Freight Forwarder Business Idea
Deciding to become a freight forwarder is a decision that can lead to a lucrative small business opportunity in the freight, transportation, and cargo industries. Freight forwarders, also known as brokers, act as the go-between for customers who ship products and qualified carriers. It is the responsibility of the forwarder to find the right method of transport at the best price. Transport methods include air, highway, rail and sea.
Freight forwarders work as independent contractors or for established transportation brokerage companies. Technology advances and a global economy make freight and cargo forwarding an industry with a high growth potential. Brokers deal with a variety of commodities including building materials, new products, hazardous materials, and livestock.
How to Become a Freight Forwarder
The transportation industry has its own jargon and terminology. A background in the freight, trucking, or cargo transport industry gives you a head-start when you become a freight forwarder. Consider the following questions as you plan out your next steps for getting started:
- Are you knowledgeable about transportation and cargo transport?
- Do you have excellent communication and negotiating skills?
- Do you enjoy working with a variety of people?
- Do you have the time and determination to get additional training, if needed?
- Would you prefer to work as an independent contractor or rather work with an established company?
- Will you concentrate on domestic shipments or will you work internationally?
As you become a freight forwarder, your primary responsibilities will include:
- Contacting clients about shipping and cargo requirements
- Contacting carriers to find available transport options for clients
- Negotiating with clients and carriers
- Completing paperwork for each shipment
- Searching for new clients
- Attending transportation and related trade shows
- Conducting research and staying informed about industry developments
Getting Started as a Freight Forwarder
A background in transportation is a plus when you become a freight forwarder, but there are many affordable training courses available. In addition to training, the following legal documents are required:
- Broker’s Authority: The broker’s authority is obtained through the Federal Motor Carrier Safety Administration (FMCSA).
- Trust or Surety Bond of $10,000: Apply for a surety bond at your bank or bonding agency.
- Process Agent: A process agent gives you the authority to accept legal documents on behalf of your client. The FMCSA processes and approves process agent applications.
- USDOT Number: A United States Department of Transportation (USDOT) number is required in most instances. Apply through the FMCSA.
Most of the freight moved today has been assigned using the internet. Freight matching sites give brokers the means to find carriers that match the needs of the shipper. Typically, freight-matching sites require annual membership fees, but quickly pay for themselves in completed jobs and time saved.
Begin finding customers by contacting nearby businesses. Nearly all businesses require shipping services, particularly those in the manufacturing industry. Most do not have the staff, time, or expertise to track down the best carrier at an affordable price. Use personal contact, direct mail pieces, and trade advertising to outline why using your services is a smart financial move. Once a relationship is established, clients will keep calling you.
Keys for Success
Successful freight forwarders earn anywhere from $40,000 a year to $225,000 a year. Income varies according to time worked, skill level, and economic factors. Keys for success include:
- A successful freight forwarder is a master at the art of negotiation. Most shipper/carrier matches begin with a dollar amount the shipper is willing to pay and a dollar amount the carrier expects to be paid. Neither amount is set in stone. Your job is to find the carrier that best matches the load requirements at a price beneficial to your client.
- Pay yourself. Freight brokers earn commissions on the loads they set up for clients. Your time is worth money.
- Roll with the times. Economical conditions have a direct correlation to the freight forwarding industry. Fuel prices in particular may require that you negotiate harder for the best prices and accept lower commissions for a time.
- Proactively deal with problems. It is impossible for carriers to be on time, every time. Occasionally, accidents, weather, and unforeseen occurrences make shipments and deliveries late. Stay in contact with the shipper and the carrier. Inform your client as soon as possible if a shipment is going to be late. If a carrier is consistently late, find one that is more reliable. Clients will stop working with you if their shipments never arrive on time or are often damaged.
When you become a freight forwarder, building a client base is the first goal. As you form working relationships with clients and carriers, expanding your services makes a lot of sense. Consider the following ideas for growth:
- Start a freight forwarding agency by hiring additional brokers
- Expand services to ship additional commodities
- Teach freight forwarder classes
- Purchase a fleet of semi tractor trailers and start your own specialty shipping service