Niche Marketing for Freight Brokers

One of the hurdles for entrepreneurs fresh out of freight broker training is establishing a solid reputation as a reliable service provider. Shippers want to be sure that you can guarantee their loads’ safety and carriers want to know they’ll get paid on time.

Small or new brokerage companies have a way of addressing these concerns and at the same time jumpstarting their earning potential the first year. They find a specific segment in the market that larger firms have overlooked or ignored and specialize in servicing that group. It’s called niche marketing and it’s the easiest path to beginning your brokerage business.

Marketing to a narrower niche has its benefits.

One, you get to know your market really well. Serving that market day in and day out, you learn about its standards, idiosyncrasies and special needs. Such expertise goes a long way in acquiring your customers’ trust and in establishing a solid reputation for yourself and your business. Eventually, you develop a profitable network of shippers, carriers, and strategic partners which you can easily tap for business and which can also be a springboard for future expansion.

Two, you can focus your marketing efforts with laser-like precision. Marketing dollars are usually wasted when you market to a broad audience that may not even be listening to you. Targeting a specific slice of the market helps in creating a characteristic customer profile, enabling you to craft messages that push their emotional hot buttons every time you reach out. And because your messaging resonates with their pain and pleasure centers, you get more positive response and more business.

How to Choose a Market Niche

Some freight brokers already know what markets to target even before they get the necessary knowledge from freight broker training. For others not so lucky, they start from the ground up.

If you’re from the last group, there are two ways on how to choose your market niche:

  1. Make an honest assessment of your skills, talents, interests and personality and determine how this will come into play in your freight broker business; or,
  2. Scope out the segmentations in the industry, choose a specialty, then learn everything you can about how to service that sector.

In deciding on a niche, find one that you like but have enough potential for growth to sustain your business over time. Some freight brokers, for example, choose to serve market niches or segments related to their passions and interests like antiques, microchips or cars.

By focusing on a niche that you’re enthusiastic about, you’re able to differentiate yourself from the competition with a can-do, bend-over-backwards type of service. And you know how it is: a satisfied customer is a happy customer is a repeat customer.

Freight Broker Niches

There are many ways to zero in on your market niche and find customers. Here are some techniques that old-timers use in finding their captive market and growing their business:

  1. Focusing on regional niches. Find customers in your immediate vicinity, whether it’s in your city or state. Your particular location may be a manufacturing beehive for cars, microchips, semiconductors, and other goods.
  2. Working with shippers who ship your favorite things. If you’re passionate about cars, you probably know a lot about their makers and can easily gain access to a contact person who can connect you to the decision-makers. Make sure you can grow with these customers and not spread yourself thinly—your enthusiasm must match your capability so you don’t destroy your reputation when you can’t handle loads satisfactorily.
  3. Servicing niches according to type of trucks used. Dry vans, flatbeds, tankers, dump trailers and everything else in between. You can choose to focus on using one or two types of trucks so you’ll be able to find shippers much more quickly.
  4. Brokering cargo that needs specialized handling. When you focus on a particular type of load, say dairy, you can quickly handle truck type to use, climate requirements, shipper preferences and the like.

When serving a particular niche, you become an expert on it over time. Before you know it, you become the go-to guy in your space for certain types of cargo. Once you’ve established a reputation for solid dependability, you can bet broadening your market or your reach becomes much easier.

There’s one danger in niche marketing though—you can become so focused that your total revenue could end up coming from a few sources. Learn from the niche haulers of the trucking industry. Less than 25%-30% of their revenues come from a single source; they keep it diversified even within the niche. With the vagaries of the economy, putting your eggs in one basket can spell disaster when something bad happens…a reality that even large freight broker companies are not immune to.

How to Build Your Freight Broker Business Plan

When you get into the freight broker business, failing to plan is planning to fail. Whether or not freight broker training school will teach you how to craft your own, the most important thing you can do before hanging your business sign out the door is to prepare a business plan.

Why should freight brokers bother with a business plan? After all, brokering is just a matter of finding shippers and carriers and matching up the two, right? In a manner of speaking, yes, but if you want to succeed at it, you’ll have to plan for it.

A good freight broker business plan will help you determine if setting up your own brokerage is a viable idea or not. It gives you a detailed view of the opportunities and risks that come with operating a property brokerage firm.

Also, with a good business plan, you break down management into bite-sized, doable pieces. It goes without saying that the investors and bank managers you’re approaching for a loan/investment will need to see one, too. They’d want to know if they’ll get a return on their investment and when.

Use the following business plan template that’s tailored for freight brokers

The Freight Broker Business Plan

A. Executive Summary

This section of the freight broker business plan is the last part you’ll ever write. It sketches a bird’s eye view of what your company is all about—what you do, why, and how you’ll achieve success. It’s usually two pages long and contains a summary of all the points covered in detail in the following sections.

But don’t let its short length fool you. Most of the time, it’s the make or break portion of your presentation when you’re looking for investors or applying for a loan. It’s usually what busy executives scan first. Their decision to invest could depend on the strength of the Executive Summary.

B. Business Description and Vision

Starting with this section, you get into the details of your freight brokerage business. Here, anyone reading the plan will get a firm grasp of what the business is all about and what it represents. Your insights on the company’s growth and potential also goes here.

