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Published On: Mon, Aug 21st, 2017

How To Start A Successful Freight Forwarding Business

If you’re a business person looking to start a new company in a promising industry, then your chances of growing a multimillion dollar business in the freight business are excellent. Your wok will consist of directly managing customer shipments via semi-trucks.

Freight moves in a variety of ways. Freight might be moved by ships, planes, trains, and semi trucks. While the size of freight operations by air and sea, and across country by rail can only be handled by large corporations, the semi-truck industry is broad enough for independent contract truckers and small freight forwarding companies to provide local freight forwarding solutions

photo/ Gerd Altmann

Your business operations might involve simply picking up goods from one location, like a factory, and delivering them to another location, like a retailer. It could also involve collecting goods from a client, storing them in a warehouse, and then when you have a large enough consignment, delivering them to the end user. You might also work as a subcontractor for a larger carrier company and transport goods to airports or harbors to be transported overseas.  In other words, there are many variations on the type of operations possible when you start a small freight forwarding business.

Although the business itself has the potential to be lucrative, the competition is also intense, and you will have to overcome the following startup challenges:

  1. Overcoming negative cash flow

Most clients expect a 30 to 60 day line of credit. While this arrangement might work out perfectly for the client, it can create a lot of hardship for your small business. Essentially, as a business owner, you will be paying for the transportation of goods out of your own pocket until you get reimbursed for it.

How do you manage to pay for it, though? If your trucks deliver goods to a company, you need the money for it now. However, since your client isn’t scheduled to pay yet, the solution to your negative cash flow prolbm is to ask a freight factoring company to buy the contract for the freight, allowing your trucking business to be paid immediately while the business receiving the freight still has time to pay for it.

  1. Raising enough money to start

The amount of money you will need as startup capital will depend on the size and scale of your operation and the goods you will be handling. While it is far more expensive than starting a freight brokerage company, you will be providing a more essential service to the client and experience a larger share of the revenue to be generated.

So you must be able to access the right amount of funding to set up the business in the most profitable way. It’s best to start small and to own your own vehicle, storage facilities, and other related equipment and packing materials. You will also benefit from using the latest computing technology, which might include cloud computing and the use of logistics software to increase the quality of your service.

While a cheaper alternative to raising all the funds you need to start the business is to commission independent carrier companies and to rent out storage facilities, you will experience two big problems: one, lack of control of operations; two, a lower share of the revenue. If an independent trucker fails to deliver freight on time, you will lose the contract and your reputation as a reliable business will be tarnished by circumstances that you had no direct control over.

Why Build A Freight Forwarding Business?

Why build a freight forwarding business when you could just as easily build a technology-based company or other type of startup that is easier to launch? Here is a quick overview of the business as a whole to understand the upside of starting a freight forwarding business:

Across the world, freight is big business because goods constantly need to be transported from one location to another as part of the modern world’s commerce. In a consumer-based global economy, a freight network plays an essential role in economic development. While many companies that transport freight via semi-trucks are huge businesses with large fleets, there is still an opening for small third party businesses to satisfy the delivery of goods for small to medium manufacturers, wholesalers, and retailers. For the most part, these small operators focus on local and regional transport, and leave national and international freight operations to some of the world’s biggest corporations who specialize in air, sea, and land transport.

Due to its vast size, reach, and economic importance, the freight forwarding business is a multibillion dollar industry in every country, contributing a significant percentage to each nation’s GDP. The enormous impact on this industry makes it highly profitable even for small freight forwarding companies.

Author: Jimmy Simond

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