Brian Smith

December 4, 2023

10 minutes

#1 Ultimate Freight Broker Guide: Results You’ll Love

#1 Ultimate Freight Broker Guide: Results You’ll Love

From the coffee beans that wake you up in the morning to the smart gadgets you can't live without, a complex logistical network gives consumers easy access to their favorite goods. It's easy to overlook the unsung heroes behind this seamless movement of goods: freight brokers.

Being a freight broker can be an exciting, fulfilling, and extremely lucrative career path. In this guide, we’ll explain everything it takes to become a freight broker, whether you want to start your own business or join an existing one.

Becoming an independent freight broker isn't for the faint of heart, but with the right experience and tools, it can be a lucrative, exciting, and satisfying career. - Jeremy Vrchota, CEO Cota Systems

Understanding the Freight Brokerage Business

So, what is a freight brokerage? A freight brokerage is an intermediary between shippers, who need to move their cargo, and carriers, trucking companies with the equipment and drivers to do so. Shippers and carriers have to manage their own day-to-day operations, and it’s much more efficient to outsource the role of brokering freight to someone specialized.

Freight brokers exist as a number of business models, including third-party logistics companies (3PL), asset-based brokerages, and agent model freight brokerages. They aren’t just connecting shippers with carriers, though. They use specialized technology and detailed systems to ensure resources on all sides are being used efficiently.

Anyone with the experience and industry knowledge can get the required licensing and insurance to start brokering freight under their own business.

what does a freight broker do

The Role of a Freight Broker

Now, what do freight brokers do? A day in the life of logistics brokers might look something like this:

  • Calling shipping companies to see if they need help moving their freight.
  • Calculating and sending quotes to customers to “win” loads.
  • Calling their network of carriers to find one interested in moving the load.
  • Negotiating a price that works for the carrier and remains within the customer’s budget (with a bit on top to keep for themselves).
  • Calling shippers and receivers to schedule appointments and inquire about fees.
  • Vet the carrier, send them a rate confirmation, and communicate with dispatch to make sure appointments are met.
  • Updating customers about shipment status and finding coverage if a driver runs into issues.
  • Checking paperwork for discrepancies.
  • Sending invoices to customers and paying carriers.
  • Checking load boards and resources to stay informed on seasonal rate fluctuations.
  • Staying in touch with current customers for any new opportunities.
  • Solving any logistical issues like broken down trucks, missed appointments, loading instructions, etc.

Imagine a business owner that ships materials to construction sites. He has to manage his employees, schedule projects, purchase materials, find customers, and manage expenses, among other responsibilities. When it comes time to ship his goods, he doesn’t have time to call 50 carriers to find one who wants his load and compare pricing. Not to mention appointment setting, paperwork checking, and putting out fires. He definitely doesn’t have the budget to hire a full-time employee to do it.

Now imagine a company that ships 100 loads per day. Brokering freight becomes a necessity and a strategy for saving time and money.

Essential Skills for a Successful Freight Broker

  • Negotiation: Brokers negotiate with customers to win freight and carriers for truck pay. The better you negotiate, the more money you keep for yourself.
  • Industry Knowledge: This allows brokers to offer competitive services and prices. People can tell if you don’t know what you’re talking about and may try to pull one over on you.
  • Flexibility: You will likely have to open your computer late at night and early in the morning to check on loads or address after-hours issues.
  • Thick-Skinned: The stress of being a cargo broker is no joke. Between tough negotiations, getting lied to, and being the bearer of bad news, there are a lot of hard conversations to be had.
  • Communication: You’ll be communicating verbally and over email to all types of logistics professionals at all levels of the totem pole.
  • Time Management: Learn to balance your time between sales and marketing, account management, building carrier networks, and overseeing compliance/document management
  • Problem Solving: Two days are never the same for logistics brokers. To keep everyone happy, it’s on the broker to provide solutions that please all parties.
  • Technological Proficiency: Brokers use numerous software to get the job done, from load management to driver tracking to their CRM.
  • Sales and Marketing: You need customers to make money, and they won’t come to you. Brokers make cold calls and emails every day.

