August 4, 2022
Adam Hoeksema
Everyday there are millions of loads of freight that need to be transported throughout the country, and everyday freight brokers help connect loads that need to be transported with drivers that are able to transport the loads. Freight brokers earn a small percentage of the cost to transport the load. There are different ways to get into the freight brokerage business, but today I want to focus on two different scenarios:
- You are already operating a trucking business and you want to broker your excess loads
- You want to start a freight brokerage as a standalone business
Note: I will be referencing our Trucking + Freight Brokerage Financial Projection Template through the rest of the article which can be used to create projections for a standalone trucking business, a standalone freight brokerage business, or a trucking business that also offers freight brokerage services.
Before I dive in, let's make sure we are all on the same page.
What is a Broker in Trucking?
A broker in trucking will match carriers (trucks) with shippers (loads of freight) by connecting truckers with companies or people who need a load of freight transported. The broker takes care of all associated shipping paperwork and makes sure all documents are in compliance with government regulations. The role of the broker is to facilitate communication between the two parties and make sure all paperwork is properly filled out and in order. They seek out reliable carriers by vetting them for safety, punctuality, reliability, and reasonable rates. Brokers also negotiate competitive rates with carriers for the shipper and regularly monitor the progress of the haul. In addition to this, many brokers offer additional services such as invoicing and payment processing, vehicle maintenance, and tracking solutions. All of this work requires a high level of experience, skill and attention to detail. By using a broker, the shipper does not need to be an industry expert or be able to recruit drivers as the broker can take care of that for them.
Adding a Freight Brokerage Business to your Trucking Business
Often our clients are already operating a trucking business and one of their customers offers them more loads than they have capacity to carry. If you don’t have the cash to add more trucks and drivers to your team, or you can find any drivers that want to work for your company as an employee, the next natural thought is to add a freight brokerage arm to your business where you can farm out these loads to independent owner operators.
How to Find Truck Drivers for your Freight Brokerage Startup
Once you determine that you want to start brokering loads, your next step is to find drivers that are willing to carry the loads for your customer. At this point you are really just a matchmaker between your customer that has freight to move and drivers that have capacity to carry loads. The challenge is going to be finding quality, reliable drivers that you can broker your loads to. Some small freight brokers will actually list loads on another broker’s load board. For example, you could list a load on a load board like DAT which boasts over 536 million loads listed per year.
Brokers can subscribe to the DAT load board starting at $139 per year. There are also free load boards, like Uber Freight, but there are probably less carriers on the Uber Freight load board when compared to DAT.
Starting a Standalone Freight Brokerage Business
If you are looking to start a freight brokerage business without offering trucking services yourself, then you probably won’t naturally have the loads available to broker from your current clients, so your first step will be to find customers that are willing to use you to broker their loads.
How to Find Loads to Broker for your Freight Brokerage Startup
This is good old fashioned networking and sales. You will need to find shippers with loads that regularly need to be shipped. You will probably find more luck with smaller companies that have less frequent loads because they will not have the regular demand required to hire their own in-house freight broker. If it were me, I would try to connect with startups and small businesses that have infrequent loads and then I would hope to grow with those companies over time.
Should You Use a Load Board for your Freight Brokerage?
Yes. At some point you will probably run out of personal connections with carriers and will need to post your loads on a load board. Keep in mind that your customer could decide that they just want to post their own loads on a load board and cut you out of the process. This is a reasonable thing for a shipper to do, so as a broker you need to make sure that you are providing value and providing a great service to your shippers so that they don’t decide to just hire an admin to post loads to a load board. You won’t want to rely too much on a load board because it will make you more replaceable. You should work to grow your network of carriers that you can place loads with so that your shippers truly need your help in brokering loads.
Freight Brokerage Startup FAQs
There are some other frequently asked questions from entrepreneurs looking to start their own freight brokerage.
Can you Start a Freight Brokerage from Home?
Yes. You can operate a freight brokerage business from home. There are low barriers to entry in the freight brokerage business. You really just need a phone, a computer, a source of drivers, and a customer that allows you to broker their loads. This can certainly be done from home.
How Much Do Freight Brokers Charge?
According to Convoy, freight brokers charge between 15% and 20% of the cost of shipping the load.
What are Common Expenses for Freight Brokers?
The freight brokerage business can be complex or simple depending on the scale at which you are operating. If you are a one person freight broker business, your common expenses will likely include:
- Home office expenses
- Internet
- Phone service
- Subscriptions to Load Boards
- Insurance
- Bookkeeping
- Payment processing fees
How much can a Freight Broker Make per Year?
This is really a function of how many loads you can broker. You can use our freight brokerage financial projection template and watch our video on creating projections for a freight broker to see how to calculate how much you can make.
According to Freight360 the average broker can earn $270 on average per load brokered. So for example if you have 5 drivers that look to you for loads 5 days a week, 50 weeks per year that is 1,250 potential loads x $270 per load = $337,500 in revenue per year. You should complete your own projections to determine how much you believe you can generate in freight brokerage revenue and profit with our freight brokerage financial model template.
If you have any questions as you look to start your freight brokerage business, please don’t hesitate to contact us!
