As requested, we are going to outline the steps to starting a freight brokerage, from start to finish. With that said, we have to give a disclaimer. While it is much, much cheaper to start a brokerage than it is to start a trucking company, it is not a get rich quick type of job. It takes a heck of a work ethic to start building your book of business, or clients. It takes some serious financial planning to assure that you are collecting from your clients, and paying the carriers promptly so they will continue to work with you in the future. The most important takeaway you can take from this article is that you must treat the carriers who haul your freight as your customers. Keep them happy, and they will keep hauling for you. Tick them off, and well……
Step One: Have experience as a broker whether you worked for another brokerage. Any of these “freight broker schools” out here are not going to teach you how to broker the right way. These “schools” are not made to see you succeed, but instead to make money off you. Most teach you the operational aspects of the industry, and leave out the most critical part of the whole brokerage process, which is sales. If you have watched our Freight Broker Live series, you know we are very critical of most of these schools and programs. The best way to learn is to work in it, either as an employee for a brokerage (be weary of non-competes) or even as a owner-operator. You will be a much better broker if you have some time behind the wheel, know what it is like to be on the road, and to have an understanding of just how much it takes to run a truck. If you insist on taking a course, and its not me teaching it, the only course we recommend is the New Broker Course, which you can link to here (we have no affiliation with the TIA or it’s offerings, however we feel they have the credibility to back the course).
Step Two: If you are certain that you are ready to make the leap into the brokerage field, now you must understand the start-up costs. Creating a business plan at this stage is a great option to see it all out in the open. The costs to open your brokerage will range in the $3000-$6000 range or higher depending on personal credit. This includes your state corporation filings, the FMCSA filing, the BOC3 filings and your bond payment (which is based on your personal credit). While the costs to set up are reasonably low, please keep in mind that your clients, the people who hire you to arrange the transportation of freight will pay your invoice in 30 or more days, and more often you will need to pay your carrier before that, so having a very healthy bank account, or set up with a factoring company, like our friends at OTR Capital will help you make sure you are paying the carriers on time. Another step many miss is getting the quote from a bonding company, while there are many out there, we recommend Pacific Financial as they seem to be the most affordable for new brokers.Once you get to this point, go back to the first step to make sure you are ready to take the leap.
Step Three: Once you are sure you are ready to take the leap, you have to do a few things. The first is set up your company in your home state($100-500) and apply for an EIN number with the IRS (free through the IRS website). Once you have that handled you can head over to the FMCSA website, here and begin the filing process to file for a new brokerage authority. This process costs $300 and will take you about an hour or more depending on your computer ability. Once you pay, you will be directed to create a Portal account through the FMCSA. There you will see your DOT and MC number. While they are instant-issue, there are several steps you must still complete before the numbers become active along with a mandated 20-day contesting period. While you are waiting you can file for your BOC3 by simply googling BOC3. That typically costs anywhere from $35-$75 or more depending on how much they can get you for.
Step Four: Pay for the freight broker bond. The bonding company will file the filing with the FMCSA. I include this as its own step as it is very important to make sure you know, this is the last step before your authority goes active. If you use a great bonding company, you can reach out to them and they will get the very day your authority will go active.
Steps Five through 10,000: It is hard to be a broker, when you first get started. There are several other steps to operating your new company, and we are not going to cover them right now as you should already have that down, otherwise why would you be thinking of opening your brokerage. Our Golden rule of brokering, treat carriers like customers and you will make a bunch of money. Treat them poorly and you will be out of business very fast.