How are Freight Brokers Different From Freight Forwarders and Carriers?

Freight forwarders take more responsibility than a freight broker/agent by taking possession of the freight. They can create their own BOLs, consolidate and co-pack, and handle customs. This also means their insurance and legal requirements are much stricter.

Carriers physically transport freight on owned or leased assets like dry vans, reefer units, hot shots, or flatbeds. Sometimes carriers also work as brokers, and some brokers have an asset-based division that functions as a carrier.

3PLs go a step beyond cargo brokers by offering services like warehousing,  inventory management, freight forwarding, or specialty services (LTL, intermodal, ports/dray).

Starting Your Freight Broker Company

Are you starting the exciting journey to become a freight broker? Here’s everything you need to know to get started:

Steps to Start a Freight Broker Company

Keep in mind that you'll need to learn the regulations in each state you'll be operating in if you plan to manage interstate loads.

  1. Choose your structure

W-2 freight broker: Get paid some combination of salary + commission under a licensed broker or 3PL. If you choose this, you can probably ignore the following steps as your employer will handle everything.

Licensed freight broker: Establish your own operating authority and business with a unique company name. You may hire employees to work under you.

1099 broker: An independent contractor under another freight broker. Less red tape, but you pay commissions to your broker.

  1. Acquire Operating Authority

Apply for broker authority with OP-1 form. You'll need a business name and LLC first.

  1. Get a Surety Bond

Brokers are required a $75,000 surety bond - the amount you can be found liable for if the business gets sued. Most freight brokerage businesses work with surety companies to put up the bond for you in exchange for a monthly premium.

  1. Select a Process Agent

Brokers need a process agent in each state where they write broker contracts. Form BOC-3 with the FMCSA declares your choice of process agents.

  1. Register through the Unified Registration System (URS)

The URS combines all forms needed to complete your registration in one place. 

  1. Get Insurance

The insurance a freight broker company decides on depends on their plans and specific needs. Many companies have the following insurance:

  • Property and general liability insurance
  • Contingent cargo
  • Vicarious auto liability and umbrella
  1. Purchase Your Equipment

Will you be working from home or in an office space? At a minimum, brokers need:

  • Printer
  • Computer
  • Landline and mobile phone numbers
  • Basic office supplies
  • Internet connection
  • Fax & copy machine

How long does it take to become a freight broker and complete these steps? Typically 30-45 days.

what you need to start brokering freight

Freight Broker Training

The only way to excel is to provide quality services and become trusted by your customers. Their recommendations will fuel your business growth.

Freight broker training will help get you there because you need to be equipped with the best industry knowledge for every situation. Arguably, the best way to learn is to start at a larger brokerage for on-the-job training, gaining paid experience that sets you up to venture out on your own confidently.

If you decide to take a few freight broker courses, DAT Freight 360 is said to be pretty exhaustive.

How to Find Customers & Carrier Networks

To find customers:

Establish an online presence for potential clients to research your services and reputation. Target industries with high shipping demand (e.g., food and beverage, agriculture, packaging) via cold calls and email marketing. Attend industry events, join logistics associations, and visit local shippers with business cards. Food expos are a great way to market your freight brokerage services to a wide audience in a single day.

To find carriers:

Prioritize quality over quantity when selecting carriers, ensuring they have the necessary licenses, insurance, and a solid safety record. Ask questions about their frequent lanes, equipment types, and driver locations to create your own carrier profile database. You can post your available shipments on load boards to attract carriers. Satisfied carriers are likely to recommend logistics brokers to friends and contacts, so always treat them well and keep their interests in mind. Cota Systems makes it easier for brokers to find trusted carriers by handling the bulk of the vetting process before they can use our platform.

