Both carriers and freight brokers are crucial supply chain facilitators, but they have very different responsibilities. However, that doesn’t mean there isn’t some overlap between the two roles.
In fact, many freight brokers consider expanding and becoming carriers for increased revenue. Freight brokers can also be freight carriers, but there are a few things to remember when discussing these two professions.
Difference Between a Carrier and Freight Broker
Freight carriers and freight brokers play very different roles, so how do they overlap? Let’s take a closer look at these two roles.
- Carrier: A carrier is a company that carries and delivers freight. When a shipper needs to ship freight, a carrier will pick it up in their truck and take it wherever it needs to go.
- Freight Broker: A freight broker is a middleman that coordinates with shippers and carriers. They help shippers find carrier companies and take care of all freight management and communication with the carrier to ensure the pickup, transit, and dropoff go smoothly.
Can A Freight Broker Own Trucks?
Freight brokers can own trucks and carry loads that they broker. It’s a great way for some brokers to expand their business because it can allow them to serve more clients, which means they will also earn more money. Also, freight brokers who own trucks can still work with a large network of carriers to carry loads that the brokers cannot handle.
If a freight broker decides that they want to own trucks, they will become an owner-operator. From there, they will have to follow the same restrictions and laws as other carrier businesses. To become an owner-operator, freight brokers must file for and receive a USDOT number for all motor vehicles traveling between states.
This can be obtained on the Federal Motor Carrier Safety Administration (FMCSA) website. While on the FMCSA, freight brokers will have to receive their Motor Carrier (MC) number. Owner-operators can only legally carry freight if they have both of these numbers.
Is Freight Brokerage Restricted by Financial Liability?
If a carrier is thinking about expanding into the world of freight brokerage, they will need to know about the financial liability of getting a broker license. Before you can get a brokerage license, the FMCSA requires a $75,000 bond, which is also known as a BMC-85.
This bond protects the shippers and the carriers that brokers work with in the event that the broker doesn’t follow through on his or her contracts and agreements. However, not every aspiring broker can meet those financial requirements.
That’s why the BMC-84 exists, which is, again, a freight broker bond. With a freight broker bond, brokers will have to pay a monthly premium. The premium amount will range depending on various factors such as the broker’s credit score, industry experience, personal circumstances, the business’ financial situation and more.
If you’re a carrier expanding into brokering, paying the premium for a freight bond will be another monthly expense the company will incur. Carriers should evaluate their business and ensure they can safely incur this expense.
Why Are More Carriers Getting Involved With Freight Brokerage?
Carriers may want to become freight brokers to expand their business into more aspects of logistics management and increase their revenue. By offering shippers both brokering and carrying services, their business becomes a one-stop shop.
Instead of turning down loads they can’t handle, carriers who are also brokers can connect the shipper to another carrying company. This means they will still make a profit off the freight.
Can Freight Brokering Be Lucrative?
Doubling as a freight broker can be very lucrative. There are many reasons freight brokering in your business can drive your revenue upwards.
Commission
A freight broker’s main income source is the commission earned on loads. Freight brokers will negotiate the price that a shipper is willing to pay and then try to negotiate a lower price with the carrier.
A broker will take the difference as a commission. For example, if a shipper is willing to pay $4,500 to have their freight shipped, and a broker negotiates with a carrier to carry the load for $4,000, then the broker will earn $500 off that load.
No Need To Outsource For Freight Brokering
Carriers without in-house broker services will need to connect with other freight brokers to get loads. That said, having a freight broker in-house lowers the need for those external connections.
That means less time will be spent communicating with different brokers. Therefore, more time can be allocated towards servicing customers and growing the business.
Streamlined Communication
Communicating with an in-house broker is much easier than dealing with multiple independent brokers. Freight brokers at a carrying business will better understand the carrier’s services, leading to faster customer communication.
Plus, carriers won’t have to wait until they hear back from a broker to determine their next loads. Communication will be much easier and quicker with an in-house broker, meaning you can then carry many more loads.
How Do Freight Brokers Get Loads?
If you’re interested in pursuing a career as a freight broker, you’ll need to know how to get loads. Freight brokers should always be working to cultivate a large network of shippers, which can be built in many different ways.
Marketing Campaigns
One of the best ways to grow your company is to make your company known on a public scale. Marketing is an all-encompassing term, but campaign ads can hit many different platforms.
For example, you could post ads in trade magazines or newspapers. Additionally, you could try out online ads, which are one of the most affordable and accurate ways of marketing on a large scale.
You can purchase ad campaigns on many social media sites, at which point you can finetune your visibility in a way that is tailored to your target audience. You can also conduct email campaigns to a list of shippers you want to contact and tailor subsequent emails to shippers who click the email.
Cold and Warm Calling
Typically, freight brokers will cold call and warm call after they have already accessed a shipper list. For starters, cold calling is when you dial the number of a shipper who has never expressed interest in your services.
Cold calling can feel like you’re having to take a shot in the dark, but it’s a great way to make first contact. Plus, it allows the shipper to become aware of your services. Even if they don’t hire you after the first call, you have made a contact and they might remember you in the future.
On the other hand, warm calling is when a shipper has expressed interest in your services and made contact with you already. This can be in the form of signing up for marketing emails or submitting an inquiry online. Warm calling may lead to building your client list or maintaining a connection so that you stay on that shipper’s mind.
Networking
Networking is the only way a freight broker can build a solid list of shippers as contacts. Luckily, networking can be carried out in a number of ways, such as connecting with shippers online or engaging with each other at trade events.
With networking, every second counts. Freight brokers should come prepared with an elevator pitch, including their rates, how they choose their carrying partners and an overview of their services. The more you can convey your value, the more likely a shipper will choose to partner with you.
Grow Your Business By Being a Carrier and a Freight Broker
Doubling as a freight broker and a carrier can help business owners open a new revenue stream for their business while diversifying and entering new markets as well. However, whether you’re a carrier who becomes a freight broker or vice versa, there are licenses and regulations you’ll need to pay attention to before you can fully launch this new aspect of your business. Extensive research can help you prepare for these new changes as well as yield optimal success for your company.
FAQ
Freight brokers typically pay carriers within two weeks of a load’s delivery.
Freight brokers want to ensure that they are working with reliable carriers, so they will likely need proof of licenses, insurance and certifications.
Freight brokering requires great communication, computer skills and knowledge of the industry as a whole. With proper training, anyone can become a freight broker.
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