You’re probably thinking about starting your freight brokerage, and so you want to know how much money it will cost you to get started. As with many things in this life, there is no simple answer to this question. However, we are going to break down a few things to make it easier for you to understand what you can expect and prepare for that.
First and foremost, there are fixed costs to setting up your freight brokerage. For starters, you’ll need to pay an application fee and a few other filing fees, which are usually around $500-600. Then you will need to obtain a surety bond, something we discussed in a different post. If you have read it already, you may know that the cost of a surety bond will vary depending on your financial and credit situation.
But let’s assume that you have decent credit and the cost of the bond is somewhere under $1,500. Maybe you also want to set up an LLC or incorporate, so there will be another few hundred dollars for filing your company registration. If we’re going to add everything up, let’s say your initial cost could be under $2,500. Again, it can be a little bit higher, or it can be lower, depending on the cost of your surety bond.
Those are your fixed expenses to establish your freight brokerage. However, you’ll probably need some equipment and software as well.
In terms of the equipment, in most cases, if you have a decent computer and a cell phone, you are somewhat set. You will need an internet connection, obviously, but you don’t really need to own anything else. Today, you don’t even need a fax machine and scanner because you can usually get documents scanned with your smartphone or printed into PDF to save files in a digital format.
When it comes to software, you will need a few things like an office suite, potentially a TMS software, and a good PDF editor. Again, all those options exist in a freemium model. You can start using them for free, and you don’t have to pay anything for them until you need certain features.
We discussed these questions in greater detail in our Freight Broker Training course, but for now, let’s just remember that in most cases, you probably already have all the equipment that you need, and all the software that you may need can be found for free.
Now you know what it will cost to form your freight brokerage and get your license and what you may need for your equipment. Is that all you need?
A lot of people make this mistake. They assume that this is all they need; they only have to spend $2,000-$3,000, and they are going to be set up to start operating their freight brokerage. And while that’s technically true, there are a few things that need to be considered.
Now you might be asking why people are using freight forwarders versus freight brokers. As we discuss in our freight broker course, there are many different reasons, but as discussed in our freight broker course, some of the examples can be a consolidation of freight, where a freight forwarder is going to pick up different pieces of cargo, such as smaller partial loads, from different shippers. Then they’re going to consolidate them into one larger shipment at their warehouse and hire a truck to deliver this shipment to a final destination. By doing so, they can save money. The same may be done in reverse, where a large shipment will arrive at freight forwarder’s warehouse and then will be broken down into smaller shipments to be delivered by smaller trucks to their final destination.
Another reason can be warehousing. For example, a shipper needs their product to go out of their production facility, but the receiver is not ready to receive it until, let’s say, two weeks later. Again, a freight forwarder may pick up this cargo, store it in their warehouse, and then ship it out to the destination two weeks later.
Freight forwarders offer a bit more complex solutions to their clients. But the main difference is that a freight broker does not take possession of the freight, while a freight forwarder does.
Are you thinking about becoming a Freight Broker or a Freight Agent? LearnFreight offers Online Freight Brokering Training Courses which are suitable for people not familiar with transportation industry. Learn more about our training by visiting Training Details page or choose your course here.
