How to start a freight business

Demand for freight companies – referring to all manner of cargo whether road, air or sea – has never been higher. Economic challenges like Brexit and rising fuel costs, mean clients are desperate for suppliers that can transport goods around and outside of the UK.

Still, that demand is also a symptom of a massive shortage of HGV drivers on UK roads which is creating problems with supply and hiring. It’s also a hotly competitive industry, and dominated by freight behemoths such as DHL Supply Chain.

But there’s no need for freight or cargo van startups to feel disheartened. Logistics companies have shown extraordinary resilience in the face of COVID. Contactless deliveries are now the norm, while increasing numbers of companies are investing in sustainable supply chain alternatives, such as electric vehicle fleets.

So how do you enter an industry that’s rapidly evolving? Luckily, we’re here to help answer that question. At Startups.co.uk, we understand the challenges of setting up a freight company in the current business climate, and the need for expert, relevant information to support you in the process.

Whether you want to learn how to start a freight brokerage business or a freight forwarding company, read on for a road trip through the top tips and tricks to starting a small freight business.

How has COVID-19 affected the freight industry?

The global transportation sector has been affected heavily by the coronavirus pandemic, as logistics firms, which are involved in the movement, storage, and flow of goods, have struggled to keep up with post-pandemic consumer demand. They’re also contending with skeleton crews, fuel shortages, and time pressures such as the upcoming festive period.

Evidence of the problem is apparent. Here in the UK, car production was down 27% year-on-year in August, as a fall in the number of semi-conductors continued to impact the automotive industry.

However, these issues existed before Covid, and there is strong evidence to suggest that, as logistical companies adapt to these issues, they are developing a solution to the global supply chain crisis.

Following global border closures as national lockdowns were introduced in early 2020, new innovations have emerged, such as alternative transport and better health and safety measures. All this means now is a particularly exciting time to join the industry.

Which type of freight business is best for you?

There are two main types of freight and trucking businesses – freight forwarding and freight brokerage – and one of the first decisions you’ll need to make is which you’d rather start.

Freight forwarding

Freight forwarding businesses take freight from clients who are looking to transport it (often picking it up from the client) and hold it in their own facility or warehouse. At the same time, the business organises how the freight will be shipped to its destination, finding appropriate carriers to transport it – or, in some cases, delivering the freight itself using a trucker of its own.

Freight brokerage

Freight brokerage companies act as the middleman in the hauling and shipping process, using specialist knowledge of the sector to connect clients who have freight to transport with the best carriers for the job, and taking a commission from the deal struck between client and carrier.

Of course, you can also start a freight business which carries out all of the shipping that clients require itself – however, this will be an expensive way to start, as you’d need to purchase or rent a fleet of vehicles and employ your own drivers for transporting freight.

In both cases, finding carriers will often involve researching the options available to choose the best fit, or advertising a shipment on an online board where carriers can place bids on taking it.

Finding reliable carriers to transport shipments is crucial but can be a minefield at first; with some carriers known to hold packages hostage or cancel jobs at the last minute.

As you grow, however, you’ll forge relationships with trustworthy carriers who have consistently provided a reliable, timely service (and disregard those who haven’t). You’ll be able to rely more and more on your own contacts than research and online boards.

Which freight business should you choose?

If you’re unsure whether forwarding or brokering sounds best for you, have a look at our handy pros and cons comparisons to learn more about both options…

Freight forwarding

Freight brokerage

Choosing a niche

Of course, the freight industry is rather saturated, and companies are already faced with so many options when it comes to choosing a freight brokerage or forwarding business to entrust the organisation of their shipments to.

So, to stand out against the competition, it’s a good idea to choose a niche – or, in other words, specialise in shipping a certain type of product from a certain type of business and learn all there is to know about this chosen sector.

For example, a company that manufactures computer monitors will feel more comfortable employing a freight business which specialises in the shipment of computer parts – and so knows exactly how to handle them, and/or which carriers will do the best job of it.

Of course, you can expand your repertoire as your business grows. But, to start with, research the manufacturers and companies that need freight hauled in your area, and examine the industry sectors and products they deal in to seek out opportunities.

How much does it cost to start a freight business?

As touched on in the table above, the costs involved in starting up a freight business will depend on whether you choose to start a freight brokerage or a freight forwarding business.

Costs to start a freight forwarding business

A freight forwarding business will usually prove to be the more expensive option. While you can save on the cost of hiring out an office by managing your shipment logistics from home, you will have several major costs to contend with, including:

• At least one vehicle – ideally a truck – with which to collect shipments from clients
• Unless you can handle picking up shipments yourself, you’ll need a driver (or a collection of drivers) who you’ll need to pay
• A warehouse or other space in which to handle freight
• Packing materials (if shipments don’t come to you already packed)

You might also want to invest in vehicle tracking software so that you can keep on top of where your shipments are at all times; monitoring how far they are from their destinations.

Find out more about vehicle tracking in our comprehensive guide to vehicle tracking costs.

With upfront costs ranging from £50 to £300 – or leasing starting at £9.99 per month if you don’t want to pay for the software outright – you can compare the best vehicle tracking systems and prices using our free vehicle tracking comparison service. All you need to do is answer a few questions about your business and requirements, and you’ll quickly be sent quotes from suppliers matching what you need – all 100% free.

Costs to start a freight brokerage

In comparison to freight forwarding, a freight brokerage is a fairly affordable start-up. All you really need to start up this business is an email address and a reliable mobile phone (for contacting clients and carriers), an internet connection, and…

Freight management software

With both business models, you will require the right freight management software. There are a range of software brands which offer this at varying costs (both upfront and subscription) so you’ll need to shop around to find the programme and payment plan that suits you best.

