10 Pros and Cons of Being a Freight Broker

Freight Brokers are essential links in America’s logistics and supply chain.

These third-party intermediaries work with shippers and carriers to transport cargo from one destination to another.

Below we dive deeper into the profession and discuss a few pros and cons of being a broker.

What Do Freight Brokers Do?

One of the primary roles of a Freight Broker is to find clients who have products to ship and to find motor carriers to carry them.

They provide cost-effective shipping solutions for shippers and carriers and earn commission on their transport loads.

Processing Payments for Shippers and Carriers

Freight Brokers collect and receive payments for their clients.

The shipper usually pays them for transporting their cargo.

Their commission fees are deducted from the cargo’s shipping cost, and the remaining balance is forwarded to motor carriers who deliver the product to its final destination.

Ensuring Legal and Regulatory Compliance

Today’s brokers are responsible for ensuring their transport loads are legally compliant with local transportation standards and rules.

They process transportation paperwork and ensure all requirements are met.

Real-Time Logistics Management

Transportation intermediaries are directly involved in logistics planning.

They plan detailed shipping routes and itineraries for motor carriers and shippers.

Brokers help shippers locate available carriers, negotiate shipping rates, and schedule pickup and delivery of products according to US regulatory requirements.

Load Optimization and Delivery Tracking

Shipping intermediaries work with manufacturers and shippers to determine their needs and match them with carriers with the available truck capacity or other carrier capacity to transport loads.

Brokers analyze critical logistics factors like size, weight, and destination to optimize cargo shipments via ground transportation using trucks, air transportation, and cargo ships.

They electronically track shipments using GPS software and tracking tools.

Where Do Freight Brokers Work?

Freight Brokerage Firms: Groups of people who work together to facilitate the logistics process operate freight brokerage firms.

They also connect shippers with carriers and arrange to transport goods via trucks, cargo ships, and commercial airplanes.

Independent Brokerages: Freight brokers without affiliation to other companies or corporations are Independent.

These individuals take on the same duties as larger brokerages and act as independent links in America’s supply chain.

Home Offices: Brokers who work for corporations and independent contractors can set up home offices to take care of their duties.

They use computers and logistics software to find loads for transport and carriers to move those loads to distribution centers, retail stores, and warehouses across the globe.

Logistics Companies: Third-party intermediaries work with shipping companies to understand their shipping needs based on the type of cargo they carry.

They create strong client relationships with manufacturers and shippers to provide cost-effective logistics solutions.

Trucking Companies: Freight brokers work at trucking companies to coordinate transportation services by maintaining good working relationships with clients and drivers.

Shipping intermediaries may also act as consultants who provide support for billing, invoicing, regulatory compliance, and load optimization.

Pros of Being a Freight Broker

Pro #1. – Unlimited Income Potential

Freight Brokers operate under a commission-based compensation model with unlimited earnings potential.

Experienced brokers who learn to negotiate the most favorable commission rates can see earnings as high as one hundred thousand dollars per year or beyond.

The amount of money freight brokers can make depends on how hard they are willing to work, their years of experience in the field, and their negotiation skills.

Pro #2. – Flexible / Remote Work Locations

Today’s freight brokers are equipped with the latest technology, including computers, tablets, cell phones, and GPS tracking devices that make it possible for them to work from virtually anywhere in the world.

Intermediaries can set up an office, communicate with clients, and track shipments from anywhere with a solid internet connection and their proprietary tools and software.

Pro #3. – No Physical Assets Required

Keeping in line with flexibility, shipping intermediaries reap financial advantages when they operate virtually using an asset-free approach.

They have little need for keeping capital-intensive investments like office space, trucking equipment, and warehousing.

Brokers can be up and running from almost any location as long as they have a solid internet signal and a few connected devices.

Pro #4. – Low Entry Barrier

One of the perks of working as a freight broker is that there is a low entry barrier.

Prospective brokers don’t have to worry about completing formal education requirements.

They can start a new brokerage business as soon as they secure the necessary local, federal, and state licenses and certifications to legally operate as an independent brokerage business in most US states.