Subheadings:

  1. Mission Statement
  2. Company Vision
  3. Business Goals and Objectives
  4. A Brief History of the Business
  5. List of Key Company Principals

C. Definition of the Market

Defining your market is perhaps one of the more important parts of the freight broker business plan you’ll have to deal with. It involves deciding on your market niche, getting to know your customers, and the potential reach of your freight brokerage so take your time.

Some of the questions you will need to answer include:

  • What is the industry you operate in and its prospects?
  • What is the scope of your freight brokerage business and what is the potential market share for it?
  • What are the market segments you’ll be targeting?
  • What are the customer needs and problems that you’ll be addressing?
  • Who are your target customers?
  • Who are your main competitors?

Subheadings:

  1. Business Industry and Outlook
  2. Critical Needs of Perceived or Existing Market
  3. Target Market
  4. Customer Persona
  5. Market Share
  6. Competitive Intelligence
  7. Main Competitor Profiles

D.    Description of Services

Freight brokering is basically a service-oriented business and there are many ways you can differentiate yours from the rest of the competition. After reading this part, your potential investor should have a firm understanding of why you’re in this business, the range of services you’ll offer, and your competitive edge.

Subheadings:

  1. Description of Services
  2. Pricing Strategy
  3. Competitive Edge

E.    Strategic Direction

This is where you do the SWOT analysis. You study your freight brokerage firm’s strengths, weaknesses, opportunities and threats in the context of the market your targeting, the industry you’re moving in, and the bigger economy in general. It may also include new service segments you’ll be offering in the future (say, in five years’ time) and business goals that you’d like to tackle down the line (for example, turning the business into a franchise).

Some would include this section in either market assessment or in products and services, but others choose to separate it as it allows them to drill down on the freight brokerage’s success factors.

Subheadings:

  1. Strengths of the Freight Brokerage Firm
  2. Weaknesses
  3. Opportunities in the Marketplace
  4. Threats
  5. New Services
  6. Future Business Goals/Objectives

F. Marketing and Sales Strategy

This section of the freight broker business plan discusses the ways and means to promote and grow your business. Describe the forms of marketing you’ll use—advertising, web strategy, sales plans, promotions, public relations efforts, and the like. More importantly, get into detail on who your market is, how you’ll reach it, and how you’ll sell your services competitively.

There’s also a subsection on forming strategic alliances—the people and companies you’ll be working with to find new and serve old customers. Describe also your networking efforts—how, when and where.

Subheadings:

  1. Market Description
  2. Service Demand
  3. Marketing Strategy
  4. Promotions Strategy
  5. Sales Strategy
  6. Web and Internet Marketing Strategy
  7. Strategic Alliances

G. Organization and Management

Your freight brokerage firm will need to define work flows, record keeping, billing and accounting…basically the operational flow of your business. Outline business routines as well as the legalities of your business. Name the leaders and their responsibilities and roles.

Subheadings:

  1. Form of Ownership
  2. Management Team and Roles
  3. Organizational Structure
  4. Personnel Plan, including freight agents
  5. Legal Process Agents and States of Operation
  6. Corporate Legal Representative

H. Financial Management

This is the numbers-crunching part of every freight broker business plan…and the least liked by most. However, this is one of the chief areas that potential investors and bank loan managers will be looking at closely. They’ll want to see your freight brokerage firm’s financial viability and the bottom line projections.

If you’re just starting your business, show an estimate of your start up costs, and the projected figures for the next year’s operations using the following: balance sheet, income statement and cash flow statement.

If your brokering firm’s been around for a while and you’re looking for new investors or a bank loan, highlight the following reports from your last three years of operations: balance sheets and income statements. You’ll also need to provide a cash flow statement. Bank loan managers would also want to have a copy of the personal financial statements of your firm’s leaders and your tax forms for the previous year.

Subheadings (where it applies):

  1. Start Up Costs
  2. Projected/Current Balance Sheet
  3. Projected/Current Income Statement
  4. Projected/Current Cash Flow Statement
  5. Personal Financial Statements of Business Principals
  6. Federal Tax Returns for Previous Year

As you can see, if you spend time preparing a business plan for your freight brokerage firm, you end up using rational thought and discipline in managing your business.

But this freight brokers’ business plan shouldn’t end at the writing of it. A good, viable business plan is a dynamic document that you should revisit, review and routinely update to reflect emerging trends and opportunities, current economic realities, and growth factors. Should you choose to get additional freight broker training, you’ll be taught how to spot these new changes in the marketplace and incorporate it in your freight broker business plan.

 

10 Goal Setting Hacks for Freight Brokers

When you attend formal freight broker training, one of the subjects included in the curriculum is goal setting. It’s a fundamental, critical activity for freight brokers for the simple reason that you can easily get lost in the tactics and lose sight of the bigger picture in such a fast-moving environment. Knowing where you’re headed to in such a competitive industry will help you manage your time effectively and cut away the unimportant incidentals that could derail your success train.

At the end of the day, your success as a freight broker will be defined by how well you accomplished objectives that you set out to do. Here are 10 goal setting hacks designed to kick-start your freight brokering success:

1. Define goals that are relevant and important to your career as a freight broker.

The goals that you set out for yourself must be motivating and inspiring. Nothing spells failure as much as having a goal that does not excite you or catch your imagination. If the end game you’re working towards doesn’t present any value to you, then you’ll be hard put to work for it.

