How to Start a Freight Forwarding Business [Business Plan]

A freight forwarding company is a company that serves as a middleman between transportation services and the shippers.  Freight forwarding companies are tasked with arranging the whole process including the storage and shipment of the goods.

They also negotiate the cost of the transport and choose the most reliable, fastest, and most economical route. A freight forwarding company helps you arrange your imports and exports. They prepare documentation, track cargo, file insurance claims, and do many other things.

The global Freight forwarding market size is projected to reach USD 207 Billion by 2026, from USD 170 Billion in 2019, at a CAGR of 2.8% during the forecast period. The total market size of the freight forwarding market in the United States reached over 145 billion U.S. dollars in 2023. Until 2020, this market experienced a downward trend that was worsened by the coronavirus (COVID-19) pandemic.

Steps on How to Start a Freight Forwarding Business

1. Conduct Market Research

If you are considering starting a freight forwarding business, you need reliable market research to be able to maximize profits from the business. The first step in the market research process for your freight forwarding business should be to develop market-based research questions in line with your overall business goal and objective.

In this regard, you should source information that will help you maximize your business, and also help you operate your freight forwarding business with less stress and of course, build the business to profitability.

a. Who is the Target Market for Freight Forwarding Business?

• E-commerce businesses
• Merchants and Warehouse Operators
• Importers
• Exporters
• Corporate organization.

b. Is Freight Forwarding Business a Profitable Business?

Yes, the freight forwarding business is profitable. For example, with net revenue of around 1.8 billion U.S. dollars, C.H. Robinson is the largest freight brokerage firm in the world. C.H. Robinson is a transportation and third-party logistics company headquartered in Minnesota.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to the freight forwarding business.

d. Who are the Major Competitors?

• DHL Supply Chain and Global Freight Forwarders
• Old Dominion Freight Line
• National Freight Logistics
• Entourage Freight Solutions
• Express International Freight
• PHX Transportation Freight Corporation
• Approved Freight Forwarders
• Crown International Forwarder
• Kuehne + Nagel International AG
• Cargo International Logistics Inc
• Expeditors International
• BGI Worldwide Logistics
• Berkley Cargo Services
• American Export Lines
• B. Hunt Transport Services
• 4 Seas International Shipping, Inc.
• International Equipment Relocations
• Supply Chain Warehouses
• River Plate, Inc.
• UPS Supply Chain Solutions
• Shoreline Express Inc.

e. Are There County or State Regulations or Zoning Laws for Freight Forwarding Business?

No, there are no county or state regulations or zoning laws for freight forwarding business, but players in this industry are expected to work with the existing regulations governing similar businesses in the county where their business will operate.

f. Is There a Franchise for Freight Forwarding Business?

Yes, there are franchise opportunities for the freight forwarding business. They include;

• AIT Freight Systems (Initial Investment – $46,000)
• Craters & Freighters (Initial Investment: $88,600 – $140,000)
• Unishippers Global Logistics (Total Initial Investment: $50,00 – $75,000)
• 1-800-Packouts (Initial Investment – $69,450 – $234,000)
• Our Town America (Total Cash Investment: $50,000
• Pak Mail Centers of America, Inc. (Initial Investment – $152,000 – $180,000)
• Packaging Store (Total Initial Investment: $164,000 – $244,000)
• PACK & SEND (Initial Investment – $210,000)
• Navis Pack and Ship Centers (Total Cash Requirement: $100,000)
• Zippy Shell Freight forwarding (Initial Investment – $657,450 – $1,219,830).

g. What Do You Need to Start a Freight Forwarding Business?

• A Feasibility Report
• Business and Marketing Plans
• Business Licenses and Permits
• Relevant Freight Forwarding Software
• Insurance
• EIN (Employer Identification Number) / Federal Tax ID Number.
• A Corporate Bank Account
• Employees

2. Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.

Some of the catchy business name ideas suitable for a freight forwarding business are;

Creative Freight Forwarding Business Name ideas

• Grass Freighters© Freight Forwarding Company, Inc.
• Queen Carrier® Freight Forwarding Company, LLC
• Global Logistics© Freight Forwarding Company, Inc.
• Tyson Fuller® Freight Forwarding Company, Inc.
• Freight King™ Freight Forwarding Company, Inc.
• Golf Global™ Freight Forwarding Company, LLC.
• Richard Clinton and Co© Freight Forwarding Company, LLC
• All About® Freight Forwarding Company, Inc.
• Star Forwarder© Freight Forwarding Company, Inc.
• Adolphus MBA© Freight Forwarding Company, Inc.
• Safe Hands® Freight Forwarding Company, LLC
• Millard J® Freight Forwarding Company, LLC
• Carry Go™ Freight Forwarding Company, LLC
• Peter Chamberland© Freight Forwarding Company, Inc.
• Sun Rise® Freight Forwarding Company, Inc.
• D Markson™ Freight Forwarding Company, Inc.
• Ship Link™ Freight Forwarding Company, Inc.
• Brad Boston© Freight Forwarding Company, Inc.
• The Globe® Freight Forwarding Company, LLC
• Dustin Dona™ Freight Forwarding Company, Inc.

3. Register Your Business

a. What Type of Business Structure is Best for Freight Forwarding Business?

When it comes to the business structure of a freight forwarding business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.

b. Steps to Form an LLC

• Choose a Name for Your LLC.
• File Articles of Organization.
• Choose a registered agent.
• Decide on member vs. manager management.
• Create an LLC operating agreement.
• Comply with other tax and regulatory requirements.
• File annual reports.

c. What Type of License is Needed to Open a Freight Forwarding Business?

