How to Become a Freight Broker in 2023: Complete Guide

In this guide, I’m gonna teach you, how to become a freight broker and earn around $73,000 annual salary. My simple 6 steps guide will take you through the path, requirements and skills you need to become a successful freight broker.

Starting a brokerage might seem easy, but it has risks. While you’re your own boss and keep all profits, there are costs to consider. Becoming a successful broker is harder than it seems. Many overlook challenges and fail, leading to high turnover.

Our guide helps you join the successful third of brokers who thrive long-term.

What is a Freight Broker?

Freight brokers play a vital role in moving goods across the country.

Freight brokers are responsible for:

• Make sure goods get from the warehouse to the store.
• Connect businesses with carriers.
• Arrange prices and contracts for a small fee.

Freight broker companies are essential for linking shippers and carriers, which is crucial for the freight industry.

What does a freight broker do?

A freight broker matches shippers with transportation for goods. They can work for a company or run their own business. Some of the responsibilities of a freight broker are:

1. Attract new leads by marketing.
2. Choose safe and efficient carriers.
3. Give shipping cost estimates.
4. Set up orders with carriers.
5. Keep records of business activities.
6. Update customers on shipping and help with questions.
7. Work with carriers, shippers, and dispatchers for collections and drop-offs.
8. Get carriers ready for loads.
9. Bargain with carriers for prices and contracts.

How much do freight brokers make?

A freight broker’s pay depends on where they work. The average salary is around $73,000, but it changes based on location and demand.

There are three types of freight brokers, each with different pay:

1. Licensed freight broker: They have their own company and can hire others.
2. W-2 freight brokers: They work for a licensed broker, earning a salary and commission.
3. 1099 freight broker: They’re independent contractors under a licensed broker.

How Long Does It Take to Become a Freight Broker?

Freight broker training takes about 30 to 45 days, but becoming fully qualified and registered can take longer. After training, you gather required documents, apply for a license from the FMCSA, and get insurance and a freight broker bond.

Also, some training schools offer flexible pacing, which is helpful if you’re changing careers or prefer to learn at your own speed.

Related: How Long Does It Take to Become a Freight Broker?

How Much Does It Cost to Become a Freight Broker? 

To become a freight broker, you’ll need to invest money in yourself and your business. Starting costs range from $4,000 to $10,000, and there will be yearly expenses. Your total costs will vary based on your situation.

You should budget for:

1. Licensing and registration.
2. Surety bond.
3. Equipment and office space.
4. Insurance.
5. Marketing and advertising.

How to Become a Freight Broker

Step 1: Get Industry Experience by Training

Your first step, start by gaining experience in the freight industry. You can do this through training, classes, or self-study. While not legally needed, hands-on experience and education will set you up for success in freight.

In the shipping industry, there are different roles that offer valuable experience:

1. Truck Driver: Experience the trucking world firsthand by delivering cargo.
2. Dispatcher: Coordinate driver routes and update shippers on status.
3. Shipping Logistics Agent: Plan and execute cargo movement in the supply chain.
4. Freight Agent: Work directly with freight brokers, a great way to learn.
5. Freight Forwarder: Organize imports and exports, often managing warehousing.

Take a Freight Broker Class: If you’re not planning on an apprenticeship, think about enrolling in a training course from freight broker schools. These courses can be online or in-person. These programs provide the skills and knowledge you need for a successful career, and you’ll have support from your peers and instructors.

Gain Industry Insights: Stay updated on current laws by reading publications about trucking, shipping, or logistics, and participate in online forums. You can also talk to fellow freight brokers and peers to learn about trends in the freight industry.

Step 2: Develop a Solid Business Plan

Start your freight brokerage business by making a detailed business plan. This guide will help you start and expand your company smoothly.

A good business plan covers:

1. Legal setup.
2. Business objectives.
3. Strengths and weaknesses.
4. Location.
5. Initial expenses.
6. Current and future finances.
7. Income sources.
8. Type of authority.
9. Possible shippers and carriers.
10. Ways to get customers.
11. Marketing approaches.

This plan isn’t just for your direction; you can also use it to apply for loans and credit.

Choose the Right Legal Structure: Pick a legal structure recognized by your state or federal government. Options include:

1. Limited Liability Corporation (LLC): Separates legal liability from the owner.
2. Partnership: Joint ownership, can be limited or with shared liability.
3. Sole Proprietorship: Single owner, simple structure.
4. Corporation (S or C): Offers different levels of personal liability protection.

Decide on a Location: You need an address for registration, licenses, and insurance. Even though much is done remotely, a physical location is important for paperwork and meetings.

Find Carriers: Discover carriers and shippers through networking, online resources, and strategic location choices. Look for reliable and professional partners.