There must also be a sense of urgency—an “I have to do this” mindset—attached to it to minimize procrastination.  To make a goal an urgent matter, connect it to your important priorities. For example, your priority for the next year is a two-week wedding anniversary trip to the Caribbean for you and your wife. Tied to that is the goal of earning x amount of profit dollars so you can afford the vacation. Certainly, you’d want to achieve the latter so you can frolic on the sands of a tropical beach, free from the pressures of tracking cargoes, finding shippers and completing reams of paperwork.

2. Make your goals as specific as possible.

Your goal must be clearly defined—no motherhood statements and abstract generalizations. Not “I will be a successful freight broker someday.” but “I will be a 7-figure-income freight broker by December 20xx.” Create a vivid picture of your goal. Add explicit details. Don’t allow vagueness into your vision. This way, you’ll have an image of the end of the road so that when you get there, you’ll know in no uncertain terms that you’ve done what you’ve set out to do.

3. Your goals must be measurable.

A goal like “I will be a successful freight broker someday” doesn’t lend itself to tangible, quantifiable results. Just what does “successful” look like? How will you know you’ve been successful if you can’t measure it? Your criteria for success must not contain any abstract definitions but dates, amounts, and other measurement standards.

4. Set goals that are attainable.

What’s the use of setting goals when you don’t have any hope of achieving them? Spell out objectives that are doable. If you don’t have what it takes at the moment to accomplish what you’ve set out to do, then you must have a plan on how to acquire that knowing so you can go about reaching your targets. Guard against setting goals that are too easy though. Aim for something that will challenge you, not bore you.

5. The goals you set must be relevant to the direction that you’re aiming for.

It’s elementary to set goals to achieve your big picture but there are some who can’t differentiate between what’s pertinent and what’s irrelevant. There are freight brokers who get embroiled in goals that are not aligned with the brokering business. Ask yourself: Will this goal focus me on my end game or will it distract me and fritter away my energy from doing what’s necessary?

6. Set a deadline for achieving each goal.

When you have a deadline attached to a goal, you create a sense of urgency. You’ll be aware of the passing time and how much of your tasks you’ve completed. You can also adjust timelines or action plans accordingly. And you’ll definitely know when you’ve become successful because you have the finished benchmarks to show for it.

7. Write down your goals.

By putting hand to pen and pen to paper, you’re physically committing yourself to a goal. Brian Tracy says that a goal that’s not written down is no goal at all. A connection is forged between the hand and the brain when you write down and experts say you’re twice more likely to remember something you’ve written down than something in your mind. Just the physical act of jotting down a goal makes it real and tangible, enabling you to fix this picture of success in your mind much more easily.

8. Create an action plan detailing your path to success.

Some people look at their goals then freeze up. They’re overwhelmed at the enormity of the undertaking. Overcome this hurdle by breaking down your big goals into bite-sized pieces. Create an action plan with accompanying dates and milestones so you can move steadily towards your goal. The exercise will help you identify priorities and define what’s necessary, important and urgent, so you can manage your time and your energies must more efficiently.

9. Reward yourself for realized goals.

The best incentive to doing something is a reward because it speaks well to our emotional pleasure-pain hot buttons. When there’s something in it for us, we’re reinforcing good behavior—good behavior being working towards achieving what we set out to do. Your reward could be something as trivial as an hour in front of the TV watching a baseball game or something as extravagant as a ticket to the NBA championships.

10. Revisit your goals regularly.

Read the goals that you’ve written down daily, weekly or monthly. This way, you’re constantly aware of where you are and how close you are at achieving your aims. Review and refine, adapt and adjust where necessary to keep your goals or your action plans relevant and updated.

Setting goals is an important skill to acquire during freight broker training so that when you finally enter the sector, you can make a beeline to success. The path to freight broker success, they say, is paved with good intentions but unless you sit down, set goals in writing and specify your milestones, you’ll never know if you’re at the end of the road or not.

8 Traits Successful Freight Brokers Have in Common

Freight brokers live a fast-paced life, but what they may not tell you in freight broker training school is the fact that the highway to success in this industry is littered with a large number of inactive property broker licenses.

What do you do so you don’t become part of cold statistics?

In an informal round table discussion with active and successful freight brokers and agents, we were able to dig out the top eight traits that most of them (and their peers) shared, listed here in random order:

1. They are self motivated.

The successful freight broker is driven by passion, a reason for being if you like. Whether it’s more time with the family, enough resources to support a hobby, or whatever it is that drives your enthusiasm, this motivation is the key that kicks them off the bed early in the morning and gets them going throughout a hectic workday.

You’d be surprised: money isn’t often the top motivator for successful freight brokers.  The reason they give why money takes second, third or even fourth place to a burning passion? When the business is slow and the cash register’s not ringing much, this “reason for being” helps them slog through the rough patch.

2. Successful brokers have a strategic mindset.

Much of the daily routine of a freight brokerage involves a thousand and one details. When you’re embroiled in these for too long, there’s the tendency to not see the forest for the trees. You lose sight of the Big Picture—your vision for setting up a freight brokerage business. You start making decisions that’s long on short-term advantages but short on long-term benefits. When that happens, your business could quickly lose its competitive advantage and stop getting better.

Successful freight brokers with a strategic mindset continually review and refine how they do things, unafraid to learn new things. They’re also aware of what’s going on in their industry, particularly with their competitors and partners, so that their business can easily and quickly adapt to any negative (or even positive) market changes.

