- Acquire on-the-job experience and knowledge in the field
- Strengthen math, communication and technology skills
- Read up on freight brokerage and attend classes
- Create a business plan
- Apply for a USDOT number and broker authority
- Get a freight broker bond
- Obtain sufficient insurance
- Start moving freight!
- Set boundaries for working from home
Technology has created new opportunities for business people, whether that be working on-site or remotely. However, technology has not lessened the work ethic needed to succeed in business, so prospective freight brokers need to strongly consider the steps outlined in this guide if they plan on being a profitable freight broker while working from home.
Can a Freight Broker Work From Home?
A freight broker has a variety of responsibilities, some of which may seem rather daunting for a person working from home. The duties of a freight broker may include, but are not limited to, the following:
- Marketing – shippers and carriers must know which freight brokers can help them transport their products and provide them with cargo, respectively.
- Pairing customers with freight carriers – freight brokers must know which vessels are available to transport specific types of cargo and match them to businesses that are looking to have these type of products shipped
- Booking orders – when a business is ready to ship 1,000 crates of their product on XX/XX/2020, the freight broker receives that order and secures the business’ space on a vessel that is headed to a region that the business needs to be shipped to
- Lining carriers up for loading – the freight broker will have to set the pickup schedule for that same 1,000 crates of product and continue to serve as a liaison between shipper and carrier until the crates reach their final destination
To further complicate matters, the freight broker must perform these responsibilities while providing maximum value to both the shipper and the carrier. While maximizing value for both parties is essential for success, it requires strategic logistics to find the point where everyone is happy, as shippers and carriers have different requirements for accepting a broker’s offer:
- Shippers want the lowest possible rate per unit. The price point for products is determined through a painstaking analysis of purchase history data. High shipping costs will cut into a business’ profit margins for a product listed at a given price, and price increases due to shipping costs could turn customers away from the product
- Carriers want an optimal load rate. Every time a truck, ship, or airplane leaves with a load less than 100% of capacity, the carrier is missing out on revenue. It is the freight broker’s job to ensure that they are matching the carrier with enough businesses and/or finding businesses with sufficient product to ship to make the carrier’s run worthwhile.
With all of that said, yes, it is possible to be a successful freight broker from home. There are a number of different software programs, depending on the industry, that make shipping rates, routes, and loads available online. It is up to the potential freight broker to roll up his or her sleeves and take the necessary steps to run a profitable freight brokerage from home.
How Freight Brokers Can Work From Home
The most important concept that a home freight broker must remember is that when it is time to work, the house or apartment turns from “home” into “office.” This needs to be non-negotiable, and the prospective home freight broker needs to prepare for his or her career and daily responsibilities in the same way that any other professional does.
Acquire Experience and Knowledge in the Field
It should not come as a surprise that those with experience and industry-specific knowledge have a major leg up in acquiring work. It also should be expected that you cannot acquire all of the experience and knowledge you will need by sitting at home and doing an Internet search for “How to be a freight broker.”
Before starting a home freight brokerage, the aspirant will want to gain some experience in the shipping industry. While many jobs in freight may seem menial to those who have visions of running a six-figure freight brokerage from home, the skills, jargon, and connections acquired while doing this work will be fundamental to opening a home business. Some ideas include:
- Sign up with your local temp agency – while temp work is often viewed as reserved for those who can’t hold down full-time employment, it can be a boon for those looking to start a freight business. Agencies often have many one-day and short-term assignments for help loading and unloading trucks, which can give aspirants a crash course in the nuts and bolts of shipping
- Get a part-time job at a department store – while this is another job choice that is often viewed in a somewhat negative light, it should be viewed as an investment for the prospective home freight broker. During the time you do this work, observe management closely and get a feel for how operations staff maintains ordering and shipping schedules
While these types of jobs can be essential in familiarizing you with how the freight industry works, they are not the long-term goal. To move up the ladder and go into business for yourself, the aspirant will need to be well-educated. Home freight brokers will need to be strong in the following areas:
- Math – freight brokers need to be able to calculate and crunch numbers quickly and with great frequency. Specifically, the broker needs to be strong in business math to understand financing, interest, accounts receivable, and accounts payable
- Communication – freight brokers network with dozens of people on a daily basis, often simultaneously working to negotiate and close many contracts. Strong written, verbal, and recorded communication skills are essential
- Technology – this may seem “no-duh” for those starting a business at home, but just knowing how to use email, spreadsheets, and word processing is not enough. Remember, there is no IT guy just down the hall, so a successful home freight broker needs to be able to troubleshoot technical issues to avoid missing out on business
Besides the general skills required for success listed above, obtaining as much information as possible that is specific to freight brokering will also prove beneficial. There are a couple of possible ways that the aspirant can study for a career as a freight broker, including:
- Reading freight brokerage books – not only will these books provide a wealth of foundational information for the freight broker, but they will also serve as invaluable references as questions arise on a day-to-day basis
- Attend freight brokerage classes – these classes can serve as a boot camp for people to learn all of the ins and outs of the freight brokerage business from experts in the field. Classes are also a great way to meet and network with others in the industry, potentially opening the door for opportunities once your home freight brokerage is up and running
Create a Business Plan
Business plans can take a long time to write, time which the unwise business owner may feel could be better utilized by jumping right into action and acquiring customers. However, don’t be fooled: A strong business plan is essential to the success of a start-up.
A business plan should be looked at as the road map or user’s manual for your freight brokerage, guiding your business from formulation to your end goal XX number of years down the road.