The Financial Aspect of a Freight Broker Business

Compared to other ventures, the costs to become a freight broker are relatively low. Aside from that, brokers do need quite a bit of cash flow to cover fixed and variable expenses. As a general rule, it's recommended to keep 3-6 months of revenue as cash flow available to cover operations. Another option is to work with a freight factoring company to help with fast payments and cash flow problems.

Startup Costs

  • Surety Bond: $1,500 to $6,000 each year on average
  • Insurance: $1,500 – $3,000 per year
  • Processing Agent Costs: $50- $150 per agent per year
  • DOT Authority: $300 application fee
  • TMS System: $100 per year
  • Load Board Access: $40-$100 per month

Other subscriptions like invoicing, factoring, or carrier vetting services can all contribute to the costs of running a freight brokerage company. Most logistics brokers start small with the minimum requirements and upgrade their services as they grow.

How Much Do Freight Brokers Make?

The average salary for freight brokers in the US is $67,000. Keep in mind that this average includes independent agents and W2 salaried workers. Independents with their own freight brokerage business normally make much more after they get settled, on the high end of the scale, closer to $150,000. Factors that impact pay include:

Commission Structure: Working at a freight brokerage company puts your earnings at the mercy of their commission structure. What are their monthly minimums? Is pay based on margin or dependent on customer and load count?

Growth Potential: Brokers can grow their book of business to no end. This means uncapped commission potential and the opportunity to make great money - if you have the right tools for growth.

Tips for Success

Freight brokering can be a very lucrative career choice whether working independently or for another freight broker business. Here are some tips for maximizing your earnings as a cargo broker:

  • Building a Solid Carrier Base: Partner with trusted carriers to minimize stress and service failures.
  • Leveraging Technology: You're only as good as your tools. Take advantage of online freight services like cloud-based TMS systems, integrated carrier tracking, digital freight matching, a powerful CRM, and a load management board to enhance efficiency.
  • Effective Rate Negotiation Strategies: Stay updated on the spot market and use tools like DAT Rateview to negotiate confidently.
  • Diversify Service Offerings: Specialization is great, but many brokers grow by offering multiple services like dry, refrigerated, and flatbed.
  • Cost Control: Budget effectively and plan for contingencies to ensure the financial health of your brokerage.
  • Document Everything: Rule #1 of logistics. Keep thorough records of all transactions, communications, and contracts. Accurate documentation is essential for accountability.

Best Paying Freight Brokerage Companies

Remember, the best training is on-the-job training; and it's paid. With the average tenure of a cargo broker around 1-2 years, it's clear that industry turnover is rampant. These brokers offer some of the top pay in the industry:

Beemac Logistics

Average salary: $83,100/year

Location: All over the U.S., but mainly PA, TX, SC, MD, and MN

Work-from-home roles available

B4 Logistics, Inc

Average salary: $75,000/year

Location: NV, WA, TX, NV

Numerous happy reviews from current and past employees

CH Robinson

Despite their reputation as a shady trucking brokerage, they have a generous commission structure. Many first-year employees make well over $60,000. The downside is that their base pay is quite low, and turnover is high.

How to Choose a Freight Brokerage to Work For

If you start at a large freight brokerage company before starting your own, consider these factors:

Reputation and Track Record: Assess their standing among carriers and fellow brokers. You don't want to learn their bad habits.

Size and Specialization: The more services they offer, the more well-rounded your training will be.

Training and Support: Is training paid? How long is the program?

Commission Structure and Earning Potential: Understand the balance between commission and base pay. Are your earnings capped?

Exit Strategy: Understand the company's policies regarding non-compete clauses and any exit strategies. Especially if you want to start your own trucking brokerage and maintain customer relationships.

Is Becoming a Freight Broker Worth It?

Becoming a freight broker can be an incredibly rewarding career choice, but it's not without its challenges. The industry has a high turnover rate, and statistics reveal that many new brokerages struggle to survive.

This is why it's recommended to start working for an established freight brokerage business to determine if it's the right fit for you. While the road may be tough, the journey can be incredibly fulfilling for those who are dedicated and passionate about the logistics world. Offering freight brokerage services gives you the chance to interact with people from all backgrounds, industries, and experience levels.

