Home Based Small Business Opportunity
Author: John D. Thomas, President, CPA * Atex Freight Broker Training, Inc.
How would you like to own a home based business that requires only a computer, a telephone, a fax and a file cabinet with an income potential of - $40,000? $75,000? $150,000? – or more! Further, you won’t necessarily need employees and you can have customers from all over the country and no heavy advertising is required. This business can be learned in a matter of several weeks or months. After you get established you will have your customers calling YOU rather than you always calling them. Start-up and monthly overhead costs are very low.
Now I’ll admit that compared to some of the other business “opportunities" that you see advertised promising thousands of dollars in your mailbox within days (and you hardly need to lift your finger in the process) this venture may appear anemic to say the least. If this “sounds too good to be true" venture is what you are seeking – do not read any further. I’m NOT offering any “pie-in-the-sky" deal that only lines the pockets of the promoter.
However, if you are seeking a REAL opportunity in an enormous industry that will deliver very nice profits over time – then read on. I’d like to introduce you to the Freight Broker industry. It’s a solid opportunity if you are willing to learn and apply the details and procedures that will lead you to success.
Yes, you CAN become financially independent as a freight broker – and here’s a very brief overview to freight brokering to get you started.
What is a freight broker?
A freight broker arranges for the transportation of cargo between shippers and motor carriers. Nearly everything you touch throughout a given day has been transported by a motor carrier. The industry is gigantic. Most cargo is shipped with either a dry van, a refrigerated unit (reefer) or a flat bed. Cargo is shipped both within local markets as well as long distance and coast to coast.
A freight broker derives a commission for his matchmaking skills. Freight brokers are also known as “truck" brokers, “transportation" brokers and “property" brokers. And the brokerage industry can span not only trucks but air, rail and ocean liners. This informational product, however, will deal only with the trucking industry in the 48 contiguous states.
What do I need before I begin?
Before an individual completes the various applications for his broker authority he will need to decide upon a business name and the form of doing business – incorporation, sole proprietor or other.
The only other requirements for licensing (broker authority) are:
(1) the broker’s authority (motor carrier number),
(2) a $10,000 surety bond or trust fund and
(3) a permit that gives the broker legal representation in all 48 states.
In regard to the $10,000 surety bond, a broker need not necessarily come up with the entire amount himself. There are several bond vendors who will put up the bond and use the broker’s accounts receivable as collateral. No other applications or licenses are required.
Who are my customers?
Shippers from all around the country are the freight broker’s potential customer. The broker will contact shippers who have cargo to ship and who use freight brokers to help find motor carriers to transport the cargo. The freight broker will need to get “set-up" with each shipper before transacting business.
By providing excellent service, the broker should strive to get repeat business and better rates over time. This should lead the shipper to start working proactively with the broker instead of merely on a day-to-day basis.
What specialized knowledge do I need as a freight broker?
The freight broker will learn to use “loading boards" which are websites where load information is posted. Motor carriers will be viewing these loading boards and will call the broker for information on each posted load. The broker will also use the loading boards to search for available trucks when necessary. A broker will also use mapping and routing software and needs to know how to set up, use and maintain a simple database.
Other necessities include knowledge of calculating rates, monitoring profitability, knowing how to put together set-up packages for both the shipper and motor carrier, understanding the broker-carrier agreement, knowing how to “book" a load, knowing how to “take the order", - to mention a few.
How do I actually take the order from each shipper?
Taking the order is super critical. Shippers have specific instructions and the broker needs to be diligent in not only taking the order but in communicating the shipper’s requirements to the motor carrier.
The shipper will have information on each load related to pick up and delivery points with instructions, type of cargo being shipped, type of truck needed and so forth.
The freight broker will need to learn how to successfully negotiate the terms between the shipper and the motor carrier. With some experience the broker learns to develop some of his own “secrets" in the art of negotiating.
How do I know what to charge for each load?
A freight broker will need to learn how to calculating rates with several different methods such as flat rates, rate per mile or by the hundred weight or piece rate. Sometimes the broker tells the shipper how much is needed to move a load other times, especially for a new broker, the shipper will dictate the rate.
The broker will need to work within the shipper’s cost constraints plus pay the motor carrier a decent competitive rate plus provide a suitable profit margin for himself.
Understanding cost structures, market demand and carrier capacity are crucial to establishing not only rates but the degree of flexibility that a broker may be required to exercise.
How do I get a good truck driver to transport the cargo?
The freight broker will initially rely upon carriers calling in off of the loading boards and will need to pre qualify the motor carrier to make sure the carrier has the proper authority, insurance, safety record and so forth.
Once the motor carrier is found to be acceptable the broker locks in the deal by sending a set-up package similar to the one used for the shipper and a confirmation with the instructions and details. The broker will monitor each load until it gets delivered.
The broker then proceeds to build a good working relationship with each carrier to get repeat business.
How can I build and maintain a good following of reliable truck drivers?
Paying truckers on a timely basis is critical – a top priority. This is one of few businesses where one wants to pay vendors quicker rather than later.
