How To Become a Freight Broker: All You Need To Know

How To Become a Freight Broker: All You Need To Know

When the United States economy improves and demand for new brokers increases, so there’s never been a more fantastic time to dive into the freight brokering business. 

As the sector continues to grow, it provides more opportunities for individuals that want to earn big and understand more about the freight industry. However, like any other occupation, learning how to become a broker for trucking can be overwhelming.

You must meet numerous requirements to ensure a legitimate freight brokerage and set yourself up for success. 

Here’s everything you need to know about how to become a freight broker, from establishing your business to getting the right licensing and business requirements to strategies for long-term success.

What Does a Freight Broker Do?

The first step in becoming a successful broker for a trucking company is understanding what the job entails.

A truck or freight broker is an individual or organization assisting drivers or shippers in moving products from the point of origin to different destinations by employing a carrier company’s services. 

Essentially, they help the ship find reliable carriers for the safe, secure, and fast transportation of the goods. A freight broker is also responsible for facilitating the product delivery to their destination, such as updating the consumers about the shipment status. These professionals can establish their own business or work for a freight brokerage company.

How to Become a Freight Broker in 2022: A Step-by-Step Guide

steps to becoming a freight broker

Now that you know what the job entails, here’s a comprehensive step-by-step guide you should follow to learn how to broker freight:

  1. Gain Industry Experience (6 months to 3 years)
  2. Acquire Freight Broker Training (3 weeks)
  3. Develop a Business Plan (1 week)
  4. Choose a Company Name and Register Your Business (1 month)
  5. Apply for a USDOT Number (20 days)
  6. Obtain a Freight Broker Bond (1 week)
  7. Get Unified Carrier Registration (1 week)
  8. See Your Process Agents at Each Stage (On-going)
  9. Market Your Freight Broker Business (On-going)

1. Gain Industry Experience (6 months to 5 years)

When starting to learn how to become a trucking broker, it’s wise to refresh your math skills because you will use them daily, helping you make careful analysis and make the best out of your opportunities. 

Besides numbers, the best trucking brokers need to learn to improve their communication and people skills, as these are also a large part of being a freight broker. You can expect to do work over the phone or email, both involving negotiating and closing deals.

Besides polishing your skills, undergoing freight broker training is also essential for becoming a successful truck driver broker. Although this isn’t legally required, a combination of hands-on experience and knowledge can give you a significant advantage. 

2. Acquire Freight Broker Training (3 weeks)

When getting closer to understanding how to become a truck driver broker, there are a couple of steps to training: 

  • Apply for formal online or in-person courses focused on freight brokers. 
  • Get it through other jobs in the industry, including operating as a truck driver or a dispatcher. 

Additionally, having transportation, shipping, and logistic industry insight is a great advantage to have as stating up-to-date on these sectors helps you best serve your clients. You can achieve this by reading publications regarding broker trucking, logistics, or shipping and looking out for the current industry trends.

It usually takes up to 3 weeks to complete this step. Depending on the type of training, you could spend up to $3,000 for learning and gaining experience. 

3. Develop a Business Plan (1 week)

Like with other businesses, if you want to know how to become a freight broker that’s successful, having a plan to lay your freight business’s groundwork can help you for the long haul. It gives you an idea of the startup costs, realistic goals, what your potential clients may like, and ample opportunities in the market. 

To help you develop a business plan that will help drive your business operations smoothly in the first years of your freight brokerage, here are the essential factors your plan should include: 

Trucker Broker Location

After choosing your freight brokerage’s ideal business framework, you must select a place for your business. Although you can do logistics and transportation remotely, there are several advantages of having physical meetings and business contracts that you should consider. However, the final decision will be up to you. 

Freight Broker Startup Costs

Starting a box truck broker’s company doesn’t cost too much. However, there are still some expenses you should calculate and plan, including licensing and business framework fees, software purchases, and other tools of the trade. In general, becoming a freight broker can cost you around $4,000 to $10,000, but if you don’t have the funds to cover these, consider getting a line of credit to help you.

If you don’t want to establish a line of credit, you can always consider other options, such as borrowing funds from friends or family. 