3. They are results driven.

Successful freight brokers can set goals and define the tactical actions to obtain the results they want. Some business owners often get trapped in the launch preparations of a new venture—crafting the business plan, studying the market, perfecting documentations and procedures and a million other details. Often, the thing that could spell success is the ability to hit the ground running even if all your ducks aren’t in a row yet.

You can always refine and redefine as you go as long as you’re doing something tangible and measurable to achieve the goals you have set for yourself and your brokering firm. Other freight brokers have found that setting benchmarks and milestones towards achieving an objective help them chop up a big goal into small, manageable, and achievable pieces.

4. They are highly customer oriented.

The freight brokerage sector has a customer-centric culture. A happy customer is a repeat (and loyal) customer. Successful brokers are helpful and devoted to the customer’s interest to keep the business flourishing. In this case, the shippers’ interest on the speedy and safe delivery of their shipments and the carriers’ focus on getting paid decently and on time.

Freight brokers who have a deep base of repeat customers are anticipatory and responsive to the needs of the public they serve. It’s not “what’s in it for me?” but “what can I do to help?” that keeps their business continually viable.

5. The best have a proactive perspective.

When loads are moving from shipper to consignee, many things are going on at the same time. Many things can also go wrong. Anticipating problem areas and having different response mechanisms to address things that could go wrong is the mark of a successful freight broker. You must know what to do when a truck breaks down in the middle of a desert highway or an accident happens. Successful freight brokers don’t only have a Plan B in place; they also have a Plan C (or even a Plan D) just in case.

6. They’re very decisive.

When you have the big picture firmly in mind, choosing what to do first among what’s necessary, urgent or important cuts your decision-making time in half. Knowing which tasks to prioritize and which to put on the back burner when crunch time comes are useful skills in this profession. Successful freight brokers know what must be done first—and quickly.

7. Freight brokers nurture relationships.

Building and nurturing relationships for the long term is vital to growing a robust freight brokerage business. At the heart of your engagements is (1) the ability to cooperate with a diverse mix of individuals and organizations with an equally diverse culture and values; and (2) the communication savvy to maintain helpful, beneficial and harmonious relationships.

8. They’re very flexible.

In this fast-paced environment, the successful broker has a firm handle on everything that’s going on while doing other things at the same time. Multitasking is a skill that most think they have in spades but only a few has actually mastered. Make sure that you’re multitasking smartly—that is, you’re working on your strengths, not on your weaknesses.

Making it to the freight brokerage big leagues doesn’t only mean knowing the theoretical stuff that you learn in freight broker training. Like these characteristic traits of successful freight brokers show, making it big means having a firm handle of the intangibles, too.

Co-Brokering and Double Brokering: The Boon and Bane of Freight Brokers

One of the most controversial issues that you’ll get to know more thoroughly in freight broker training school is double brokering—a grey area where freight brokers, motor carriers and shippers have conflicting stances.

A shipper trusts the broker to find a trustworthy carrier to deliver their cargo to the consignee safely and promptly but how the other players accomplish this at the root of the disagreements.

Double Brokering and Co-Brokering: Definitions

Co-brokering, according to most industry experts, is the legal option of the two practices. In this setting, a licensed property broker agrees to move a load for a shipper and asks another licensed freight broker’s help in finding transportation for the cargo. Co-brokering usually happens when the second broker has the expertise and experience that the original broker doesn’t have in moving the load.

It’s a matter of not turning away a business opportunity when there are resources available to move that load, just not strictly by your own brokering outfit. This arrangement is possible as long as the first broker’s contract with the shipper does not specifically forbid co-brokering.

Double brokering, on the other hand, is the practice that’s fraught with risks. Here, the freight broker and the motor carrier agree to move a load…and then the trucker promptly brokers the load to another carrier to transport without (or even with) the original broker’s consent or knowledge. The original carrier may pass on the load as a trucker or through its own brokerage firm. The chain of custody becomes murky and the shipper and consignee may be left holding an empty bag once the smoke clears.

When the freight broker is unaware of its motor carrier’s actions, several things are happening at once:

  1. It’s unclear who’s handling the freight;
  2. The second motor carrier may not have the appropriate license to move the load;
  3. The actual carrier may not have the financial coverage to cover the liability if things go wrong;
  4. The original carrier may not have done a thorough due diligence check on the actual carrier; and
  5. It becomes difficult finding out who’s accountable for the cargo—the freight broker, the original motor carrier or the actual carrier who delivered the load.

The Risks of Double Brokering for Freight Brokers

In co-brokering, all the parties are aware, in writing, of their responsibilities with regards to each other, to the shipper and to the shipment. Ascribing liability when things go wrong, even in legal proceedings, is more or less straightforward.

As you can see above, following the chain of custody for the shipment becomes tricky in doubly brokered shipments. Ideally, when a double brokering occurs, the party who obtained the services of the second carrier should be the one accountable for the actions of its mover(s). If the freight broker was careful in doing background checks on the carrier but still didn’t catch the double brokering, then s/he may be protected from damages.

It isn’t the same though if the freight broker was aware of the carrier’s frequent double brokering practice and still ignored it. This assumes that (1) the broker knew of the substitution and didn’t evaluate the second carrier’s safety and reliability record or even, (2) the broker didn’t know which carrier has the actual custody of the load. When this happens, the freight broker can be charged with irresponsibility and become liable for damages borne by the shipper when something bad happens to the freight.