A strong business plan will delineate the tactics and strategies your business will employ and should include the following sections:
|Business name||The name of your freight brokerage should be catchy and concise while letting potential customers know the industry you serve.
You will want to check with the U.S. Patent and Trademark Office to ensure that your name is unique and has not been previously used
|Business model||An increasing number of start-ups are registering as limited liability companies (LLC), as this model has a number of tax and legal advantages.
Other models include a sole proprietorship, partnership, or corporation. Registering your business can be done easily on your state website for a fee of about $50
|Purpose||A business exists to satisfy the needs of customers. Yes, your business is a freight brokerage, but what specific niche do you serve?
Do you want to work with bulk tankers, automobiles, or oversized equipment? A jack of all trades is a master of none, so what does your ideal customer look like?
|Financing||How much capital will it take to get your freight brokerage off the ground? Where will this capital come from?
How will you acquire additional capital to grow your business?
|Facilities and equipment||Just because your home is also your workplace does not mean that your kitchen table will lead to freight brokerage success.
Will you need to redesign a bedroom into an office? Will you need to purchase new computers, printers, and software programs? Are your Internet and mobile plans sufficient?
|Marketing||How are you going to brand your service to occupy a unique place in the minds of consumers? What is your plan to create a strong social media presence?
It takes money to make money, so how much are you willing to budget for direct mailings, conferences, and meetings with clients?
|Scheduling and clerical||What are your work hours going to look like? Will this schedule be compatible with the shippers and carriers you have targeted as clients?
What will be your method for keeping track of daily expenses, client databases, and compliance concerns?
|Revenue||How much money will you take for your salary, and how much will you reinvest back into the freight brokerage?
What is your plan if your company suffers losses and/or is slow in the march toward profitability?
Apply for a USDOT Number and Broker Authority
Although you are well-educated on the role of a freight broker and have your business plan ready to launch, there are still some hurdles that need to be cleared before the freight broker can get to work.
An important legal barrier to entry is the acquisition of a freight broker license from the Federal Motor Carrier Safety Administration (FMCSA).
The first step to getting a freight broker’s license is to acquire a USDOT number, which will be required before an application can be submitted to the FMCSA. In addition to the application, a $300 fee will be incurred.
Once the fee has been paid, and the application has been processed, the FMCSA will issue the freight broker a number via mail. There will be a 10-day window in which the license number will be posted on the registration webpage. During this window, the license can be protested. If the window closes with no issues, the freight broker is officially licensed to begin shipping.
Get a Freight Broker Bond
In addition to the freight broker’s license, the freight broker bond, or BMC-84 bond, is an important legal requirement within the industry.
This bond is for $75,000 and is used to ensure accountability among freight brokers. It is put in place to guarantee that freight brokers will follow all applicable rules and regulations within their brokering.
Since there is a risk in bonding a freight brokerage, the surety (the entity who is issuing the bond) will need to thoroughly check the applicant’s finances. Based on the results of this financial evaluation, the surety will then decide the premium the broker will pay for the bond. Those with good credit scores will pay a lower portion of the $75,000 than those with poor credit scores.
If the freight broker bond is still confusing, think of it as a three-way contract, broken down as such:
- Due to the potentially hazardous nature of freight hauling, the FMCSA is taking a risk when licensing freight brokers
- The freight broker pays the surety a premium (usually between 1.5 – 8 percent of the face value of the bond, depending on credit score), indicating that they will abide by the rules and regulations of the industry in which he or she operates
- In the event that malpractice occurs on the part of the principal (freight broker), the surety will pay the obligee (FMCSA) $75,000 as a result of the infraction
Obtain Sufficient Insurance
Shipping companies will want proof of insurance before they begin working with you. In addition to the freight broker bond detailed in the previous section, freight brokers will need the following:
- Cargo load insurance – the freight broker will need to fill out form BMC-34 to get covered in the event of loss or damage to goods being shipped
- Liability insurance – this will cover bodily injury, property damage, and environmental restoration and can be filed for using form BMC-91
In addition to the freight broker bond and insurance coverage, the freight broker must designate process agents in each state he or she does business in. This will be the person to whom court papers are served in the event of alleged malfeasance on the part of the motor carrier or freight broker. Agents will be designated on form BOC-3.
All of these forms can be found on the FMCSA website.
Start Moving Freight
Now that you are educated on the role of a freight broker, have crafted the perfect business plan, and have cleared all legal hurdles, it’s time to start moving freight.
Set Boundaries for Working From Home
Remember, although working from home is convenient, it does not mean that you are or can cut corners on the path to success. Some best practices for the home freight broker are:
- Maintain a stringent pre-work schedule – your workday starts at 9:00, so there’s the temptation to sleep in until 8:59 and still be able to make it work on time. Coffee, breakfast, and exercise are staples in the pre-work regimens of those with traditional jobs, and you would do well to follow a similar routine while working from home
- Cut out distractions – televisions, loud music, and Instagram–you don’t have a boss around to get on your back, so you can let them roll, right? Wrong! There is a reason why these items are prohibited in some workplaces, as they are proven to decrease productivity
- Resist temptation – the sofa is inviting you for a midday nap, and the refrigerator with last night’s lasagna makes it seem like you should budget a couple of snack breaks in around your lunch hour. Probably not the best idea
While being your own boss is convenient and offers home freight brokers a high degree of freedom, sometimes holding yourself accountable can be harder than having someone else tell you what to do. As a home freight broker, your own performance directly impacts your bottom line, so don’t let all of the hard work you went through to open your brokerage go to waste.