Pro #5. – Direct Impact on the Commerce Cycle

Freight Brokers play a fundamental role in the commerce cycle by seamlessly connecting freight carriers with shippers who need to deliver products.

Today’s brokers electronically facilitate the delivery of goods, using optimized logistical routes to ensure timely deliveries.

Timely delivery of goods keeps a steady flow of available products flowing through the supply chain, enhancing overall commerce.

Cons of Being a Freight Broker

Con #1. – High Responsibility

Juggling multiple tasks, negotiating rates, and ensuring legal compliance are just a few freight broker responsibilities that can lead to high stress levels over prolonged periods.

Even the smallest oversight can lead to bottlenecks or snags in the supply chain that can impact the entire nation.

Con #2. – Regulatory Compliance Management Can Be Tough

Navigating the regulatory compliance cycle for manufacturers, shippers, and freight carriers can present notable challenges for third-party shippers.

Frequent changes in US transportation laws and regulations mean that brokers must stay abreast of these changes and ensure their clients are compliant.

Brokers are responsible for understanding rules, and keeping compliance records, and documentation.

Non-compliance penalties include fines, legal disputes, supply chain snags, and reputational damage.

Con #3. – Market Volatility

Fluctuations in supply and demand can lead to market volatility that directly impacts the earnings potential of freight brokerages.

Rapidly changing market conditions can significantly affect the price of shipping and the ability of brokers to ensure cost-effective and competitive rates for their clients.

High volatility can lead to shipping service disruptions, undersupply, oversupply, and client dissatisfaction.

Con #4. – Intense Competition

Today’s freight brokers can face intense competition in the marketplace.

Competition in the industry is high due to the pros of high earnings potential, low entry barriers, and work flexibility.

Many brokers are at a disadvantage during negotiations as competitors often outbid them.

Being consistently outbid for clients can lead to low profit margins, weakened business relationships, and eventually going out of business without a resolution.

Con #5. – Commission-Based Pay

Brokers who work on commission-based pay are only paid when they secure a sale.

The unpredictable nature of a commission-based compensation plan is not ideal for people who cannot afford the fluctuation in their income.

Being driven to secure high-value deals to land high commissions can lead to brokers lacking in other areas, such as offering value-added services and administrative tasks.

10 Pros and Cons of Being a Freight Broker – Summary Table

Should You Become a Freight Broker?

If you want to become a freight broker and work as a third-party shipper, there are a few critical factors to consider.

Working as a freight broker requires drive, dedication, attention to detail, good negotiation skills, and, most importantly, the ability to work for commission-based compensation only. 

Consider becoming a freight broker if you have or are willing to learn the following skills.

Strong Communication Skills

Communicating with clients, and regulatory authorities, solving transport issues, closing deals, and negotiations.

Problem-Solving Skills

Having top-notch problem-solving skills is a must for intermediaries, who are often the sole point of contact for manufacturers, shippers, drivers, and carriers.

Market Research Skills

Understanding how industry trends and market dynamics affect shipping rates is a critical skill for freight brokers.

Brokers can make more informed decisions and more money when they understand market volatility and how it affects their shipping business.

Sales and Marketing Skills

Independent brokers must learn how to market and sell their brokerage products and services.

They will need to understand the concepts of digital marketing, social media marketing, and how to define their ideal customer persona to create targeted marketing campaigns to drum up new business.

Meticulousness

A keen eye, patience, and attention to minute details is another crucial skill for today’s brokerage professionals.

Brokers must learn how to train their eyes to notice the slightest imperfection in regulatory documentation, licenses, and other business components that can lead to severe issues or shutdowns when paperwork issues go unnoticed

Time Management Skills

Ensuring the delivery of products on time is one of the most essential duties of a broker.

Untimely product delivery can have devastating effects on brokers in the form of increased shipping costs, transportation fines for consistently not meeting deadlines, and a slowdown in the US supply chain.

These are a few of the primary skills required for success as a new freight broker.

If becoming a freight broker sounds like a career for you, learn more about how to get started by visiting your local transportation department and learning about the profession on the United States Bureau of Labor website.