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How Much Does it Cost to Become a Freight Broker?

11 Min Read

cost to start a freight brokerage
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A freight broker is just a job role within the transportation industry. However, it is highly in demand and offers exciting opportunities in terms of money.

If you are someone who enjoys autonomy and flexibility in your career, becoming a freight broker is an attractive career.

But, there is a cost to fulfill this career dream. The costs aren’t that high, however, having an understanding of how much does it cost to become a freight broker can help you plan and budget efficiently.

Let’s dive right into this blog and uncover the potential costs.

Let’s get started.

Average costs for starting a freight broker business

Before we dive into details, check out this freight brokerage startup cost checklist. It will help you plan your startup budget and know how much financing you need to get started.

Item Average Cost
One-time Expenses
Initial bond payment $750 to $9,000
Brokerage authority (Application fees) $300-$600
Freight Broker Training $300 to $3,000
Business registration $150-$300
Business licenses $0-$100
Legal Expenses $1,000 to $3,000
Lease deposits $1,000-$2,500
Leasehold Improvements $1,000-$5,000
Office Equipment $300 to $2,000
Transportation Management System (TMS) Software $1,500 to $5,000
Website $300-$2,000
Marketing and Branding $1,000 to $5,000
Insurance $1,200 to $4,000
Contingency Fund $3,000 to $5,000
Total One-Time Expenses $11,800 to $46,500
Recurring Expenses (Per Month)
Lease $500 to $2,500
Utilities and Office Maintenance $100 to $500
Payroll $2,000 to $6,000
Transportation Management System (TMS) Software $100 to $1,000
Marketing and Advertising $500 to $5,000
Load boards $100 to $250
Professional Services $200 to $1,000
Total Recurring Expenses $3,500 to $16,250
Total $15,300- $62,500

Using this freight broker startup cost checklist, you can plan your startup budget and get an idea of how much financing you will need.

How to calculate the cost of starting a freight brokerage

You now have a list of potential expenses and a rough estimate of your startup costs. Let’s estimate your actual startup costs using these two proven methods.

The first, traditional method involves using a startup costs calculator to estimate the startup costs. However, the second, the Upmetrics method, is an innovative method that uses the Upmetrics financial forecasting tool.

Let’s understand both methods so that you can choose one that suits your requirements the best.

The traditional method—startup costs calculator

The calculator includes categories such as pre-trading, website setup, marketing, operations, and people. You can enter the estimated costs in each field and let the calculator estimate the costs for you.

Remember that many startup costs fall under recurring expenses, so cover those costs monthly, quarterly, or annually.

Calculate your startup costs using this calculator.

The Upmetrics method—financial forecasting tool

It is an intuitive and efficient method of calculating startup costs. Using Upmetrics will not just help you estimate startup costs but also help with financial forecasting.

All you need to do is enter your sales, costs, and other financial assumptions and let the tool calculate monthly/quarterly/ and yearly projections for you.

Pro-tip

Check out the financial forecasting tool for accurate financial forecasting. Once you have an accurate estimate of startup costs, you can easily identify funding requirements for your laundromat.

Financial Planning to calculate startup costs

Calculate Your Startup Costs

Raising funds for a new startup is certainly a nerve-wracking and time-consuming process, but having a solid laundromat business plan can make things a lot easier.

Let’s move ahead and discuss the factors that affect your laundromat startup costs.

Raising funds for a new startup is nerve-wracking and time-consuming, but having a solid freight brokerage business plan can make things a lot easier.

Let’s move ahead and discuss the factors that affect your freight brokerage startup costs.

Factors that affect freight broker startup costs

There are very few costs associated with becoming a licensed freight broker. Let’s discuss the factors influencing those costs.

1. Freight Broker Authority and Registration

Registering your business as a freight brokerage is not mandatory. However, it’s highly recommended.

Moreover, the associated costs with business registration are quite low. Depending on the state regulations and the type of business entity, the overall registration would cost you between $150 and $350.

Regarding a license, freight brokers must register with the Federal Motor Carrier Safety Administration (FMCSA) to get their USDOT number and a broker authority.

Now, there are two types of brokerage authority—broker of property and broker of household goods. You can apply for both by paying a non-refundable application fee of $300 each.

Getting your broker authority is the equivalent of getting a freight broker license and it is mandatory to have one.

Additionally, registration with the Department of Motor Vehicles is essential, if freight brokers are planning to run their own fleets. The costs of licensing each commercial vehicle would vary significantly between $11 and $10,000 depending on state regulations.

Lastly, consider getting zoning permits and a general business license for your freight broker business. The costs for these won’t be higher than $100.

2. Freight Broker Bond (Surety Bond)

Freight brokers have to secure surety bonds and file their proofs to complete their licensing process through FMCSA. This is again a mandatory aspect of the Freight Brokers Act to become a freight broker.

The freight broker bond is an insurance coverage, however, it does not work like our typical insurance. The coverage and protection in this case are extended to vendors and customers and not your brokerage firm.

It’s like a security fund that will be used to pay for the claims made by vendors. Such claims could be regarding shipping delays, cargo damage, breach of contract, and late payments.

Now, the amount for a freight broker surety bond is $75,000 which is quite huge for a new entrepreneur. However, you can secure such freight broker bonds by paying a small negligent percentage of the amount, i.e. 1-5% annually.

The percentage rates vary for different freight brokers and are generally determined based on their credit history and business experience. Brokers with poor credit scores may have to pay up to 12% to secure their broker bonds.

To give you an approximate figure, the annual freight broker bond cost would vary between $750 and $9,000.