Another risk worth mentioning is the fact that the original carrier who passed on the shipment may not pay the actual carrier for moving the load. In this instance, you as the freight broker may end up paying twice—the original carrier and the actual carrier—for the service.

Protecting Yourself with Due Diligence

When a freight broker agrees to be responsible for a shipment, the shipper assumes that the broker has conducted due diligence in sourcing his/her carrier and that they have the integrity to get that load delivered.

With the perils inherent in double brokering, freight brokers have to exercise prudence and caution when arranging transport for the shipments they’re responsible for to make sure the shipper’s assets are safe.

Note though that co-brokering is not without its vulnerabilities. Some freight brokers ended up working with fly-by-night brokers whose bait-and-switch modus operandi left respectable brokerage firms high and dry. They hype up their services, enter into co-brokering agreements, pass off the load to another carrier and when they get paid, they disappear off the face of the earth without paying their carriers. The original broker ends up paying and if it’s a small operation, they could end up seriously hobbled with major losses.

Due diligence—making sure you investigate the other party’s background, experience and capabilities thoroughly—can go a long way to ensuring you’re protected from liabilities. Here are some ways to do it:

  1. Double-check safety ratings, registration, safety scores, FMCSA inspections, and insurance filings before entering into a contract of carriage.
  2. Conduct credit checks to make sure the carrier can guarantee the liability.
  3. Ask for and follow up references given.
  4. Be clear in defining obligations and responsibilities in co-brokering agreements.
  5. Include a clause against unauthorized double brokering and the penalties associated with it in the contract of carriage.
  6. Make sure that carriers are moving loads under their own authority and that you have access to their records to prove it.
  7. Maintain direct communication with the drivers while the load is in transit.

Once you accept responsibility for a load, you’re liable for what your agents (and their agents) do and fail to do. A freight broker’s business viability is dependent on keeping your shippers’ trust and confidence. Once broken—and frequently—it’s a matter of time before you’re shuttering your freight brokerage business altogether. And that is something that you don’t need to go to freight broker training school to know.

6 Legal Areas All Freight Brokers Must Know About

Because freight brokers have to answer for shipments that cross state lines, your business will be overseen by federal authorities, particularly the Federal Motor Carrier Safety Administration under the 49 CFR §371 rule. In freight broker training school, you’ll have a chance to study in detail all the rules that deal with freight brokering.

You already know the basic requirements for freight brokers – an operating license from the FMCSA, the services of process agents, and a surety bond for possible financial liabilities. Here’s a quick summary of the other rules that govern freight brokering:

1. Working with Authorized Motor Carriers

A property or freight broker is part of the transportation industry so they go under the oversight of the Department of Transportation. Since you’ll be working closely with motor carriers (or truckers), you’ll have to register with the DOT using your FMCSA freight broker license.

Make sure that you only work with recognized entities to avoid risk or liability. That is, the motor carrier moving your load must carry an authority that matches yours. For example, if you have a property broker license, then you can only transact loads with a carrier that has a valid property motor carrier authority. If you arrange a load with a carrier that doesn’t have the right license, say a household goods motor carrier authority against your property broker license, the FMCSA may subject you to penalties and fines. Frequent violations may lead to a cancellation of your freight brokering license altogether.

2. Record-Keeping

Liabilities are an unfortunate part of brokering that’s why freight brokers need to maintain a record of each transaction for future reference. You’ll be dealing with the same motor carriers and shippers most of the time so to simplify this task and eliminate unwieldy records-keeping, you can create a master list of these records. The following are the information that FMCSA must see in each transaction/master list of transactions:

  1. Shipper’s name and address
  2. Carrier’s name, address, and registration/USDOT number
  3. Bill of lading/freight bill number
  4. Freight brokering rates and the person who paid for the brokering service
  5. Other non-brokerage services you did with regards to the shipment, how much you were paid for it, and the person who settled the obligation
  6. Freight charges you collected and the date the motor carrier was paid for the shipment

There’s no cut-and-dried rule on how to sort out this information. You can create a record tracker that fits your work flow as long as you capture all these data correctly.

Both your shippers and carriers have legal access to those transaction records that pertain to brokering services you did with or for them, up to a period of 3 years. After the third year, you can destroy these records.

3. Freight Broker Accounting

You may have other businesses alongside your freight brokerage. When it comes to revenues and expenses, the law requires separate financial records for your brokering firm. In case your businesses share common expenses—say rental and utilities—third parties must be able to identify what outlays are from the brokerage and what are not. Of course, it goes without saying that you must be able to explain how and why you assigned these amounts to the brokerage in an audit.

4. Misrepresentation

Whatever advertising that you do—whether in print, radio or web—your business must be what you say it is. That is, you cannot go around introducing yourself as a carrier to your customers if you are not. You have to use the same name which was approved in your freight broker license in any transaction that you do. Misleading information on your broker status can be a cause for liabilities or heavier penalties.

5. Double Brokering and Co-Brokering

Due diligence is required of all freight brokers, mainly because heavy penalties and liabilities could arise from unethical brokering practices. Two common industry practices—double brokering and co-brokering—present some problems.