Incorporate Technology: Modern tools like freight broker software, communication, marketing, and bookkeeping systems are crucial. Consider costs and training.

Calculate Start-Up Costs: Include licensing, training, business structure expenses, software, and office basics in your budget. If you lack cash:

1. Small business loans
2. Lines of credit
3. Personal assets
4. Loans from friends/family

Step 3: Apply for a USDOT Number and Obtain Broker Authority

Once you’re comfortable with the industry and have your business plan ready, it’s time to secure your freight broker license from the Federal Motor Carrier Safety Administration (FMCSA).

This process includes applying for a USDOT number and obtaining your broker authority.

1. Apply for a USDOT Number:
   • Obtain a USDOT (Department of Transportation) number through the Unified Registration System. It’s free.
2. Obtain Broker Authority:
   • You need broker authority from the FMCSA to transport goods for compensation.
   • Apply online via the FMCSA website once you have your USDOT number. There’s a one-time $300 fee.
3. Consider MC Authority:
   • Depending on your operations, you might need MC authority (Interstate Operating Authority) to transport regulated commodities.
4. Choose Process Agents:
   • Process agents offer legal representation within your state of operation.
   • You need a process agent registered with the FMCSA (using form BOC-3) as part of the licensing process.

You’re on your way to becoming a licensed freight broker!

Step 4: Fulfill the $75K Requirement

To obtain your freight broker license, you must secure a freight broker bond (BMC-84) or establish a trust fund (BMC-85) worth $75,000. This is submitted to the FMCSA. This amount safeguards shippers and carriers in case a licensed broker fails to fulfill a contract.

The bond guarantees payment to truck drivers and others if issues arise and you can’t fulfill an agreement. It’s mandatory for all freight brokers operating in the United States.

To obtain your BMC-84 bond or BMC-85 trust fund, understand the difference in covering the $75,000:

1. BMC-84 Bond:
   • You don’t pay the full amount upfront.
   • Pay a percentage (usually $500 to $2,000) based on your credit and finances.
   • It’s like insurance that ensures the full amount.
2. BMC-85 Trust Fund:
   • You fully fund an account with $75,000.
   • The money is set aside and can’t be used; it acts as a guarantee.

Check how surety bonds work to decide the best option for your situation.

Step 5: Get Your Unified Carrier Registration

Along with the mentioned requirements, new freight brokers must also register with the Unified Carrier Registration.

This isn’t part of FMCSA but is a pact among states to manage and set fees for motor carriers, brokers, and other transportation professionals.

Step 6: Create a Strong Freight Brokerage Marketing Strategy

Once you’re licensed, you’re set to work as a freight broker. But, having a good marketing plan is key. If you didn’t cover it in your business plan, now’s the time to add ideas for getting leads.

Strong marketing is vital for lasting success as a freight broker. Building a solid list of industry contacts is important. Use lead boards, online marketing, and networking to keep a steady flow of work. Here are some tips for marketing your new freight brokerage business.

Calculate ROI: Always assess the Return On Investment (ROI) for your chosen marketing methods. Online marketing is affordable but watch your spending. Use tools like Google Webmaster or social media analytics to track effectiveness. If a strategy isn’t working, adjust before losing money.

Use Directories and Load Boards: Get listed in online business directories like Google Business Profile, Yelp, or Yahoo! Local Listings. These put your business in front of potential shippers and carriers. Free load boards also help generate leads.

Build a Good Reputation: Your reputation matters. Deliver on promises, be transparent about pricing, and have legal structures like bonds and registrations. A solid reputation brings repeat customers who might refer others to you.

How to Become a Freight Broker with No Experience

Have you ever wondered about diving into the world of logistics and transportation without any prior experience? The thought of becoming a freight broker with no experience might seem like a colossal challenge, but fear not!

Check out my guide on How to Become a Freight Broker with No Experience, this will you through the intricate maze of freight brokerage, even if you’re starting from square one. Yes, you heard it right – no previous experience needed!

By the end of this guide, you’ll be equipped with the know-how, confidence, and insider tips to set foot in the world of freight brokering.

What are the advantages of being a licensed freight broker?

If you’re all about freedom, independence, and making good money, running a freight broker business could be a fantastic option. Getting a freight brokerage license comes with loads of perks, such as:

Unlimited Earnings

Your earnings as a freight broker have no upper limit. How much you make depends on how determined and dedicated you are. You earn a commission for every load you successfully arrange and transport. Top brokers can make over $150,000 annually.

No Commuting Hassles

If you’re tired of being on the road and missing important occasions like birthdays and holidays, or if you’re seeking a job with less travel, becoming a freight broker might be just what you need. Even if you’re not from the transportation world, but you’re interested and want to work near your home, this could be a great fit. While success requires effort, you can design a schedule that suits your lifestyle.

