Do I need a freight broker license?

Very green to the broker world. I am wondering if I need to get myself a freight broker license? I currently work a manufacturing company and over the past few years there has been a constant struggle with finding drivers for our loads. This is on both finished goods and raw materials. That being said, I have started to research starting up a trucking business to run loads for my current employer. I have friends/previous employees who are O/O who currently use broker boards to acquire loads. This lead me to thinking that I could start an LLC and sub contracted these drivers. Question is would I need the freight broker license, USDOT number, application fee, freight broker bond, ect. I would not be posting these loads on a board but would rather be "partnering" up with the O/O who already have their USDOT number, licenses, insurance, ect. Plan is to set my LLC up as the preferred carrier and I would have the O/O sign the sub contractors agreement. I have not been able to find specific examples of this on any of these forums so any input is appreciated. Also if anyone has any legal information regarding brokers or what actually determines if a company is a broker.
 

Agent_Z

Well-Known Member
You need to get bonded, your brokerauthority (MC#), etc. Your type of authority will reflect the cargo types that you're able to broker. Then there's cargo insurance, which you should have to cover your butt or supplement a carrier's insurance in case they don't have the amount of coverage required by the company that you work for. --- It's a pretty large investment that requires quite a bit of research for it to be done right.
 
Would I need to be bonded, get my MC#, authority, insurance ect if my O/O already have all these? I would just have them sign a sub contractors agreement and I would supply the load through my company.
 

Agent_Z

Well-Known Member
You'll need a $75k surety bond, MC# / authority, liability insurance, period. Brokers are held to the same requirements and standards that carriers are, there are just some differences in the authority itself that the FMSCA issues: Broker Registration.

It's not something for any company to dive into without some forethought, especially considering that it sounds like you're just having trouble finding carriers to haul what would and should be contract freight. The only positive that I can see from this, and I'll let someone else chime in if they don't agree, is that you're not going to have to negotiate for large profits since you are supplying the load through your company. --- Brokers usually if not always take a cut off of the top, and that cut is usually as much as they can get.

The only benefit I could see you guys really having is getting access to the pool of trucks that use load boards like DAT and Truckstop. But, will the insurance and operating costs of running an in-house brokerage really be worth it for you in the long run when the company could've just invested more time and found some carriers to haul dedicated freight? --- I don't know just how hard of a time you're having.

Maybe one of the guys here can tell you some resources to list freight contracts for bidding. I'm not sure where or how you're allowing your contracts be bid on. There are resources out there for you. I just don't see an in-house brokerage being beneficial at all. It sounds like you need a more reliable and active platform to list your contracts on for better exposure. You want a dedicated, reliable carrier. Not this load-to-load, day-to-day crap that brokers offer. Brokers are always a last resort for a lot of smaller companies, and their services chew into profit quite fast.

Insurance is expensive. Your company would probably better spend the money wasted on insurance to pay an employee or two to manage in-house freight contracts rather than having to have multiple people sitting in chairs answering phone calls all day. A brokerage requires an office staff of multiple people to run smoothly, and it's a royal pain in the ass.

... I'm losing my train of thought.

There's also a hefty bank roll required to get started, which deters a lot of small folks from starting their own brokerage. Managing pay-outs can be a hassle. But we're talking in-house, so it may not be an issue for you in this case if you're just brokering loads from your own business...
 
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Agent_Z

Well-Known Member
Questions:

How many loads per week does your business need to move?
If this is less than 100, then I'd say the brokerage idea is definitely a no.

Do you plan on brokering loads for other shippers and expand the business to increase the brokerage's profits after your brokerage is established?
If the answer to this is yes, then I'd say that you should continue doing research into the idea. Brokering loads for other shippers, and also being and established shipper that knows the game, could be a selling point. And brokering loads for other shippers could offset the profit loss your business would most likely incur from being forced to take on the operating of expenses of a brokerage.
 
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I would not be doing 100 loads per week getting starting. I was planning to start small and move the loads with one of the vendors to test the waters. This week we will be bringing in approximalty 10 loads of the product. Once operations is fully functional we should be bringing in about 20 loads of this one item. This is for one of the packaging materials. I do have many other raw materials that I could potentially use to acquire loads. The company I work for also has a sister company that also has shipping needs. We do have a relationship with a local trucking business but they are already at capacity which has caused us to use brokers. I know there is a potential to make a profit but I am trying to determine how? I do have a few investors who are willing to invest some money into a truck/trailer to start but I would rather start with an O/O because of the risk factor being lower.
 

Agent_Z

Well-Known Member
What wound up happening at the last branch office I worked at was that the office hired contracted sales agents. Typically when a company hires contractors in a situation like that is because it's more profitable for them. If the volume of sales had been higher they probably would have gone to a business model that paid employees hourly with a small 3-5% commission per agent per sale. That office was a revolving door of contractors, and despite having 1000 loads on the board every day some weeks split between 10-13 agents on any given day, the freight was cheap, cheap, cheap. Making a sale was tougher than rawhide.

I think a lot of people hear the word 'brokerage' and see dollar signs without doing research into what it takes to actually turn a profit. If the loads you are trying to sell are also being offered through 5 or 10 other brokerages, the competition gets steep and you'll find a lot of wasted time just to make a sale or two. If the shippers your dealing with are only offering these loads to you, you'll have a much better chance of success.

