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Freight brokering: an alternative to driving

According to Entrepreneur magazine, a freight brokerage is the second best business to start because it involves relatively small start-up costs, overhead and operational expenses, yet offers the potential for big returns. With fuel prices climbing to record highs, freight brokering of-fers entrepreneurial owner- operators an attractive alternative to driving a truck. What’s more, the business can be operated out of the spare bedroom in your home.

About 150 businesses apply for a transportation business license each business day. That includes trucking and bus companies, moving companies, freight brokers and freight forwarders. Many go out of business because they’re not adequately trained or they unintentionally fall out of compliance with financial security obligations, and their business licenses are revoked.

Freight brokering isn’t for everyone, but for those that succeed, the payoff is substantial. The average commission on a brokered load can vary between 10 percent and 20 percent of the bill of lading, with 15 percent the industry average. Depending on their knowledge, skills and abilities, freight brokers can earn between $50,000 and $300,000 per year.

Freight brokering is much like real estate brokering. A freight broker is a third-party intermediary who arranges for the purchase of transportation services. Brokers serve as matchmakers or “travel agents” for full truckloads of freight, dealing with buyers of transportation services (shippers) on the one hand and sellers of transportation services (motor carriers) on the other.

Shippers tend to rely on brokers for their skill at monitoring the marketplace, watching supply and demand trends, and their ability to advise shippers of the going rates for line transportation, surcharges and accessorial services such as tarping. Carriers, in turn, especially independent owner-operators who have their own authority, often rely on brokers as their dispatchers.

Although there are financial obligations in the form of a bond to ensure the broker pays his carrier, brokers have no mandatory insurance obligations as they do not operate trucks or take possession of freight, and they are therefore not normally liable for shipments. This enables brokers to keep much more of their profit than their motor carrier counterparts, who have high insurance premiums and vehicle maintenance issues to deal with.

In order to operate, brokers need to obtain a license and file a $10,000 surety bond and other legal documents.

Freight brokering can be mastered by individuals with trucking experience, thanks to training programs. The DOTAuthority.com “Introduction to Freight Brokering” seminar, for example, is offered in 25 cities nationwide. The one-day program covers basics like setting up a business entity, securing a federal license, federal regulations, finding freight and trucks, sales & marketing, contract negotiations and freight rate development. For more information, call toll free (888) 414-1874.

—James P. Lamb