Co-brokering is when you work with another freight brokerage in arranging transportation for a load that you can’t handle anymore. This is legal and acceptable, as long as the agreement with the shipper allows for this arrangement.

Double brokering, on the other hand, is when a motor carrier contracts another carrier to handle a load you have given the first trucker. This practice is frowned upon and fraught with risks, particularly when shipment problems happen. Whether you are aware of the double brokering or not, you may still have to pay the shipper for losses incurred related to the load. Authorities will examine due diligence steps you’ve taken to determine whether you’re answerable for this error or not.

6. Brokering Exempt and Non-Exempt Commodities

When you arrange transportation for loads from shippers, you must be aware of the following rules governing exempt and non-exempt commodities:

  1. 49 U.S.C. §13506(a)(6): list of items that are exempt from USDOT regulation
  2. 49 CFR §372.115: list of non-exempt items that are similar to exempt cargo or created from exempt cargo
  3. Administrative Ruling No. 133: freight not exempt under 49 U.S.C. §13506(a)(6) as stated in 49 CFR §372.115
  4. Administrative Ruling No. 107, March 19, 1958

You can always arrange shipments that contain unregulated freight. Shipments that have non-exempt cargo bring you under FMCSA oversight.  Keep in mind that specific commodities require specific authorities for both freight brokers and motor carriers. The long and short of it:

  1. If a shipment is exempt, then you don’t need authority to broker the load nor does it need to be moved by an authorized carrier; and
  2. If the load is non-exempt, then both you and the carrier need the appropriate authority to handle the cargo.

Failure to comply with exempt/non-exempt guidelines could be grounds for penalties, the suspension of your operating license, or worse, revocation of your freight broker license.

Disclaimer: This article does not constitute legal advice; if you require legal assistance, please consult the services of a professional who has the necessary legal education, certification, training and experience in the freight brokerage sector.

What Every Freight Broker Needs to Know About the Transportation Industry

Freight brokers live under the enormous umbrella that is the transportation industry. Everything that carries people and goods from one port to another is part of this sector – buses, trucks, boats, airplanes, rails, cars and everything else in between.

The industry is so huge that in 2011 alone, it was worth about $1.82 trillion, roughly representing about 10% of the US’ economic activity. In the same year, close to 4.3 million people accounted for truck transport services that amounted to $200 billion and exports that reached $1.48 trillion.

Practically everything around you – the clothes on your back, the books you’re reading, the computer on your work desk, the supplies in your office, to name a few – came from somewhere. And all these stuff came to you in one of several ways: by land, sea, or air transport, delivered not just by the truck driver or the mailman but also by the dispatchers, pilots, train engineers, and a host of other back-of-the-house logistics personnel who planned, coordinated and tracked the routes that these packages travelled to get to you.

Freight Brokers and Other Industry Players

Freight brokers belong to the broad logistics sector which ensures that people and goods leave on time from a point of origin and arrive on time to a point of destination. Work could range anywhere from scheduling pick-ups and deliveries, mapping cost-efficient routes, tracking movements, through to troubleshooting problems en route. The end goal is to limit the amount of time products and people stay in one place that’s not yet journey’s end.

The trucking industry, which is the biggest concern of freight brokers, carries 80% of all consumer goods from shippers to consignees in America. Within this sector, there are several players that the freight broker must be aware of:

  • Shippers are your customers – they’re the ones who have products that need moving.
  • Consignees are the receivers of the loads, the final destinations so to speak of these products being moved.
  • Motor carriers are the companies that supply the trucking to move these products. They can either be private – they move their own cargo; or for hire – they get paid to move cargo belonging to other companies.
  • Freight forwarders. As we have discussed in a previous post, freight forwarders are similar to freight brokers. Only, they handle loads bound for international shipment, not domestic destinations. Sometimes, freight brokers need to work with them when a load that moved from point A to point B locally needs to be shipped internationally.
  • Dispatchers are employed by trucking companies to manage drivers and their loads. They decide which load goes to which driver, arrange and coordinate drivers’ schedules, and help drivers toe DOT regulations. Often, dispatchers link up with freight brokers to see if there are available loads that match their drivers’ routes.
  • 3PL (third party logistics) can be likened to a one-stop shop. 3PLs are companies that can provide a host of services all at once to their customers: warehousing, order fulfillment, customs, inbound and outbound freight, and distribution.

The Freight Broker’s Regular Routine

At the heart of the freight broker’s job is the freight – the load, shipment or cargo that needs to go somewhere domestically. These are goods produced in the US or abroad that are delivered to a domestic address. Whatever it is, a load will always have a shipper and a consignee.

Your work as a freight broker starts by soliciting business from shippers. Ideally, you should already have a solid database of shippers to call for loads. If they’ve already worked with you in the past and found your service punctual and reliable, they’ll likely offer their cargo. Rates vary depending on the kind of freight to be handled so you’ll be negotiating terms with the shipper.

Once you agree on the figures and accept responsibility for the load, your next order of business is to find a truck that wants the cargo. Again, you’ll negotiate freight rates with the carrier. This time though, you’ll be selling the load to the trucker at a much lower rate – enough to cover your expenses and provide you a fair profit, but also factoring into the equation a fair return for the carrier.