There's a game truckers play where they call every broker with X load and haggle to see if they can figure out what the real price is. --- They want to make as much money as possible. (Duh?) --- The whole frickin' sales end of it is basically a GAME... If you're the only one with the load, the odds are in your favor, and you have the house advantage and better odds at winning the game and taking home more money for yourself.

... I hope you're good at negotiating.

I was a sales agent, not a manager, accountant, or business owner. My knowledge of the start-up costs involved were all done through research and experience working at the offices that I was at, plus a few mistakes by the IT department when they left the manager logged into my computer a time or two. (I got to see quarterly and yearly sales for my office, and all of the awesome little pie charts and graphs that came with it. Teeheeheehee...)

If you can afford the insurance and bond, and you're willing to bust your butt and do all of the paperwork, answering phones, etc, then go for it. If you're only doing 10-20 loads a week, you better do research on the lanes that those loads are running in. If the lanes that freight is moving in is static, and these loads are going to the same places every week, you'll have a better chance of success as it'll be easier to build relationships with carriers that run the lanes your shipping in on a regular basis. If those loads all ship out of the same location every week, but shotgun all over the place ... Well, you're going to have a rough start. The best freight is the freight that comes from the same point A to the same point B every week or two.

These crazies here on the forum can tell you all about lane rates and how they fluctuate.

--- Once again I'm losing my train of thought and I don't want to start rambling.
 
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mndriver

curmudgeon extraordinare
Supporter
I currently work a manufacturing company and over the past few years there has been a constant struggle with finding drivers for our loads
If your company is the manufacturer and owner of the product and being the direct shipper, you do not need broker authority if you are working for your employer.


IF you leave your employer and arrange transportation for compensation THAT is where you will need broker authority.

You better off learning how to pay a fair rate that will attract a carrier that WANTS to haul contract freight with your employer instead of putting a ton of energy into a trapped market brokerage.


Here's a book that could help you there.


Home Page
 

dave350

Well-Known Member
You better off learning how to pay a fair rate that will attract a carrier that WANTS to haul contract freight with your employer
I believe this is the heart of the problem.
When the price is right the trucks will come. To put it simply.

If your struggling to find carriers at the rates as it is it will be a much bigger challenge finding carriers after you take a cut of the pie.
 
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Agent_Z

Well-Known Member
If your company is the manufacturer and owner of the product and being the direct shipper, you do not need broker authority if you are working for your employer.


IF you leave your employer and arrange transportation for compensation THAT is where you will need broker authority.

Home Page
Or, if your employer wants to move loads for other companies. A lot of trucking companies and shippers have their own in-house brokerages.

Going back to my statement about bids and better exposure. It sounds like you're trying to land a profit on loads that already aren't moving, either due to bad pricing, or because the contracts aren't getting the exposure they need. It still sounds to me like the company you work for needs to work on advertising and exposure rather than relying on a broker to do this for them. A carrier can't bid on a contract if they don't know where to find it.

Advertising is a lot cheaper than starting up a brokerage from scratch.
 
I am going to place a call with the FMCS/DOT tom and ask some them questions. I may also reach out to a lawyer to get some legal advice. Would be nice to find a firm who specializes in the freight industry.
 

Agent_Z

Well-Known Member
I'll beat MN to it. SCORE | Free Small Business Advice

No one can estimate your initial profits with a brokerage, unless you really do have guaranteed loads from the company that you work at, and can somehow figure out an expected profit margin per load with them taking lane rate averages into consideration. Offer the trucks rates that are too low, the freight won't move. Else you're going to wind up being that poor sucker running a brokerage like the last office I was at with 1000 loads on the board that are too cheap to sell, wasting every business day whipping contractors like horses to track down that one desperate driver that just wants to get home. --- Then we get to ye olde backhaul fallacy. But I'll save that spiel for another day.

You're going to spend countless hours on the phone cold calling companies to try and establish a book of business. The chances of you ever finding a company that is willing to list their loads with you and you exclusively are slim. You're most likely going to always be competing with 10 other brokerages on loads. And if you can't move loads, it doesn't hurt a shipper to drop you and find someone else that can move them. Most shippers shotgun their loads to multiple brokerages for better exposure, which gets freight moved, but makes it harder to sell freight by increasing your chances of success.

You're better off trying to find that one shipper that only has a few loads a week with a good profit margin for both you and the carrier, and then making 300-400 phone calls a day, if you have to, to try and sell them. There's no point in having 1000 loads to try and move if you can only push 20, 30, or even 50 of those a day and making $50-$100 gross on each load because the shippers are offering them at dogsh*t prices. It's a waste of time. I've been there, done that.

I can already tell you're seeing dollar signs that will vanish quickly like a fart in the breeze when all of your expenses are paid every month... Start factoring in hourly pay or commission, or a mixture of both for your employees, office staff, etc. . .

A brokerage can be a good business model to make a nice living, but it's not a get rich quick scheme.
 
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Getestarted

Active Member
As an independent transport broker it all depends on how much the company is willing to pay if, it pays well you can find carrier's or driver's who has there own authorities who will do it but if the pay out is low you are going to be sitting on those loads for a long time mite well get yourself a retirement package
 

majorpull

New Member
i think it is required for freight transportation. Many Truck truck transport companies register their companies required in freight transportation. Many logistic companies can register their companies in majorpull websites to get freight transportation's clients.
 
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