3. Office and Equipment

Getting an office space is not mandatory for setting up your freight brokerage business. However, if you are getting a space, consider the lease and deposit costs in your start-up cost calculations.

A 500 s. ft. space is sufficient when you are starting with a small team. The lease expenses for such size would vary significantly depending on the location you choose. However, it’s easy to find places that cost you between $500-$2,500 for a monthly lease.

With an office space, comes along expense for security deposits, remodeling, and furnishing. The basics of these would cost you between $1,000-$5,000.

Additionally, also budget for essential office equipment like computers, a fax machine, and a printer.

The costs for these are highly subjective depending on the size, concept, and scale of your freight broker business. But a small-sized firm can budget spending between $300-$2,000 for such equipment.

Don’t spend extensively on office space and decor, unless, you are planning a large venture that would be frequented with employees and customers.

4. Insurance

While insurance is not quintessential, it is definitely a good practice to have a few essential ones for your freight broker venture.

Now, if there’s one insurance, you undoubtedly must get, it is general liability insurance. The coverage within this insurance will offer you general protection against damages, accidents, and other potential claims.

Additionally, consider getting cargo insurance and property insurance if necessary. And if you are planning to employ people, getting a worker’s compensation would be mandatory.

The cost of premiums for a broker would vary annually between $1,200 and $4,000 and sometimes much more.

Becoming a freight broker comes with many associated risks. Having a well-planned coverage can help you meet contingencies efficiently.

5. Freight Broker Training Course

Getting certified or taking courses and education is again not mandatory. However, the knowledge gained from such courses will take you a long way in setting up a successful freight broker business.

Now, if you are someone with no prior expertise in brokerage, getting a course will help you gather a detailed and more nuanced understanding of the freight industry and equip you with skills essential to manage freight business.

The freight broker training costs vary depending on the mode and source of education. Getting an online certification might come at a cheaper price than attending a college or University

However, to give you a rough overview, budgeting anywhere from $300-$3,000 would be enough.

6. Marketing and Lead Generation

Marketing is crucial for individual freight brokers and related businesses. Now, spending on marketing may seem inessential, especially if you are struggling with the initial costs.

However, it’s the only business activity that will bring you customers and eventually sales.

Now, there are a variety of marketing strategies you can adapt, online as well as offline.

This would include creating paid ads, growing your social media presence, launching your website, offering print ads, and using billboards to advertise your business.

The overall costs for these vary extensively depending mainly on your budget. However, initial marketing costs can be budgeted for as low as $500.

Keeping a range of $1,000-$5,000 will allow you to experiment with different marketing techniques and drive desirable results.

In the freight and transportation industry, there are load boards that can help you generate leads and connect with interested stakeholders. The price of becoming a part of freight broker load boards comes at a negligent price of $100-$250 every month.

7. Freight Broker Software

Having a centralized system or software in place can help you efficiently manage the operations, leads, jobs, and contracts.

For freight brokers, a robust transportation management system would be enough. It will take care of accounting, deals, and freights all through its extensive features.

The costs for the annual subscription of this will cost you not more than $1,200 annually.

Now, if you are planning large-scale operations heading multiple projects at a time, consider getting a CRM as well. The costs for this would again vary between $2,000 and $10,000 annually depending on the features and the system.

And those are pretty much the only software investments you need to make.

8. Employee Costs

Consider adding employee costs to your startup budget if you are planning to hire people for different positions.

This would include accounting for hiring, training, and payroll expenses for the first couple of months.

However, even if you are not planning to hire people, you may avail a couple of professional services to help you with business setup and operations.

For instance,

  • Legal Help: Helps mainly with acquiring a freight broker license, business setup, and ensuring legal compliance. The costs can soar up to $5,000 at a time.
  • Accounting services: Helps with taxation, bookkeeping, and financial planning. The costs for these vary between $150-$300 monthly.
  • Consulting services: Helps in business growth and strategies. The professionals charge between $1,000-$5,000 for a session.

Identify the areas where you can acquire help and consider their costs while budgeting for your business.

Now, that you know the mandatory, essentials, and exceptions in terms of costs, let’s see if there is a way to bring down your overall costs.

Tips for reducing freight broker startup costs

Wondering how you can reduce your startup costs for becoming a freight broker? Check these few practical tips.

1. Start with a remote work model

Don’t get a commercial space right from the beginning. With commercial space, comes along expenses for lease, deposits, utility bills, remodeling, and furnishing. The expenses on all these will increase your start-up costs considerably.

2. Outsource non-core activities

The hiring, training, and payroll expenses soar pretty high. So instead of making extensive hiring plans, focus on getting the secondary work outsourced from freelancers and agencies. This includes marketing, accounting, legal, consulting, and everything else.

3. DIY Marketing

Become a part of load boards to get leads and focus on low-cost marketing avenues for your marketing activities. This includes social media, content marketing, email marketing, and paid ads.

Hire specialists wherever essential, but not for easy-to-perform tasks.

4. Negotiate deals

Whether it’s your office lease, supplies, vendor contracts, or employee expenses—negotiate and find a favorable deal to reduce costs wherever possible. However, know the difference between getting the best price and settling for a cheap deal.

Conclusion

That’s the wrap. Now that you know the costs associated with starting a freight broker venture, let’s calculate the actual costs for your business.

Use the Upmetrics startup cost calculator to get a precise estimate and manage the funding accordingly.

Use Upmetrics for Accurate Startup Cost Projections!

Looking to estimate your startup costs? Dive into Upmetrics! Our business plan software makes financial forecasting a breeze

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About the Author

Upmetrics                                                       
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Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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