As soon as you and the carrier concur on the terms, you’ll exchange setup packets – information containing each others’ operating authority (MC number), surety bond, W9s (request for taxpayer identification and certification) and references. At this point, you’ll need to draw up a contract between you and the carrier. The contract, among other things, will help to protect your business. If you’re not careful, the carrier could go directly to the customer and offer their services, cutting you out in the process. The best way to avoid this is by exercising prudence: don’t give away too many details about your customer.

Once they have signed and returned this contract to you, you have to fax the carrier a rate confirmation for their signature. When they send it back, your load is now officially covered and off for delivery. The next phase of your job is to ensure that the load gets to the consignee promptly. Your reputation as a reliable freight broker, and the future of your business, depends on it.

A Brief History of the Freight Brokerage Industry

If you step into a freight broker’s office today, the busy chatter, continuously buzzing fax machine, and incessant ringing of the telephone could give the impression that freight brokering has been around for ages. In freight training school though, you’ll know that it is a fairly recent addition to the logistics world. But tracing the history of the freight brokerage industry won’t be complete without a discussion of the history of the trucking industry in the U.S.

Before the arrival of trucks and tractor trailers, moving freight was done by train or a horse-drawn carriage for smaller local shipments. Trains could only ply the major cities where there were railroad tracks so any cargo that needed to go outside the cities was delivered by horse-drawn vehicles.

This was the early 1900s and trucks were, for the most part, just novelties—new machines that ran without horses but couldn’t go very far. Their engines were powered by electricity so they were only confined to short routes. Additionally, there were no paved roads in the countryside to speak of so driving was difficult and took hours. Thus trucks were limited to carrying small loads and short trips within urban routes.

Around 1910, technological innovations opened new opportunities for trucks, not least of which is the gasoline-powered engine and the invention of the tractor and semi-trailer combination designed for hauling relatively larger loads. Moving freight by truck increased in popularity. Still, the bad condition of rural roads, solid tires and a speed limit of 15 mph continued to restrict trucks to the cities.

With the congestion in trains and railways during the Second World War however, trucks started to get an extensive exposure to hauling freight. At this time, government and shippers alike began exploring with long-distance truck shipments. Faster speeds became possible with the advent of pneumatic tires, too.

The addition of a network of paved roads in the 1930s made a farther reach for trucks possible. Then in the 1960s the US started building an interstate highway system that connected major cities and towns across the continental United States—something that was heretofore improbable.

Trucking gained a foothold in the transportation industry this time, steadily wresting dominance in the freight industry from rail freight because of its flexibility and agility. Trucks could deliver any load whenever and wherever.

Still, the industry was hampered by the Motor Carrier Act passed by Congress in 1935. The restrictive regulations imposed by the Interstate Commerce Commission (ICC) meant small players can’t enter the market with ease. Lobbying and work done by industry stakeholders culminated in the deregulation of the trucking industry in 1980, opening the sector to new players and new configurations.

For example, warehousing companies started getting involved in freight shipment, and trucking companies began offering warehousing services. A happy consequence to the new law was the entry of small businesses into the logistics world, giving larger, more established companies new competition.

The sudden influx of service providers naturally decreased shipping costs. Shippers can now shop around for cost-effective, more reliable carriers. That was not the only thing that was changing the complexion of the transportation and logistics industry. Increasing globalization and lower trade barriers have allowed manufacturers the opportunity to ship their products farther and wider. In this environment, freight brokers began to thrive and flourish.

Manufacturers and small shippers without their own traffic departments turned to freight brokers who took over the responsibility of getting shipments delivered to their customers on time.

Large shippers who maintained an in-house logistics and supply department found valuable support from freight brokers when their own traffic department had spillover loads that they couldn’t handle anymore. Freight brokers simplified the complex work of making sure shipments found their way to the consignees by liaising between shipper and carrier.

If there’s one thing you’ll learn from freight broker training, it’s that the transportation and logistics world is a symbiotic world. Although there are inherent frictions among the players, one cannot do without the other.

Shippers—whether large or small—need the deep database of reliable carriers that freight brokers have to get their loads shipped on time. Carriers also need the leads and business that freight brokers bring on the journey back from a delivery and during lean times. In the middle of this, the freight broker directs the traffic.

 

3 Legal Requirements to Become a Freight Broker

Freight brokers make sure that carriers deliver the goods to where they’re supposed to go. Because of this enormous responsibility and the potential for great economic loss should freight brokers fail to do their duty, the industry is regulated by the federal government.

Every freight broker wanting to enter the business has to satisfy three legal requirements to become a licensed property broker—the DOT official designation for freight brokers.

Freight Broker Authority

It’s the Federal Motor Carrier Safety Administration (FMCSA), an agency of the Department of Transportation, that receives and facilitates the application for and grants freight brokers the authority to operate. You’ll have to fill out the OP-1 form with the “broker of property” checked. Some of the information you’ll be providing includes your business name, contact information and a USDOT number. The USDOT number is not mandatory to being a freight broker but you need one so you can file an application with the FMCSA for a property broker license.

Once your freight broker application has entered the FMCSA system, you’ll be assigned a motor carrier (MC) number. The MC number will be instrumental in acquiring a surety bond, which is the second part of the whole process of granting you the license.

There are instances when FMCSA may dismiss your application for an operating authority. You may have stalled at some point and failed to complete the whole licensing process, surety bond information was missing, or some other information was lacking. Be mindful of these factors so you won’t have any headaches later on.