A broker’s payment history goes on record. Various credit agencies will compile information on each broker that allows the motor carrier to check out the broker.
Some motor carriers will require advance payments. While this is a good step in building a good carrier following, beginning brokers are recommended to rely more on a “quick pay" option such as the 21- day pay out.
Do I need to buy expensive or specialized software?
There is freight broker software available at a price. This software will enable the broker to build a history of load activity for each load as well as building a shipper and carrier database and for generating carrier confirmations. A freight broker will need to create shipper and motor carrier databases to enter names, addresses, phone numbers, etc. Building these databases is crucial.
Usually, most beginning brokers will use spreadsheets to monitor loads, calculate profitability and so forth. And there are some good relatively inexpensive database packages available as well.
Mapping and routing software is needed. There are both free and low-cost alternatives for this. These resources will allow the broker to calculate the number of miles for each load.
Other financial and accounting software is available to help the broker create various financial and operating reports.
Will a written business plan help me?
Yes, most small business owners neglect doing this. A business plan is a written description of the business and a plan of action. Business plans exist initially in the minds of the entrepreneur – but eventually they should be expressed in written form. Written business plans will “force" the business owner to think about things that would otherwise be neglected. And a business plan should also serve to inspire all who read it.
The three major elements to a business plan are the narrative – or telling your “story" the cash flow projections of anticipated financial income and expenses and any relevant exhibits that will help clarify certain aspects of the business.
What financing options are available if needed?
Most beginning brokers rely upon “factor" companies. These companies will advance money based upon the broker’s accounts receivable. There is no debt incurred as the factor relies upon receiving payment from the shipper. Having a cushion of money is essential in order to pay the motor carrier in a timely manner otherwise, the carrier will go elsewhere.
While bank loans are an option they can be time consuming and downright difficult at times. Bankers most likely will require a written business plan including cash flow projections.
As a freight broker, am I legally liable for any damaged cargo or missing pieces?
A freight broker is not liable if he uses diligence in pre-qualifying the motor carrier and monitoring each load until it is delivered. The freight broker does not want to be found negligent in performing daily operations.
If other problems arise, the essential thing to remember is to be upfront with the shipper – don’t try to hide or cover up a sour situation - and use good people skills to lessen the friction.
What industry resources are available for freight brokers?
The Transportation Intermediaries Association (TIA) is the only professional association for freight brokers. The organization provides educational forums as well as periodic conferences.
Small Business Development Centers (SBDCs) are sponsored by the Small Business Administration. They offer one-stop, small business assistance from various branch locations and are usually connected with a community college.
There are numerous other professional associations, websites, services and resources related to the transportation industry – specifically, shippers, motor carriers and freight brokers – all of which contain a wealth of information.
How much money can I realistically make?
You can make very good money as a freight broker – but it won’t happen overnight. As with any service-oriented business, it will take time to get established. How much time? It depends.
It depends on a number of variables such as: will you have help, will you operate out of your home or an office, are you willing to work weekends, can you be prepared to manage and monitor loads 24/7/365, can you manage cash flow, can you put a deal together, are you assertive, are you detail oriented, can you work in a fast-paced environment, can you multi-task, do you have capital to carry you until you get established, can you work the phones effectively, do you have goals and specific strategies, are you determined, can you push frustration aside and keep plugging away - and so on and so forth – and last but not the least – do you know all the detailed, step-by-step procedures required to operate successfully over the long haul.
If you can answer yes to a good number of these variables, you are on your way to success. Making $40,000 to $75,000 is within reach after getting established. And with a larger operation and the right resources, the income potential is unlimited.
To be sure, the freight broker business is a REAL opportunity. But first, you need to get properly trained …
I would like to get properly trained as a freight broker. Are there reliable training options available?
Yes, there are both classroom type freight broker schools and a few that do training over the telephone and internet. You should ask many questions when interviewing these people to help you make the correct selection.
You might ask: Who is the instructor? Has he ever owned and operated a freight broker business? If not, has he ever owned any type of business? If so, what kind? How long has he been a trainer? How many people are taught at the same time? Is there any one-on-one training sessions available? Is there a structured program used? If so, explain it to me. Can I call someone after training to get answers? If so, how long after training can I call someone?
What instructional materials are used? Who created them? Did a freight broker create them? If not, who created them? How much does the course cost? What exactly does this include? Am I encouraged to buy software? If so, does the training company receive a commission on these sales? Are other low-cost options given if the student does not buy software? Is there any training on business finances, accounting and cash flow planning? If so, give me some examples. The list could go on and on.
About the author:
John D. Thomas, President, CPA and sole owner of Atex Freight Broker Training, Inc., with over 25 years’ experience with small business start ups, provides comprehensive, one-on-one, step-by-step freight broker training over the telephone and Internet. Training begins with applications for the broker authority and continues with all the nuts and bolts of brokering. His website can be viewed at www.atexfreightbroketraining.com and he can be reached by email at info@atexfreightbrokertraining.com or by phone at 915-383-3803.
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