How to start a freight business
The perfect opportunity for organised, client-focused entrepreneurs, read our detailed guide to starting a freight brokerage or freight forwarding business...
Transporting all manner of cargo across the UK and beyond by road, air and sea, the freight industry is currently booming.
In fact, the sector hit a staggering £29bn revenue in 2018, and is reported by IBISWorld to be growing by 3% year-on-year between 2014 and 2019.
While it’s potentially a very lucrative industry to be part of, it’s also hotly competitive and dominated by freight behemoths such as DHL Supply Chain – which, according to IBISWorld, has a market share of more than 5%.
However, there’s no need for freight or cargo van start-ups to feel disheartened. Success in this industry takes persistence, organisational skills, and a keen desire to provide clients with a smoother-than-silk shipping experience. If you can bring these to the table, you have just as big a chance at success as the next logistical entrepreneur.
So, whether you want to learn how to start a freight brokerage business or a freight forwarding company, just read on to get on the road…
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
1. Types of freight business
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 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 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.
To find out how to start a courier company instead, visit our comprehensive guide.
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 business should you choose?
If you’re unsure whether forwarding or brokering sounds best for you, use our handy pros and cons comparison table to learn more about both options…
|Freight forwarding||Freight brokerage|
|✓ You can have more control over the quality of shipments, ensuring freight is packed safely, passed to the carrier punctually and delivered successfully.
✓ This is a great business opportunity for an organised person who enjoys managing logistics and gains satisfaction from providing a quality service to clients.
|✓ A freight brokerage is usually cheaper to set up – see section two for more detail on this.
✓ This is a great business opportunity for someone who enjoys communication and building relationships.
✓ A freight brokerage isn’t liable for claims or held responsible for problems such as damaged or missing packages and late deliveries.
|✗ Freight forwarding is usually more expensive to start up – see section two for more detail on this.
✗ Having increased responsibility for the freight means you’ll be held responsible for problems with the shipment – however you’ll have more capacity to reorganise the shipment and action solutions.
✗ Because you’ll physically handle shipments, you must adhere to a maelstrom of insurance and licensing regulations (see section three); and these only increase if you’re shipping overseas.
|✗ It’s difficult to ensure your clients receive a quality service: you can’t oversee/manage the movement of the freight as this is down to the carrier. Poor service on the carrier’s part may still reflect badly on you.
✗ Cashflow can be difficult to manage at the start: many carriers will ask for upfront payment while your clients won’t pay you until their shipment has been delivered.
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.
2. The 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.
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.
3. Regulations and insurance
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.
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
4. Finding business
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?
In a previous post, our Startups Forum users weighed in on using freight exchanges.
Forum user Cliff 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 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.”
Another forum user 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.”
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. Good luck!