Pros and Cons of Being a Freight Broker

Pros

High Earning Potential: Your income is only limited by your willingness to work hard, build a strong client base, and move on from hard days.

Low Startup Costs:  With just a few thousand dollars, you can launch your brokerage and set the wheels in motion.

Flexibility: Freight brokering offers the freedom to create your schedule and work from anywhere. 

Entrepreneurial Opportunities: Freight brokers/agents have the autonomy to make decisions, set goals, and shape their own career paths.

Cons

Intense Competition: To succeed, brokers need to stand out and consistently deliver exceptional service. The sheer number of brokers in the field can make it challenging to build a robust portfolio.

Regulatory Compliance: Brokering is subject to various federal and state regulations. While these rules protect you and your partners, remaining compliant can be complex and confusing.

Client Acquisition: Acquiring clients can take time and be pretty discouraging.

Market Fluctuations: The freight industry is extremely sensitive to economic shifts and seasonal demand changes. This can lead to periods of uncertainty and income fluctuations.

Career Growth and Opportunities

Like any sales job, your earnings potential is uncapped, and you don't have to spend years climbing the corporate ladder to make real money.

If you choose to grow, you can hire employees under you and make money off of their sales, too. Brokers can expand into new regions and markets and acquire large, enterprise-scale clients. 

A freight broker/agent can always transition into a less stressful role in logistics management, operations, or compliance. The skills learned are highly transferable to other supply chain positions.

How Cota Systems Can Help

At Cota Systems, we foster a community of trust and confidence all around. We work with small carriers and freight brokerage services, spending time on the vetting process to ensure users can enjoy the platform stress-free. By building a community based on workplace ethics, brokers can focus on doing their job and not worry about double-brokering or poaching.

Free Load Board

The same goes for our load board. Only trusted partners get access, and we vet carriers before they can even see the load board. 

Shippers and freight brokerage companies can post their dedicated, partial, or LTL loads, and our carrier partners get real-time updates when a load is posted along or near their saved lanes.

Protection from Double Brokering

Double brokering's impact can be devastating to those targeted, destroying relationships between cargo brokers and their customers. Our intense security process means double brokers can't even get through the door. We may be new, but as we grow, so does our capacity to perform thorough vetting and background checks.

Education and Resources

Our team is packed with industry experts, including past carriers and logistics team members, with a passion for making shipping easier for all parties.

We've created a number of guides and how-tos for drivers, shippers, and freight brokerage companies to help them navigate the crazy world of logistics.

Free Freight Quotes with FREIGHTPRO™ 

We offer guaranteed freight quotes for partial, LTL, and dedicated loads. That's right: we never re-rate. Our system matches drivers with empty or partially empty trucks with available freight along their route. This means they can efficiently deliver loads that would otherwise be run dedicated or using the old hub-and-spoke model. It also lets cargo brokers offer more competitive pricing and speedy service to their customers.

logistics brokers finding freight quotes on FREIGHTPRO™

Carrier Pro™

Our free dispatch software for trucking provides one-click billing and easy communication with drivers and shippers/receivers. This type of transparency benefits all parties. No more missing paperwork, no more slow faxes, and messy Excel spreadsheets. Carrier Pro™ is there for dispatchers and any freight brokerage business that needs to use its features.

Key Takeaways

You now know how to begin the exciting and lucrative journey of becoming a freight broker. We've covered what to expect, what steps to take to get started, and how to make the most money while you do it. As you take that first step toward your future, remember that Cota Systems is here to support you along the way. Check out our site to learn how we can make brokering freight more efficient.

Brian Smith

I joined Cota Systems to help U.S. truckers grow their businesses. I proudly served in the U.S. Navy, managed some of the largest brands on earth, and I'm excited to share what I've learned with you. Truckers are the backbone of our great nation and when you and your family are thriving, so is America! 🇺🇸

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