Freight Broker Surety Bond

You must submit proof of a surety bond before the FMCSA can issue an operating authority to you, filing a BMC-84 or BMC-85 form along with it. Usually, the surety bond is for $10,000 but depending on a credit and background check on you by the bonding company, this amount could increase.

Why the need for a surety bond? Although it’s not insurance per se, the freight broker’s surety bond guarantees that carriers are compensated for moving loads. If and when shippers default on this obligation, freight brokers will have to pay carriers out of pocket for services rendered. Freight brokers usually don’t have the available cash to settle this obligation so the bonding company will take on the role of creditor and settle the carrier’s costs up to the amount of the bond.

Legal Process Agent for Freight Brokers

Freight brokers have the one license granted by the federal government to operate across the nation but like any business, they need a point of contact to operate in individual states. This is where process agents come in.

Simply, process agents act as legal representatives for freight brokers in the states where the brokerage plans to operate. Should claims or other legal actions arise against the freight broker in a state, the process agent will be the legal point of contact or representation in the area. Instead of a single individual in each state, you might want to consider engaging the services of a law firm with branches in the states where you’ll be operating.

A freight broker will have to register these process agents for each state where the freight brokerage firm will do business. You’ll use the BOC-3 form (Designation for Process Agent) to list your legal representatives. Once the fee has been paid, FMCSA deems the application complete. Your operating authority should be issued within four to six weeks of submitting this final form.

Ultimate Guide to Being a Freight Broker – Role & Resposibilities

Freight brokers are the matchmakers of the transportation and logistics world—they match a shipper with a carrier in order to get any cargo from a point of origin to its final destination. If you’re out hunting for freight broker jobs, this job description will help you assess your work readiness.

Freight Broker Duties and Responsibilities

Generally, freight brokers have four main responsibilities:

  1. Ensure the safe passage of shipments from the shipper to the carrier through to the consignee.
  2. Prepare all the necessary documentations and reports involved in transporting cargo.
  3. Negotiate terms and rates, and settle all money obligations due your carriers.
  4. Find new customers and truckers, while making sure that current customers (both shippers and carriers) are happy with your service.

Drilling down to what these duties and responsibilities would translate to, the following tasks may be part of your daily routine as a freight broker:

  1. Work with shippers and carriers to arrive at a fair rate for a particular load, making sure that your commission is included;
  2. Search for carriers or truckers who will deliver your load to the consignee;
  3. Prepare all load information and other documentation required for each cargo (including bills of lading and in some cases over, short and damages reports—OS&D) using appropriate software and systems;
  4. Monitor load movement by keeping in constant contact with drivers and shippers to ensure that your shipment is en route and on time;
  5. When necessary, arrange for load storage;
  6. Troubleshoot problems that may arise during load movement;
  7. Confirm with truckers and consignees that your load has been delivered according to schedule and load information;
  8. Bill your shippers and pay your carriers on time, with supporting documentation;
  9. Create the necessary marketing materials to promote your business; and
  10. Network with individuals, companies, carriers and other stakeholders in your niche to develop new business.

Keep in mind that your objective is to get that load where it’s supposed to go. Once any shipment leaves the customer, it becomes your primary responsibility. That load has dollar values attached to it. The key to your freight broker success is in making sure that the shipper doesn’t lose the money riding on that load.

Freight Broker Qualifications

Freight brokers are essentially entrepreneurial by nature. They have to be so as to succeed in such a fast-moving, highly demanding industry. The following skills and qualifications will give you an edge over the rest of the competition:

  1. Highly organized. Many things are going on at once so you’ll have to know what’s going on where without breaking stride. That means everything’s in its proper place, you know where everything is, and you know how to access and obtain tools and resources to do your work fast.
  2. Decisive problem solver. Problems can happen anytime the load is between the shipper and the consignee. You must know how to troubleshoot these headaches swiftly and when needed, be quick to do damage control to prevent losses.
  3. Good people skills. Negotiating rates with shippers and carriers, networking with relevant individuals and organizations in increase business, solving load problems, and keeping your customers happy means you know how to engage people and create lasting relationships. How well you relate with others can spell the difference between your freight brokerage business’ failure and success.
  4. Effective time management. With all the tasks that you need to complete before the day is over, knowing how to make good use of the time that’s available to you can help you create a reputation for punctuality and reliability.
  5. Efficient multitasking abilities. Between finding shippers, looking for carriers, writing loading information, filing reports, calling people to track moving loads, negotiating rates, maintaining cash flow and a million and other things that are clamoring for your attention, knowing how to juggle things at the same time and doing it right the first time will be valuable skills. Learn how to identify the tasks that are important, urgent or low priority so you can maximize productivity with your limited time.
  6. Computer proficiency. Computers and software applications will facilitate the grunt work, cash management, reports, documentations and many other clerical tasks so it’s vital that you know your way around this equipment. That includes the ability to make good use of the Internet to find new customers.

Freight Broker Education

Whether you’re fully employed or work in a large logistics company, being a freight broker means you must at least have a high school diploma or a GED. To add to their know-how, aspiring freight brokers attend reputable freight broker training schools. Others work with companies who conduct one-day training seminars or apprenticeship programs to gain a solid grounding in the ins and outs of freight brokering.

While you’re looking for freight broker jobs, continue to refer to this freight broker job description to determine what skills you already have and what you need to acquire.