Target Customers

The last essential aspect of your business plan is getting an overview of your ideal client base. Doing this helps you identify reliable shippers and carriers while giving you an idea of how you will earn money. 

It usually takes up to one month to develop a business plan. Developing a business plan can cost up to $1,000.

Read More: How To Start A Trucking Business Checklist

4. Choose a Company Name and Register Your Business (1 month)

Besides choosing a unique company name as you learn how to start a freight brokerage, the most crucial aspect of creating a solid business plan is selecting a business structure recognized by your local or federal government. Below are the different business frameworks you can use for your freight broker company.

  • Limited Liability Corporation: The LLC lets you pass the company’s legal liability to the actual business, not the owner. All profits or losses are passed through this framework to the personal income without paying corporate taxes. However, the owner has to pay self-employment taxes. 
  • Partnership: A partnership is when two or more individuals establish a legal business framework. Profits from the truckload broker company pass through personal income like the LLC structure. 
  • Sole Proprietorship: This framework is when a business has a single owner. However, no individual business entity gets created in the process, meaning all company assets and liabilities are connected with personal liabilities and assets, forcing the business owner to be responsible for all debts. 
  • Corporation C or S: A C-corporation is a structure that separates from its owners, offering the best protection against personal liability. Meanwhile, S-corporations work similarly, but it helps you avoid the double taxation that C-corporations experience. 

Choosing a name and registering your business can take up to one month, costing from $300 to $1,000. 

5. Apply for a USDOT Number (20 days)

semitruck driving on a highway with sunset

If you want to know how to be a broker for truckers, one of the most vital components you need to ensure is meeting the legal requirements before doing business with clients. These include applying for a unique USDOT number, getting your truck driver broker authority, business insurance, licenses, and securing a bond or trust fund. 

To help you out, here’s an in-depth explanation of each legal requirement all freight brokers need to comply with: 

  • USDOT Number

All truckload brokers are required to have a USDOT (U.S. Department of Transportation) number. You can get this by filling up an application online with the URS (Unified Registration System), and you don’t need to pay for anything. States require freight brokers to have a valid USDOT number for the licensing process through the FMCSA.

  • Broker Authority

The FMCSA requires any individual transporting goods for money or helps in the process, like how freight brokers are doing, to have a broker authority from the organization itself. Operating authority allows you to run your business legally as a freight broker. You’ll need a valid USDOT number before applying for operating authority online through the FMCSA’s online registration system. 

You’ll need to pay a one-time fee of $300 for the broker authority. It takes around 20 days to obtain it. 

6. Obtain a Freight Broker Bond (1 week)

To understand how to become a truck broker and get a freight broker license, you’ll need to get a freight broker bond (BMC-84 or surety bond) or a trust fund (BMC-85). A freight broker bond is required for freight brokers operating in America, as the bond protects shippers and carries against unlawful actions of unlicensed freight brokers. The surety bond comes with a large fee of $75,000 but doesn’t require a freight broker to pay the entire amount upfront for the bond. 

Instead, you can pay your freight broker bond in increments, usually $500 to $2,000 per year, depending on your credit history and current financial standing—the FMCSA prices BMC-84 surety bonds as a percentage of the total bond amount. 

If you’re not too keen on the surety bond, you can also go for a BMC-85 trust fund. Unlike the freight broker bond, where a surety bonds company backs your $75,000 bond requirement, the BMC-85 trust fund allows you to set aside the total amount. Although the trust fund can become a financial burden for startup freight brokers, it’s an excellent alternative if a surety bond isn’t available. 

7. Get Unified Carrier Registration (1 week)

Besides getting a bond or trust fund, freight brokers must register for the Unified Carrier Registration program. The FMCSA does not handle this. Instead, it’s an official agreement among the states governing and regulating fees paid by every motor carrier, box truck broker, and other industry professionals. 

8. See Your Process Agents at Each Stage (On-going)

The final legal requirement is that you’ll need to determine your process agents at each phase of your freight brokerage. A process agent is a person providing legal representation within the state you’re operating in. These agents are registered with the FMCSA under the BOC-3 form, and brokers need to hire a process agent as part of the licensing and registration process.

