VIDEO TRANSCRIPT:
So, you’ve been doing your research on freight brokerage and you’ve decided :
“This is something that really matches up well with my skill set. This is something I can see myself doing and enjoying! I’m really thinking about going into this and giving it everything I’ve got.”
And, usually, the very next question that we have is: “how much is it going to cost me?” We always want to know how much it’s going to cost me and what we’re really asking is “what is the investment.”
So the real question is, “what investment are you going to have to make to get a freight broker business started?
I say investment because you are investing money into your freight broker business in order of course to produce a return on your investment.
So, we’re going to talk about that today. We’re going to show you exactly what it’s going to cost you to start a freight broker business from scratch and I’m also going to show you are required that you must have as a freight broker and what those prices are. We’ll show you some things that are optional. I’m also going to show you some things that we didn’t have in place when we started with but as we’ve progressed things have changed and we made upgrades to our business.
First, we’re going to talk about some Administrative Costs. We’re going to take a look at how much those things costs and what they are. Number 1, we know that we have to set up a business.
SET UP AN LLC
In order for us to be able to do business with our customers, we need to set up a business entity, set up an LLC, sole-proprietorship. We use an LLC and it’s going to cost you between $300-$500, that’s a one-time payment. With us, it costs us $400. So, right out of the gate you’re looking at $300-$500 to get started with your LLC.
MOTOR CARRIER AUTHORITY
Next, after you set up, you need to get your Motor Carrier Authority. A Motor Carrier Authority allows for you to have the right or the authority to broker freight. There is one type of authority that is a trucker authority there is a different type of authority that is a broker and that’s called a property broker authority.
That will cost you a $300 one time payment.
SURETY BOND
In order for your Motor Carrier Authority to go active, you have to have what’s called a Surety Bond. This is a bond that all freight brokers have to have. Now, I’ve seen this bond anywhere from $1500-$3000 when I first got started and now I’ve seen those numbers cut back to about $900 to $2250 is what I’m seeing my students get now.
I have a rate of $1500. And I’m looking to upgrade that bond this year probably with the TIA. And, you can get a better bond with a better price. So, it’s not just about cost, we want to make sure you have a solid, reputable bond. But it should be around $900 – $2000 depending on your credit. If you have great credit, your price should be closer to the $900 range. If your credit is not so good it’s going to be higher.
When I first started, my rate was $3000 and I had excellent credit but I didn’t know to negotiate. So I just took the price and that’s the price they gave me.
So, you want to look for $900 to $2250.
UNIFIED CARRIER REGISTRATION
Ok, next up you’ll need the UCR (Unified Carrier Registration), all freight brokers and freight carriers have to register with the Unified Carrier Registration service every single year. That registration is going to cost you $60-$80 annually.
It’s an annual charge you can look for every year that you have to pay, but it’s only about $60. Depending on where you are and what state you’re in.
Now that we’ve taken a look at those administrative costs, now let’s switch gears and look at Hardware Costs.
(When I say Hardware, I’m saying Computer).
COMPUTER
My computer is a Dell XPS/i5/8GB, it’s more than sufficient for me, it’s not an expensive computer. If you have something with an i5 processor, 8 GB hardware you’ll be just fine.
Always remember to do backups. If you don’t do backups like I did, you’ll lose everything and didnt’ have a backup. So I lost a lot of my information.
Make sure you’re doing backups, but this is a great place to start.
Now, I’m not saying you have to go out and get a Dell. Whatever type of computer that satisfies you, then go out and get that computer. If it has i5 with 8 GB that’s probably enough to get started. You can probably get away with less than that.
MONITORS
Ok, next up, I use two monitors with my setup. Of course they are Dell 22” monitors and they are called P2214H. They are about $150 a piece.
Now, you’re also going to need a printer. You’ll need a solid printer because there is a lot of printing that you’ll have to do when you are moving loads. You’re moving loads and having to get out freight confirmations and rate quotes and get all of your paperwork over to your freight factoring company, if you have to use a factoring company or getting your invoices out to your customers.
PRINTER
I’ve found the Brothers MFC 9130-CW Color Printer/Scanner/Fax combination has been an excellent choice and I cannot say how happy I am with that printer.
Ok, now that we’ve taken a look at the hardware costs let’s take a look at some software costs and see what it’s going to cost to manage our business from a software perspective.
