When people consider getting their freight brokerage license, they often wonder whether they’d be able to also own their own fleet of carrier trucks.
So can a freight broker own trucks? The answer is yes, freight carriers often take on a brokerage license as a secondary source of revenue, freight brokers can also act as carriers as long as they are not transporting cargo that is double brokered. There are no restrictions on freight brokers owning trucks, only in how they use them.
Freight brokerage and fleet possession can be confusing to those who aren’t familiar with the industry. Read on to find out more about freight brokers and how they can own their own trucks.
Let’s start with the basics: What Is a Freight Broker?
Traditionally, a freight broker is the middleman who acts as a go-between for the client who owns the cargo and the carrier. Because freight brokerage is a somewhat complicated and highly regulated industry, many carriers focus on cargo transport and don’t get involved with freight brokerage.
Now that the Internet has made getting a freight brokerage license easier than ever, many carriers who already possess a fleet of cargo trucks are beginning to get involved in the brokerage side of freight.
Not only does this make loading up their own carriers easier, but it also allows the company to generate a second stream of revenue through brokering cargo for other carriers. Transportation logistics is a 1.45 billion-dollar industry, and expansion into brokerage is a good way for carriers to expand and become more profitable.
In general, freight brokers can be broken down into two major categories: brokers with assets (trucks) and brokers without assets. While the broker with their own in-house cargo transport might seem like the more solid bet, freight brokers that don’t own trucks often possess a large network of carrier connections that they can use to transport cargo.
Carriers and Freight Brokerage
More and more often, carriers are attempting to become a “one-stop-shop” by incorporating their own branch of freight brokerage into the company. Freight brokerage is a bit more complex than simple cargo transport, however.
Some of the top-performing freight brokers focus solely on brokerage and don’t get involved in the fleet side of things. This can have distinct advantages, such as the following:
- Avoiding truck-related expenses. It costs tens of thousands of dollars per truck to operate a commercial cargo truck annually, and if you multiply those numbers with even a modest fleet, you are looking at a business operation costs of several million dollars a year. This doesn’t even include the cost of emergency breakdowns or shipment delays.
- More specialized expertise. A freight broker that also handles carrier trucks will have their attention and resources split between the two pursuits, which require very different networks, soft skills, and background knowledge. On the flip side of this, a freight broker that focuses on brokerage is able to deepen their knowledge in that part of the trade.
- Simpler customer service process. It can be difficult for freight brokers to balance between maintaining and operating a cargo fleet and finding the most efficient routes for transport shipment, and as a result of this, customer service can begin to fail. While these two goals seem to be complementary, they actually require very different sets of skills.
While these are some good advantages to running a freight brokerage alone, bringing cargo trucks into the mix complicates things. However, owning assets as a freight broker can be helpful too. Here are a few ways that having your own trucks can help you as a freight broker:
- Able to take on jobs that you can’t carry yourself. If a transport company offers their services as both an asset or non-asset carrier depending on the needs of their shipping clients, this allows them to take on deliveries whether they have one of their own trucks available to handle it.
- More control over logistics. It is tempting to have a fleet of trucks available just to be able to have more control over exactly when and where cargo gets shipped out, as well as what time it arrives.
- Offers savings and helps maintain client relationships. Sometimes in order to maintain a relationship with a cargo client, a carrier would have to take on a load at a lower rate than they are comfortable taking. But with freight brokerage, they can still get the customer taken care of while not bogging their own trucks down with cheap cargo.
For a freight brokerage to work, a freight broker needs to have a wide network of trusted carriers that they can call on to get cargo transported, whether they have their own trucks. While owning trucks can potentially be a benefit to a freight broker, it isn’t a necessity for success as a freight broker. Having a strong network of carriers available is.
Why Are More Carriers Getting Involved with Freight Brokerage?
Carriers that already own cargo trucks are getting more involved with freight brokerage all the time, including individual truckers who own their rigs and gain brokerage authority in order to get into direct shipping.
Because a lot of freight brokerage can be controlled via real-time digital technology these days, it is becoming easier and easier for newcomers to enter the transport logistics game, especially if they already have experience on the carrier side of things.
Freight Brokerage Is Restricted by Financial Liability
One of the restrictions on freight brokerage is financial liability above and beyond what the broker is already responsible for if they own trucks. Since 2013, freight brokers have to be bonded for a minimum of $75,000, according to the Federal Motor Carrier Safety Administration (FMCSA). This bond ensures the freight broker’s financial security.
There is no way to get around this requirement, as all trucks operational in the United States are subject to the regulations set forth by the FMCSA.
While it is possible for a freight broker to own their own trucks (or for a motor carrier to obtain a brokerage authority) these two branches of transport logistics are both expensive to maintain and invest in, so unless an individual already has capital and networks established from one branch or the other, it can be difficult to become financially established on both fronts.
For Carriers, Freight Brokerage Can Be Lucrative
For trucking who already own their own fleet and want to branch out into the logistics side of things, getting a freight brokerage running in-house can be a good opportunity to make money on shipments those companies can’t transport directly.
The main thing to avoid when brokering as a trucker is double brokerage, which is considered unethical. This is when a carrier takes on a shipment through a broker, then goes on to broker the shipment to someone else.
Owning Trucks Can Be A Great Investment for Established Freight Brokers
For freight brokers who have already established themselves in the transportation industry and have developed some financial security as a company or individual effort, purchasing trucks as company assets can be a good way to invest money back into the business.
Brokers should be aware, however, that trucks are an investment that bring their own set of costs and liabilities onto the table. Freight brokers planning on starting up a fleet of their own motor carriers should be prepared for the potential financial pitfalls of commercial vehicle ownership at the same time as they scout for new and lucrative opportunities to use their fleet.