The logistics industry has advanced and become sophisticated, opening new opportunities for freight carriers. Therefore, people with a passion for logistics, problem-solving ability, and organizational skills can join the freight industry. But how can one start a freight carrier business? The path is straightforward, but critical steps must be followed. This article highlights every important step to becoming a successful freight carrier.
Undertake Relevant Training
Although logistics courses are not mandatory, people starting carrier businesses need the relevant knowledge and skills to succeed. Prior experience as a trucker, dispatcher, or logistics manager could be a significant asset. Without that, the person interested in the freight carrier business should consider enrolling in college or an online class to understand the industry before joining the bandwagon. The training should focus on transportation options, applicable regulations, required documentation, and invoicing. Additionally, a hands-on experience in a logistics company can help one gain a footing in the industry.
Register the Freight Carrier Company
Starting a freight carrier business requires proper planning. For example, the owner must choose between a partnership, sole proprietorship, or limited liability company. A limited liability company offers better protection by eliminating personal financial risks. The business owner should choose a good business name for easy marketing before proceeding to the next step.
Acquire the Relevant Licenses
The freight business owner should apply for motor carrier authority from the Federal Motor Carrier Administration by filling out the OP-1 form. Households and non-household goods need separate applications and fees, but they can be applied together. Online applications provide a motor carrier number, but the business cannot operate yet. The next step is to fill out the carrier packet and setup form, buy relevant insurance, and get agents from different states where the company will operate.
Get a Surety Bond
The surety bond for freight brokers is about $75,000, which is high for a starter. Fortunately, some companies can provide the surety bond for a premium of 1%-10% of the bond amount. The surety bond rates vary depending on the business owner’s credit history, criminal records, financial security, and business risks.
Compliance with Corporate and Tax Regulations
Even with the relevant licenses and operating authority, a freight carrier must comply with the relevant state regulations. Different states may have unique business registration and tax compliance requirements. Therefore, the business owner must understand the permits and documents required to ensure compliance.
Create a Practical Business Plan
After identifying a gap in the market to fill, the freight business owner should contract with companies that need cargo transportation services and others that need the cargo delivered to different destinations. However, a business plan should demonstrate how the business owner will bridge the gap between the money they pay before they are paid. Where will the company get money for insurance, equipment, transportation, and documentation? The business plan should highlight any issues likely to arise and provide a viable solution. It should also set realistic targets, indicators, and milestones that the business should achieve within certain timelines. The business owner should also have cash reserves to run the business without inconveniences.
Set the Rates and Sign Contracts With Clients
It is important to set realistic rates based on market conditions and competition. The business owner should set up and maintain contracts with different players to ensure business continuity and growth. Involving a lawyer when signing contracts can help prevent legal problems later.
Starting a freight carrier business may not be as hard as some people think. This guide can help people interested in logistics get started in the right direction. However, it is important to research and understand every aspect of the process to ensure everything runs smoothly.