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Written by: Natalie Fell
Natalie is a business writer with experience in operations, HR, and training & development within the software, healthcare, and financial services sectors.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on June 14, 2022
Updated on May 8, 2024
Investment range
$32,100-$76,100
Revenue potential
$200,000-$400,000 p.a.
Time to build
3-6 months
Profit potential
$80,000-$120,000 p.a.
Industry trend
Growing
Commitment
Full-time
Ever wonder what goes into getting products from factory to customer? There are a ton of moving parts and freight forwarders play a key role, which is why the global freight forwarding industry expects steady growth for at least the next five years.
Acting as intermediaries on behalf of the shipping company to provide storage, coordinate logistics, and negotiate contracts, US freight forwarding companies do nearly $160 billion in annual business. With your own freight forwarding business you could grab a share of that vast, growing market and make a great living.
But before you rent out a warehouse, you’ll need to learn what it takes to successfully launch a business. Fortunately, this step-by-step guide contains the entrepreneurial tools and resources you need to get started in freight forwarding.
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Before starting a freight forwarding business, it’s important to weigh the pros and cons.
Trends within the freight forwarding industry include:
Challenges within the freight forwarding industry include:
Startup costs for a freight forwarding company range from $32,100 to $76,100. Your main costs will be leasing a warehouse and the purchase of quipment like forklifts. Costs will depend largely on the type of freight you specialize in.
Depending on the type of freight you work with, you’ll be required to obtain specific licenses and insurance, including what is known as a surety bond that serves as a financial guarantee to carriers and shippers. If you’re interested in taking a course on freight forwarding, Udemy offers some for under $100 that can be completed in a few hours.
You’ll need a handful of items to successfully launch your freight forwarding business, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Licenses and permits | $300-$500 | $400 |
| Insurance | $500-$1,000 | $750 |
| Marketing and advertising | $1,000-$2,000 | $1,500 |
| Website | $1,000-$3,000 | $2,000 |
| Computer | $800-$1,600 | $1,200 |
| Warehouse lease | $5,000-$10,000 | $7,500 |
| Warehouse equipment | $20,000-$50,000 | $35,000 |
| Employee wages | $3,500-$8,000 | $5,750 |
| Total | $32,100-$76,100 | $54,100 |
Pricing for freight forwarding services depends on a number of different factors and largely depends on the types of companies you serve. A company might charge the equivalent of a portion of cargo value, for example $20 for every $500 handled. Aim for a profit margin of around 40%.
In your first year or two, you could forward $5 million worth of freight at $20 per every $500 worth of cargo, bringing in $200,000 in annual revenue. This would mean $80,000 in profit, assuming that 40% profit margin. As your company grows, you could handle $10 million worth of freight per year. At this stage, you’d hire additional staff, reducing your profit margin to around 30%. With annual revenue of $400,000, you’d make a tidy profit of $120,000.
There are a few barriers to entry when it comes to starting a freight forwarding business. Your biggest challenges will be:
Now that you know what’s involved in starting a freight forwarding business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research freight forwarders in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a freight forwarding company that includes packaging or assembly services.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as air freight or ocean freight.
This could jumpstart your word-of-mouth marketing and attract clients right away.
As a freight forwarder, you’ll be responsible for arranging shipments and storing goods for your customers. As a supply chain expert, you may also play a part in packaging, distribution, maintaining appropriate documentation, and consulting on logistics strategies.
Pricing your freight forwarding services is an extremely detailed process. Freight forwarding companies take several things into consideration when quoting, including the type of goods, shipping containers, weight, and volume of shipments. They also consider the work it takes to negotiate rates with carriers, completion of any compliance paperwork, and warehouse labor costs. Your pricing will greatly depend on the niche you serve. After factoring in operating costs, your profit margin should be around 40%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be manufacturers looking for supply chain experts to help move their goods at the lowest rates. You’ll want to find relevant businesses and managers on professional social media platforms like LinkedIn to generate leads. Attending trade shows within your niche is also a great way to find potential customers.
To run your freight forwarding business effectively, you’ll need to hire workers for various roles and rent out a warehouse. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to freight forwarding businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your freight forwarding business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a freight forwarding business.
Starting a freight forwarding business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your freight forwarding business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Linbis, Magaya, or Logitude to quote shipments, automate customs compliance workflows, and store documents.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your freight forwarding business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your freight forwarding business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a freight forwarding business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in logistics for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in freight forwarding. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a freight forwarding business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Owning your own freight forwarding company takes a lot of hard work and dedication, but it’s also crucial to economic growth. You could become a dedicated, reliable partner to your customers and make great money along the way.
Now that you’re familiar with what it takes to launch a business, it’s time to get out there and make some logistical magic!
Freight forwarders acquire clients by networking at industry events, receiving referrals from satisfied customers, using digital marketing strategies like social media and SEO, and partnering with other logistics and transportation businesses.
Freight forwarding is an extremely profitable business venture. The key to success lies in strategic pricing, working within a lucrative niche, and having a robust network of carriers and supply chain experts.
Some ways to differentiate your freight forwarding business from competitors are offering specialized services, providing exceptional customer service, and utilizing technology.
The risks associated with being a freight forwarder include liability for cargo damage or loss during transportation, legal and regulatory compliance issues, and fluctuating fuel prices and currency exchange rates.
To become a successful freight forwarder, you should focus on gaining education and experience in logistics, transportation, and international trade, building strong relationships with carriers and logistics providers, providing excellent customer service, investing in technology to enhance efficiency and shipment visibility, and keeping updated with industry trends and regulations.
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