In enabling you to efficiently oversee your freight operations all in one place, most freight management software will offer crucial benefits including:

• Inventory and contacts management
• Increased control over/visibility of supply chains
• More accurate lead times and delivery time predictions
• More detailed insight into your business’ financial income and outgoings

NB: We would recommend opting for a cloud-based option so that you can check in on your operations from any device, wherever you are.

Because they manage legal export and import issues and customs clearance, freight forwarding businesses must also use specific software that can report payments and other activities directly to the HMRC (HM Revenue and Customs) central computer. Read more about this on the government website.

What regulations and insurance will you need?

Qualifications

You don’t need any formal qualifications to get started – but possessing prior experience of the freight industry will definitely be a benefit to you.If you don’t, it may be a good idea to seek out training. Organisations such as The British International Freight Association (BIFA), The Institute of Export and the Chartered Institute of Logistics and Transport (CILT) offer various specialised training courses which will help you learn more about the ins and outs of freight shipping.

Regulations checklist

In order to operate your business legally, you will need to:

✓ Get the correct licenses

The specific licenses needed to operate a business vary from council to council, so you’ll need to check in with your local authority to find out which they expect you to hold. This applies to both freight forwarding and freight brokerage businesses.

In general, freight forwarders will want to look into licenses relating to international haulage and the transport of goods.You can also use the government’s license finder tool to get an overview of what you’ll need.

✓ Get insurance

As standard, any freight business should look to get public liability insurance, professional indemnity insurance, products liability insurance and employers liability insurance (though this last only applies if you have employees).

You should also look to get a specialist freight insurance policy which includes things such as cargo insurance, logistics liability coverage and surety bonds.

Brokerages can also seek out specialist freight broker liability insurance while forwarders can find a freight forwarders liability policy.

You’ll also need to:

✓ Register your business with Companies House

✓ Ascertain whether you need to register for VAT

If you’re planning to start a freight forwarding business, you should do all of the above AND:

✓ Understand the duties and measures affecting importing and exporting freight – learn more here

✓ Understand the legal standards for transporting freight, plus the international trade documentation required, including CMR consignment notes, air waybills and bills of lading – learn more here

✓ Ensure your warehouse or storage facility is managing health hazards in line with health and safety legislation.

How do you find clients?

Whether you’re a freight brokerage or a freight forwarding business, securing clients who’ll let you – a new start-up – organise carriers or shipments for them is tough. It’s a competitive market, after all. But it’s by no means impossible to crack.

Finding clients and contacts

The key is to stay motivated: just keep searching and prospecting potential clients. It’s important that you find the appropriate decision-maker within the company (LinkedIn profiles and company websites can help with this), and try to contact them rather than anyone else.

Explain why it is that you can provide a better service than anyone else (but don’t talk rubbish – key decision-makers know when they’re being over-promised).

To find potential clients to prospect, try:

• Searching Google for local product businesses and manufacturers, or those which fit your specialist niche, and cold calling them.
• Asking your existing customers to refer their peers and other people or businesses in their network to your freight services (of course, your customers will only do this if you’ve given them a stellar service).
• Scouring your personal network for people who work at relevant companies. If they already know (and like!) you, getting them to trust your service will be an easier sell.
• Chasing up website leads. Any new business absolutely needs to set up a professional website (more on how to do that here). See if you can capture leads from yours by asking visitors to leave contact details if they’re interested in your services. Just be sure to comply with GDPR when gathering this data.
• Using apps such as Uber Freight, uShip and Convoy, on which local companies search for freight shipping capabilities.
• Using a freight exchange…

What is a freight exchange?

An online platform for logistics and haulage companies, a freight exchange is a searchable database of available freight that needs delivering. It also allows freight businesses to advertise their drivers’ available capacity so freight-providing companies can match their goods with drivers.

The main idea is that, after performing a delivery, vehicles can optimise their return journeys by picking up additional freight – improving efficiency.

Not to mention that freight exchanges can also be used to build valuable contacts within the haulage industry.

There’s normally a fee to pay for both advertising and searching, often on a monthly subscription basis. It’s also worth noting that the quality of exchange services can vary considerably, and rates and prices can differ too from platform to platform.

Should you use a freight exchange?

Startups sounded out truck drivers on their experiences of using a freight exchange service.

Veteran truck driver Cliff Johnson said:

“I have been a truck driver 32 years and have set up again with a van, Merc Sprinter. I am a member of two freight exchanges, but it depends on what you’re using.

“I’m on Loadup and there is a lot of work for trucks but I can’t tell you what the rates are like. Plenty of work for vans UK/ European but the rates are rubbish, although I did make one contact which has given me a lot of work.”

Charles Clinton, a retired truck driver, added:

“I tried these for a while, I went through quite a few of them, all wanting a subscription to let you in.

“You are better off trying to forge your own contacts, but this isn’t easy or every driver would be doing it.”

Starting a freight business: What’s my next step?

Hopefully, this guide has inspired you to get started on your own freight, trucking or cargo van business, and you’re now feeling confident that you could make a success of it.

It’s a competitive industry, but with persistence and motivation, you can find those first clients to help you get off the ground.

Remember, when shipping freight, problems and delays can crop up anywhere; but learning from these situations, only re-using reliable, careful carriers who have provided you a timely service, and being entirely transparent with your clients about what’s happening to their cargo, will stand you in good stead.