9. Market Your Freight Broker Business (On-going)

After securing your license, bond or trust fund, and other essential tools of the trade, you’re now ready to start your business legally. However, before you become a freight broker, it will be challenging to achieve success if you don’t create a marketing plan. 

Here are several ways to start marketing your business and easily become a freight broker. 

  • List Your Freight Broker Company in Online Business Directories: These online directories include famous sites such as Yelp, Yahoo! Local Listings, or GoogleMyBusiness. All these can help place your name for a potential shipper or motor carrier searching for a broker. 
  • Target Buyer Personas Online: Before putting your business up for online marketing, decide which market niche fits your skills the best. 
  • Determine Your Return on Investment: When it comes to marketing strategies for an aspiring freight broker, most ignore calculating the potential ROI. This factor is essential for any marketing strategy as these aren’t free and could cost you more in the long run. That’s why paying attention to how your marketing plans generate revenue using social media analytics tools is best. 

Setting up marketing processes for your business can take up to one month, and you can expect to pay between $500 and $1,500. 

Finally, like with any business, having a good reputation is crucial for the long-term success of any truck driver broker. You can become a freight broker that’s reputable by delivering promises to your shippers and carriers, transparency on pricing, having the right bond, and other legal structures up-to-date. When you pair the marketing strategies mentioned with these additional measures, you can fuel your business relationships while creating a positive outlook on your new freight broker company. 

How Much Does It Cost To Be a Freight Broker?

If you’re considering starting a whole freight brokerage company, you generally have to pay around $4,000 to $10,000 per year for the initial years. 

However, if you solely want to become a freight broker, all you need to pay is the one-time fee for licenses and other legal requirements. These usually cost up to $300, and you may have to pay this fee twice since, like most brokers, it’s wise if you register as both a motor carrier and freight broker.

Read More: How Much Does It Cost To Start A Trucking Company?

Do Freight Brokers Make Good Money?

Being a freight broker is one of the most lucrative options you have in the industry. 

New brokers can earn an average annual income of $29,000 to $72,000, depending on their level of experience in the industry, location, and service prices. 

Brokers in practice long enough can make a lot more per year, ranging between $100,000 and $200,000. These are usually the individuals that have additional freight agents or are well-known in the industry. 

However, those at the top can rake in millions to billions in annual revenue, providing freight brokers with ample and lucrative opportunities.

How Long Does It Take To Become a Trucking Broker?

Following the general recommendations, from proper training, conducting a business plan, and processing the licenses and other requirements, you can become an established freight broker within 6-12 months. However, this will ultimately depend on how much time and effort you dedicate to this career path.

Working as a freight broker can be extremely profitable. After undergoing proper training, establishing your business, and staying ahead of your competitors, you can earn commissions up to 6 to 8 figures per deal. 

It’s worth the time and effort if you’re looking to achieve financial success and a fun career. We hope this guide helped you learn more about the industry and inspired you to continue your journey to becoming a freight broker for better, profitable, and life-changing opportunities.

Read More: Trucking Authority Insurance: The Ultimate Guide

Are Freight Brokers in Demand?

As the industry evolves, so does the demand for freight brokers in 2022. If you are considering becoming a truck broker, you should know that freight brokers can work remotely in many cases, and their average salary is around $57,000 a year.

Is Becoming a Freight Broker Worth It?

Being a freight broker can be very profitable. After completing the training and becoming an experienced freight broker, you can earn commissions ranging from 6 to 7 figures per deal. 

How Do Freight Brokers Find Loads?

Marketing campaigns can be very helpful when it comes to helping freight brokers find loads. Campaigns can include sending mailers to companies with loads that fit their niche, social media marketing campaigns, or even targeted online ads. 

Why Do Freight Brokers Fail?

There are several common reasons why freight brokers fail in their business, such as:

  • Lack of capital
  • Misunderstanding licensing requirements
  • Strong competition
  • Not understanding modern technology
  • Lack of marketing
  • Wrong business model

Can I Work As a Freight Broker Agent Without Licensing?

Yes, you can learn how to become a freight agent without obtaining your own licensing. If you do that, you would work as an agent under another broker’s authority and split the profits with that broker. 

If you are interested in finding out more about how to become a freight broker to keep your fleets safe, read more about commercial fleet insurance.