In the past, a great way to break into a home based business was in freight brokering. I wrote this article to educate people looking at freight brokering as a potential business. Freight brokering has attracted people from all walks of life to simply dive into the home business arena.
I wasn’t about to wait another year, be on call 24/7, not be able to take any time off and see my profit margins dwindle even more, only to discover I should have gotten out of the business a year or two earlier
With 20 yrs in sales and marketing behind me, freight brokering was my first, real home based business. The first two years were profitable posting 2 million in gross sales. I got out of the freight brokering business because the industry as a whole has seen dramatic changes and the smaller companies are always the first to get eliminated, I just wasn’t going to wait for that t happen.
Too Much Fraud: Getting a freight broker license is nothing more than getting an MC# (Motor Carrier) or your authority as it’s called. Getting your authority is an easy process and one that lends itself to a criminal element many times.The problem has skyrocketed in light of the bad economy.
When a freight broker “authorizes” a trucking company to move a load for them, there is a contract created through something called a “load confirmation sheet”. It’s understood that the trucker will haul the load from the shipper to the final point on “their” truck.
The trucking company quite often will put the cargo on another trucking company’s truck, therefore “double brokering” the load. The “shady” trucking company gets paid by my freight brokering company, the cargo is delivered on time and all is well, right? Not exactly.
The “shady” trucking company takes the $4,000 pay from my freight brokering company and leaves town. The carrier that actually hauled your load (the 2nd one you knew nothing about), doesn’t get paid.
Filing a claim against your company is their next step and also against your customer for the payment they never received. (This is legal by the way) It sure makes it hard to hold onto customers when they’re being sued because of something your company did…even if you didn’t know about it.
Often times the “shady” trucker or broker gets another freight broker license (MC#) across state lines and begins the process again. The Federal Government isn’t interested in pursuing these guys because of lack of resources.
At least that’s what I was told by an FBI agent investigating a claim for me.
A Lot of Cold Calling– This is where we separate the men from the boys. Your survival depends on acquiring customers, right? And how do suppose you get them? COLD CALLING and lots of it. Even though most are lured by the ability to work at home, few are prepared for what is to come.
Many companies advertise and sell so called “qualified leads.” There is no such thing folks. Creating your own leads is the only realistic way to be successful. If anyone tells you differently, they simply haven’t been in that position before and are probably trying to sell you something.
In 30 days I replaced my corporate income by making 40-50 telephone book cold calls talking to total strangers each and every day. Smiling and dialing as it’s known. If somebody tells you they don’t mind cold calling, they are simply not telling the truth.
Someone like myself doesn’t like it and I’ve got years and years of experience cold calling. If rejection is a problem for you, this is not for you. If being on the telephone 99% of your day, then you need to find another business to be in.
Other Expenses– Many shippers and customers will now only work with a broker if that broker has contingent cargo insurance, because of the increase in fraud and claims filings.
Most motor carriers do carry cargo insurance ($100,000 is common), but more and more customers are requiring backup, especially when working with a freight brokering company.
The customer simply wants another layer of protection in light of all the claims and fraud that exists today. This is in addition to the other expenses for the freight broker license, surety bond expenses, etc
Today the freight broker license or MC# is the least of the start up costs, still hovering at around $600.The final costs for your freight brokering business can be quite extensive, including state and federal requirements, insurances, bonds, and not counting office expenses, employees, utilities, multiple telephone setups, long distance, high speed internet. The bottom line for start up alone can get quite large in today’s environment.
Motor Carrier Base Smaller- The small one man freight broker many times uses more of the smaller carriers to haul their freight and establish lanes with a customer. Those “mom and pop” truckers become the smaller freight broker’s best friend many times.
They simply pay more attention to details than the larger publicly owned “corporate carriers” normally do, generally giving you more control over the process.
In this bad economy, many of the mom and pop truckers just couldn’t stay afloat and went out of business. These smaller truckers may have had 10-25 trucks they owned and operated.
Operating at a loss for long periods of time like the big boys is simply impossible for these guys. Hundreds of these companies are no longer in business.
Simply put, you will have more difficulty moving your customer’s cargo. The larger carriers and brokers can provide more equipment availability now so the customer will give up some service to get cheaper rates, which they get from the giant carriers and brokers.
Eventually it’s just something out of your control, that is controlling your freight brokering business.
3 PL’s- Because of the worst economy since the “Great Depression”, growing in the industry is the Third Party Logistics company. The 3 PL is better known as the one stop shop for a customer or manufacturer today.
A customer’s need for supply chain management, re-packaging, warehousing, and trucking can all be handled by the 3PL. This allows a company to lay off employees to save money also and just integrates their system into the customer’s system , saving them thousands of dollars and removing operational problems as well.
A home based freight broker is ill equipped to compete at that level plain and simple. Most times the 3PL moves the cargo much cheaper given the volume levels they can operate at, making the home based freight broker darn near extinct in the near future.
Even with all the hassles of involved, the freight brokerage business can still be a profitable one.
But with all the additional expenses today, ie, obtaining a motor carrier number (MC#), showing evidence of a $10,000 surety bond or trust fund, and obtaining a BOC-3 and the UCR, not to mention the tiny profit margins in today’s freight environment, freight brokering just doesn’t have the attraction it once had as a viable and sustainable home based business.