Startup Costs is Low

Starting out won’t break the bank – a few thousand dollars, or possibly even less, is all you need. Especially if you begin by working under an experienced freight broker. The key is to begin modestly as an independent agent and steadily expand your business as time goes on.

Minimal Costs

Running a freight brokerage usually demands lower expenses compared to other small businesses. As a freight broker, you’ll need to cover a handful of costs, like a dependable internet connection, a transportation management system (TMS), and a cell phone. It’s a smart move to consider getting a separate laptop and phone for work to maintain a clear boundary between business and personal matters. The bright side is, you can deduct the expenses of office items exclusively used for your business when filing taxes.

What are the challenges of being a licensed freight broker?

Every job or career has its ups and downs. Here are a few hurdles you could encounter on your journey as a freight broker:

Getting Quality Carriers Onboarded

When you bring in a new carrier to work with, it’s crucial to ensure they understand your operations and are legally qualified for the task. This means careful screening to verify their compliance, safety, accountability (CSA) scores, risk evaluation, insurance coverage, liability, and operating authorizations are all current.

Even though this might seem like a big job, neglecting it can lead to potential problems, damaging your reputation and business. Typically, the traditional manual onboarding process takes 1-3 days. Yet, by utilizing the right tools to automate these steps, you can reduce it to just minutes. This leaves you with more time to secure loads or attract new shippers. Proper onboarding also lays the foundation for strong carrier relationships that you can rely on down the line.

Handling Financial Risk

Dealing with risk is a nerve-wracking aspect of any business, and freight brokering is no exception. There might be times when you need to pay the carrier before receiving payment from the shipper. Slow periods with fewer jobs can also pop up. Building a solid footing can take time, so brace yourself for income fluctuations.

Keep in mind, carriers are more inclined to choose brokers that offer swift payments. Make it a priority to compensate your carriers promptly, as this strengthens bonds and fosters trust.

Keeping an Eye on Carrier Safety and Rules

Checking that your carriers follow the guidelines of the Federal Motor Carrier Safety Administration (FMCSA) and their Compliance Safety and Accountability (CSA) program is a vital aspect of your role as a freight broker. Your shippers rely on you to steer clear of carriers with freight-related violations that might jeopardize their cargo if the carrier has a history of offenses.

Yet, staying updated on carrier compliance can drain your time and resources from tasks that directly affect your profits. Luckily, there are tools that make ensuring carrier safety and compliance quicker, simpler, and more dependable.

Carrier monitoring lets you receive alerts about changes in carrier status and notifications. Armed with a database of carrier insurance certificates and the ability to assess inspection and violation details, you can allocate more time to securing top-notch loads for your carriers and less time on compliance paperwork.

Earning Trust

Gaining trust from clients is a tough task across all industries. As a freight broker, you’ve got to demonstrate your reliability to both shippers and carriers, assuring them you won’t vanish when they’re in a pinch. Additionally, consistently winning over new clients is essential for building a thriving business. This can pose a challenge, especially if networking isn’t your strong suit.

Navigating Contracts

When dealing with major carriers or shippers, you might encounter contracts filled with legal language. These contracts might contain clauses like non-compete agreements that could limit your actions. For instance, if a customer gets a quote directly from the carrier and then asks you to beat it, you might not be allowed to do so. It’s crucial to have a lawyer who’s knowledgeable about the trucking industry review any contract before you put your signature on it. Make sure you comprehend every aspect of what it entails.

Freight broker license costs

To grasp the ins and outs of obtaining a freight broker license, it’s essential to be aware of the associated expenses. There are four key types of costs:

Read more: How Much Does It Cost to Become a Freight Broker?

Training Expenses

The price of training can vary significantly, depending on whether you choose self-guided study with books or opt for a formal class. It’s a good idea to explore different options and find the most cost-effective one.

Freight Broker License Fee

The actual fee for your license differs from state to state. This amount needs to be paid to the Federal Motor Carrier Safety Administration (FMCSA) during step three of the application process. Note: You’ll need to update your information every two years, but this update is free of charge.

Surety Bond

Once again, the surety bond required for a freight broker is set at $75,000. You can secure this bond through a surety company for a small premium. The exact premium you pay mainly depends on your credit score, usually ranging from 2% to 4% of the bond amount, which translates to $1,500 to $3,000 annually. You’ll need to renew the bond every year by paying the designated premium.

Business Organization Costs

Depending on how you structure your company, you might incur expenses for obtaining a business license, insurance, and other startup and organizational expenditures. It’s a good practice to have discussions with your attorney and tax professional to understand the potential expenses you might encounter.

Keep these costs in mind as you navigate the process of obtaining your freight broker license.