That value depends of whether you want to become a freight broker or a freight agent. The main difference between one and another is the following:
- A broker has filed for a FMCSA license and has a series of certificates that legally help him operate within the field.
- Freight agent works for a broker mostly because he has no legal cover – hasn’t filed for any certificates or license and needs the broker in order to operate.
Both work on a margin of percentages. They invoice their clients depending on the cost and value of the merchandise being shipped. The broker takes the full percentage while the agent need to pay a broker part of their percentage in order to operate.
FreightBrokerBootCamp is a fantastic website that works with real values and percentages normally employed in this business. They can help you out with negotiating tactics and strategies on who to properly charge for your work.
A freight agent, in general, has little to no start up cost, while a freight broker risks a great deal of his capital at first just to start operating.
Freight Agent Startup Expenses
- Phone service = $25-$50 per month
- Printer/Fax/Scanner combo = $100-$200 one time
- Load boards = $30-$150 monthly based upon how many load boards
- Office Supplies (misc) = $5-$20 monthly
- Desk/chair = $50-$200 one time
A total of more or less $500.
Freight Broker Start-up Expense
Broker authority = $300 one time
The FMCSA (The Federal Motor Carrier Safety Administration) requires, once you have your license, insurance and bond that you file for a port authority certificate. Paper work that will allow you to operate within the boundaries of the local port authority.
Bond/trust = $500-$6,000 annually depending upon credit and the bond amount.
The BMC is an updated liability passed on by Congress in 2015. It assures the shipper that his goods and merchandises are insured.
If ever a claim from a shipper proves that the broker or the carrier is a fault for damaged goods, shipping delays or lost of income this bond is used in order to recompense the aggrieved party. Congress has placed the starting point of this value at $75000.
This is a one-time value that all freight brokers have to deposit into a legally binding escrow account. Shippers, nor ports, will not work with a broker that lacks his bond.
There are a series of bond brokers that are willing to give you the value of the bond for a small price or percentage of your annual gross and sometimes a collateral. Each and everyone works on a different system. Each works with different figures and different stipulations.
Unlike the bond, which you only have to pay once in your lifetime – or if it’s ever used up – the bond broker’s fee is a value which you’ll have to pay once a year.
- Process agent (BOC 3) = $50-$150 one time
- Insurance = $0 to $500 monthly depending upon value/type of insurance
Under the ICC (Interstate Commerce Commission) termination Act, all brokers are required to register and file proof of financial responsibility.
There are, aside from the broker’s bond, 4 types of insurance you’ll need to take into account:
Contingent Broker Auto Liability:
Protection against third-party claims. A common problem in the industry, and one that’s more than likely to affect you, is that certain truckers falsify their driver’s certificate of insurance. If, or when that happens, this insurance has you covered.
Contingent Broker Cargo Liability:
Pays claims that the carrier will not pay.
General Liability and Property Insurance:
An all-encompassing insurance.
Insurance for on-the-job accident. This insurance not only covers you workers and agents but also third parties that work for you; in case one of the trucking companies suffers an accident, and does not have worker’s comp’. If said accident happened on one of your rides, then the claim will unfortunately fall on your shoulders.
Once more, FreightBrokerBootCamp has a list of insurance companies, with great premiums that are gold standards in the industry.
Freight Broker License = $750.
In order to operate as a freight broker in the USA you will need a legally approved license.
Apply online at the FMCSA’s website, pay the fee and receive an approval as well as a federal motor carrier number.
Mileage software and office equipment = $0 to $5,000 one time
- Telecommunications; Computers; Office equipment.
Total cost of starting out as a Freight Broker can range from $6000 to $10000.
The difference between getting your license and being agent, as you can clearly see, are vast. Investment wise they are two completely distinctive risks.
As an agent you don’t really have that much of an initial investment and almost zero to no overhead. A freight broker, meanwhile is looking at an initial investment in the thousands and a monthly overhead that is almost the same.
If you’re new to the industry or simply not that committed then your best bet is to start as a Freight Agent. Why? Well, like Dennis Brown’s of FreightBrokerBootCamp says – expert in the field:
“Because it limits your capital risk and allows you to earn while you learn and then decide if becoming a license freight broker is really for you?”
Still, given the recompense and pay in both cases (Freight Broker or Freight Agent) the start-up cost are almost inconsequential compared to what you are likely to make on your first year. Regardless of your financial situation, the freight brokerage business is a field rife for exploitation.
It offers an amazing opportunity to earn a great supplement to your finances – up to 6 figures – for a relative low cost and, best-of-all, right from your living room.
The benefits of being a Freight Broker abound (possibility of expansion, easy to relocate, international business model, recession proof, huge income potential, being part of a 400 billion dollar industry). It’s a simple but necessary job, one that’s liable to make all the difference, pay wise, at the end of the year.