TRANSPORTATION MANAGEMENT SYSTEM
We’re all going to need a Transportation Management System. Some people say they don’t need a TMS system, or I can get away with writing it down on notes or what have you but I disagree with that way of approaching it. I think you should definitely have a TMS system. It keeps you organized, it keeps all of your loads in one place and you have to provide information to send a rate quote, send a rate confirmation, you can do that at the click of a button.
So. I’ve really enjoyed the TMS system. There is a big difference between TMS systems, you’re going to pay anywhere from $50 to $100. I’ve seen some systems cost up to $700. So. it just depends on what type of system you’re getting.
I very much think you should start out with a very basic system. There is one called Load Pilot, it’s going to cost you about $50 per month. But you should be between $50 and $100 per month what you start out with on your TMS.
My TMS currently costs about $225 per month. I’m using a different type system. My system is called eFreight Solutions and I’ve been using that system for about two and a half years. But the startup system is more than enough to get started with.
I don’t think you should go out and get very expensive systems to get started because, it’s not about the system it’s about moving freight. Of course, when it’s time to upgrade the system you can but start out with an affordable system—$50 to $100 per month.
LOADBOARD
Ok, next up is the Load Board, you’re going to need a Load Board if you’re going to be moving freight and start giving prices to shippers. You’re going to need a start. A Load Board is going to get your loads priced.
You can use TruckStop or DAT, they are the largest load boards in our industry. I personally started off with TruckStop and that LoadBoard cost me $120 per month with that Rate Mate Tool. To me, it’s very necessary to get the rate mate tool. It’s going to allow me to see the rates are in certain lanes. So, it will give you a starting place when it comes down to developing or creating your rate that you’re going to take to your shipper.
A Load Board is going to go from $50 to $500.
ACCOUNTING TOOLS
An Accounting Tool, this is definitely a need. You are going to need a way of accounting for money that comes into and goes out of your business. I think Quickbooks is a great, great accounting tool. I’ve been using it for about 4 years. There is definitely a learning curve. You’re going to want to go in and learn how to do simple tasks like recons. But, it’s a very good system it will definitely keep your organized when it comes down to your finances.
That’s going to cost you about $40 per month.
Let’s look at some things that you’ll need as far as communication is concerned.
WEBSITE
First off, we have a website.
And, yes, you hear some people say that the website is one of those items that is optional, you don’t have to have a website to start but I don’t look at that the same.
It’s a very good idea to start with a website because you’re setting up your company like your company is supposed to be setup. And, when you look at there and you look at different companies, all legitamite companies or at least most of them have a website. Especially when it comes to the freight broker world.
You want to have a website, you want to have a presence.
And, I don’t mean go out and spend a lot of money on a website. I mean a website is going to establish your presence, what you do and your contact information. You don’t need a very elaborate website to get started but a very basic to give you a presence so that when someone goes to put your website in and what comes up is a representation of you.
It’s going to cost you between $250 to $500.
Of course, websites can cost you thousands and thousands of dollars but we’re talking a basic website that just gives you a presence between $250 to $500.
HIGH SPEED INTERNET
High-speed internet is going to cost you about $100. It’s very important, you don’t want a system that is delaying or slow because when you’re looking for rates, you need that information to come up fast so you can get it back to your customer in a timely manner.
Now, I’m not saying you’re in a race but you want to do things in a timely manner and high-speed internet is a key piece to your business. You definitely want some good solid internet so that you can do your job as a freight broker.
VoIP/Phone Line
Ok, next up we have the telephone system. I use a system called RingCentral and it is actually Voice-over-IP. Now, I could just use my cell phone but I like the idea of having a landline, so to speak. It gives me a second option for my phone and I like having that second option. Is it required? No.
You could just use your cell phone for now and then once you start making some money you can choose to put in a Voice-over-IP line or a landline if that’s what you want to do.
It does cost about $100.
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Optional:
CREDIT BUILDER
There is something called a Credit Builder. When you first come into the business as a new freight broker you have to build your credit. It does not build itself.
There is a company called Transcredit. You can go in and start building your credit profile using Transcredit. They will help you to establish your business credit. It costs me when I first started $250 annually. And, it was very good for my business. It helped me to establish credit and get a credit established much quicker.
It’s not something that you have to have, but you may want to give it some thought considering the benefit it can bring to your business.
CONTINGENT CARGO INSURANCE
Contingent Cargo Insurance. You often hear a lot about Contingent Cargo Insurance, is it really required or not? FMCSA does not require you to have Contingent Cargo Insurance as a broker but I highly suggest you take a look at it and consider getting Contingent Cargo Insurance because most shippers are going to require that you have Contingent Cargo Insurance.
