Starting Brokerage Business

[Jesse]

Bonjour,

I am interested in learning more about the freight brokerage business and would truly appreciate any guidance you can share about how things work in the brokerage industry. I am currently working as a dispatcher and would like to better understand the broker side of operations.

I had a few questions and would be grateful for your insights:

1. What types of insurance are required for a freight brokerage company?
2. How do brokers typically find shippers? Are there specific portals or platforms used? I often hear brokers mention “bidding on loads” and would like to understand how that process works.
3. How are credit ratings updated on platforms such as Equifax? Do brokers need to report or update payment records with them?
4. What contracts or agreements are usually required between a broker and a logistics company/carrier, and between a broker and a shipper?
5. Before assigning a load to a logistics company (besides collecting the Certificate of Insurance and checking references), what other important checks or steps should be taken?

Thank you very much for your time and guidance. I appreciate any advice you can share.

 

[loaders]

Well, you have certainly asked a lot of questions, all of them very good ones. I would recommend you look at the NTBA Brokers website for some general information regarding the freight broker industry.
1) you should get contingency cargo insurance that could be used in the event that a carrier you selected had let their insurance lapse. You should also look at obtaining an Errors and Omissions policy.
2)This is the hardest part. You have to find your own shippers with whom you can develop a relationship. Talk to friends, neighbours, acquaintances, anyone who might know someone looking for help with their transportation. By all means, try to get on a bidders list at one of the large shippers but don’t hold your breath that you will ever receive a winning bid. Smaller shippers who need your knowledge and assistance should be your target market.
3)In order for you to keep a good credit rating, you will need to pay your suppliers(carriers) on time…religiously! That often involves paying them before you have been paid. As a result you will need to have either some customers who pay quickly, or a source of your own funding. A line of credit, a rich uncle or something similar.
4) Contracts can be all over the map. Some large shippers will insist you sign theirs, some carriers have their own contract for dealing with brokers. You will have to review each one and determine for yourself if they are too onerous or not. The NTBA Brokers website has a sample broker/carrier contract.
5) Probably the most important question. There is no such thing as too much due diligence when assigning one of your customers loads to a new carrier. Insurance, registration, licensing (both Provincial and US),references (at least three from other freight brokers), Google map search their address, ensure their workers compensation is current.
This is just scratching the surface and in all honesty, I would strongly recommend against it. Perhaps instead, look for a position with an existing freight broker where you could learn the ropes and determine if indeed, this is the path you want to take. Starting your own business can be very rewarding and occasionally successful but it isn’t at all easy especially for someone with what appears to be , limited experience.

 

[Jim L]

Perhaps instead, look for a position with an existing freight broker where you could learn the ropes and determine if indeed, this is the path you want to take. Starting your own business can be very rewarding and occasionally successful but it isn’t at all easy especially for someone with what appears to be , limited experience.

^^^above is the best advice. Learn at someone else's expense but be careful what contracts you sign for employment at a broker. You don't want to limit your next job or business prospects.

 

[Jesse]

Thanks for the great advice but I gave couple of interviews and got rejected due to no experience in brokerage. Also market is quite tough these days companies want to hire experienced professional.

 

[loaders]

Thanks for the great advice but I gave couple of interviews and got rejected due to no experience in brokerage. Also market is quite tough these days companies want to hire experienced professional.

Then perhaps the timing isn’t right for you to try and start a new business. Most employers, including your current one probably, want their employees to be ambitious and are always searching for people who are looking for more responsibility. Talk to your boss, and see if there is something more you can be doing in your current position.