses can only be obtained on a federal level. They are issued by the Federal Motor Carrier Safety Administration (FMCSA) and remain federally regulated. It’s vital to note that you will have to identify process agents in each state in which you plan to do business. This is different from federal licensing.

How can you determine if a carrier is a good contact?

Since the success of your freight broker business really depends on your ability to actively connect shippers with quality carriers to transport their freight, you need to ensure that you’re finding the right carriers. There are a few key things you can do to help make sure that you’re doing business with reputable carriers.

First and foremost, you want to ensure that they are actually licensed by the FMCSA and that they have appropriate insurance coverage to handle well above the freight values that you’re shipping. Don’t just take an insurance certificate at face value. Put a call into the insurance provider to verify a potential carrier’s policy and coverage limits.

The Motor Carrier Operating Authority will have on record the names of motor carriers that are authorized to operate. A simple look at their online listings can allow you to verify that a potential carrier is operating with full authority to do so.

Is freight broker training school mandated?

Currently, you’re not required to show proof of any freight broker training school to obtain licensing to operate a freight brokerage. However, training will provide you with the necessary knowledge and skills that will allow you to succeed in this type of business. It’s not unlikely for a training school to become a new requirement for licensing in the near future.

Do you need more than one process agent to operate in multiple states?

The FMCSA requires that you name one process agent per state where you plan on doing business. You can’t list the same process agent for more than one state. The main reason that you need to have an individual in each state is so that they can legally receive court documents on behalf of your business if you’re sued.

How much of a commission do freight brokers make?

Freight brokers are compensated for their legal know-how and ability to connect shippers with necessary carriers. Most brokers can expect to receive between 10% and 35% commission on each freight shipment that they handle. Depending on the shipper and carrier, freight brokers may also be offered incentives and additional commissions.

Where can you find customers?

Probably the most difficult part of any new freight broker company is trying to find new clients. You need to find both shippers with freight to move and carriers who can safely and efficiently move that freight.

The best place to start finding customers is to check online software programs. Load boards can be extremely helpful for finding carriers and shippers alike. You’ll likely have to do some cold calling to introduce your business and try to acquire their business.

Apart from software programs, you can search online forums. LinkedIn and Facebook both have groups for freight brokers. Additionally, if you’ve had past industry experience or know others in the industry, reaching out to get information about new clients can be a successful way to grow your new client list.

Some other great ways to obtain new customers are through local meet-ups and industry organizations. The more you’re able to network with others in your industry, the more you’re going to be able to discover and connect with both shippers and carriers who need your professional services.

Becoming a freight broker can be a great way to change careers and open up a whole new income potential and generational business for your family.