When I first started my business, my Contingent Cargo Insurance was about $130 per month for a basic plan. I would suggest you get a basic plan when you get started. Talk with your insurance provider, tell them about your business so they can guide you toward the right insurance set up for your business. It will usually cost between $100 and $400.
Again, I started out at about $130. Now, my insurance is about $400 a month. But, it’s because I’m working with different customers who require different endorsements on my insurance. So, as you get a bigger customer base, some customers who are bigger customers are going to require that you have additional insurance and if you want to work with them, you will have to increase your insurance to get the necessary endorsements in order to do business with them. But, usually between $100 and $400.
For the first year and a half to two years, my business was doing $130 per month in Contingent Cargo Insurance.
As you progress, your costs are going to increase you’re going to get different TMS systems as you progress, you want to do things like get an additional add-on to your load board and get different things you are able to do and see at different prices.
FACTORING
Next, a Factoring Company. This is optional, you don’t have to have a factoring company. A Factoring Company is going to allow you to basically have all of your receivables paid for without you having to worry about paying for them out of your pocket.
A Factoring Company comes in and does that and you are going to pay a fee in order for them to do that. That fee is usually about 5 percent on every single invoice.
That’s going to be a little costly when you first get started but it will give you the comfort of knowing that you can move loads without having to worry about how you’re going to pay them.
It is 5 percent per invoice and it is optional.
You can factor your own invoices through your own money, if you have that type of money lying around or you can use a factoring company like 95% of the people do, like me.
When I got started, I used a factoring company.
FREIGHT BROKER TRAINING
Next, we’re going to talk about Freight Broker Training program. Freight Broker Training is optional, you do not have to go through a program to start a freight broker business. FMCSA doesn’t say that you have to have freight broker training.
It says you have to have a Motor Carrier Authority and a Surety Bond to get started. But at the same time, the freight broker training is going to give you the “know how.” Right now, you don’t know how to be a freight broker and a trainer is going to give you that know how, the knowledge that you need to be effective as a freight broker. To be able to make money as a freight broker.
A training is definitely something that will be a very big benefit to you!
Freight Broker Training usually starts out about $100 and go all the way up to $5,000. When you look at a training, it’s not based on price. Just because a training costs $4,000 doesn’t mean that it is better than the other trainings on the market.
So, when you’re looking at a training, find someone you can trust and you can identify with. Then, when you see that person doing what you’re interested in doing, you’ll have the confidence in the person to teach you how to do it. But if the trainer isn’t doing the business then it may be hard for you to see how they are going to teach you how to build something that they haven’t built themselves.
So, Freight Broker Training is between $100 and $5,000. It is again, optional.
Now, let’s look at the total costs to see what it’s going to cost to get started:
Start-up Costs (Required):
- Website $500
- LLC Costs $400
- MC Authority $300
- Surety Bond $2000
- UCR $60-80
- Computer $1000
- Printer $350
- TMS 1st Month $50
- LB 1st Month $120
- Total Costs $4780 (If surety bond is paid in full)
Monthly:
- TMS $50
- LoadBoard $120
- Quickbooks $40
- Internet $100
- Telephone $100
- Bond x12 $166
- CCI x12 $130
- Total Monthly Costs $706
Of course, if you already have a computer, if you already have a printer that’s $1350 that comes off of the $4780.
Some of the items you may already have when it comes to your computer, don’t go out and buy a new computer if you already have a computer.
So, less than $4000 to start your own business. Plus, less than $700 per month of operational costs. So, all you have to do is make $1,000 per month and you’re winning!
Now, it will take some time to get to that point, but you’re not going to have to eat a lot of costs up front and then work a long time to make that money back.
It’s a minimal investment up front and when you start working, you don’t have to make loads and loads of money until you break even.
It’s a very good business model in my opinion. Because of the fact that it does not cost a whole lot at all to get started, especially when you compare it to other businesses.
Option Costs:
Credit Builder $250
CCI $1200-$1800
List Purchase $500
You can purchase a list, but you don’t need to. I purchased a list when I first got started. It’s basically a lead sheet so you can call shippers.
But you can find those shippers on Google without you having to pay that amount.
Now, the $1200-$1800 Contingent Cargo Insurance is included in the monthly costs.
As you can see, it doesn’t cost a lot to get started in this business!
Building a freight broker business is a time commitment, you’ll have to dedicate and commit yourself to building and starting out small and grow it as big as you want to grow it!