• General Business License
• Zonal Permits
• Signage Permit
• Operational State Facility Inspections for your facility (warehouse)

d. What Type of Certification is Needed to Start a Freight Forwarding Business?

You don’t need any certifications to start a freight forwarding business.

e. What Documents are Needed to Open a Freight Forwarding Business?

• DBA
• EIN
• Business and liability insurance
• Federal Tax Payer’s ID
• State Permit and Building Approval (For your storage and warehouse)
• Certificate of Incorporation
• Business License
• Business Plan
• Employment Agreement (offer letters)
• Operating Agreement for LLCs
• Insurance Policy
• Online Terms of Use
• Online Privacy Policy Document
• Contract Document
• Company Bylaws
• Memorandum of Understanding (MoU)

f. Do You Need a Trademark, Copyright, or Patent?

If you are considering starting a freight forwarding business, you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

4. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Freight Forwarding Business?

The startup cost for a freight forwarding business is not uniform. But basically, a standard freight forwarding business will cost over $250,000.

b. What are the Costs Involved in starting a Freight Forwarding Business?

• The total fee for registering a business in the United States of America – $750.
• Legal expenses for obtaining licenses and permits as well as the accounting services total – $10,200.
• Marketing promotion expenses – $5,000
• The cost for hiring a business consultant (writing of business plans inclusive) – $4,500.
• Insurance (general liability, workers’ compensation, and shipping insurance) coverage at a total premium – $22,400.
• The cost of logistics software, accounting software, CRM software, and Payroll Software – $7,500
• The cost for leasing a warehouse facility (long term lease agreement) – $250,600.
• The cost for facility remodeling and installations – $20,000.
• Other start-up expenses including stationery – $500
• Phone and utility deposits will cost – ($2,500)
• Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $350,000
• The cost for store equipment (cash register, security, ventilation, signage) – $3,150
• The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, tables, and chairs et al) – $20,000.
• The cost of launching an official website – $600
• The cost of our grand opening party – $10,000
• Miscellaneous – $25,000

c. What Factors Determine the Cost of Opening a Freight Forwarding Business?

• The size of the freight forwarding business
• The choice of location
• The required licenses and permits
• The cost of hiring and paying a business consultant and attorney
• The cost for branding, promotion, and marketing of the freight forwarding business
• The cost of furnishing and equipping the facility
• The cost of insurance
• The cost of registering the business
• Cost of recruiting and training your staff
• The cost for the purchase and customizing of uniforms
• The cost of the grand opening of the freight forwarding business

d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

It is not compulsory to build a new facility for your freight forwarding business, but, if you have the required finance, it will pay you to build your warehouse facility and administrative office. The truth is that building or reconstructing a warehouse facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.

e. What are the Ongoing Expenses of a Freight Forwarding Business?

• License renewal fees
• Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
• Salaries of employees
• Insurance
• Marketing costs

f. What is the Average Salary of your Staff?

• Chief Operating Officer (Owner) – $68,000 Per Year
• Admin and HR Manager – $48,000 Per Year
• Transport and Logistics Manager $48,000 Per Year
• Marketing and Sales Executive (Business Developer) – $42,000 Per Year
• Accountant $38,000 Per Year
• Feight Forwarders – $36,800 Per Year
• Customer Service Officer (Receptionist) – $26,100 Per Year
• Security Guard -$24,000 Per Year

g. How Do You Get Funding to Start a Freight Forwarding Business?

• Raising money from personal savings and sale of personal stocks and properties
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for a loan from your bank/banks.

5. Write a Business Plan

a. Executive Summary

Golf Liner™ Shipping Company, Inc. is a registered and licensed shipping company that will be based in Port of Houston, Texas. We are in business to function as an agent or intermediary between the company that makes the shipment and the final destination of the goods.

Golf Liner™ Shipping Company, Inc. has been able to secure all relevant licenses and permits to operate throughout the United States and other countries of the world. We will ensure that we abide by the rules and regulations guiding the shipping and logistics industry.

b. Products and Service

• Offering expertise and advice to the shipper
• Booking freight space on the modes of transportation
• Packaging, warehousing, and distribution
• Offering insurance services
• Perform documentation and custom clearance
• Consolidation and deconsolidation
• Cargo insurance and customs compliance
• Inland transportation from source and/or to destination
• Ocean or air freight transportation.

c. Mission Statement

Our mission is to ensure that we specialize in removing the supply chain frustrations our customers have by developing custom-made solutions. We want to offer international and nationwide freight forwarding services through our fleet and logistics division partners and to build a successful freight forwarding services company that will operate not just in the United States of America but all across the world.

Vision Statement

Our vision is to become one of the preferred choices for individuals and organizations when it comes to shipping goods across the United States.

d. Goals and Objectives

The goals and objectives of a freight forwarding business are to help clients arrange their imports and exports – dealing with documentation, tracking cargo, filing insurance claims, and many other things.

e. Organizational Structure

• Chief Operating Officer (Owner)
• Admin and HR Manager
• Operations and Logistics Manager
• Marketing and Sales Executive (Business Developer)
• Accountant
• Freight Forwarders
• Truck and Van Drivers
• Material Handlers/Yard Spotters/Forklifts Operators
• Customer Services Executive/Front Desk Officer.

Marketing Plan

a. SWOT Analysis

Strength:

• Excellent operational history
• Attention to detail.
• Accurate estimates with no hidden costs.
• Experience and trained professionals.
• Large storage facility.
• Excellent customer testimonials.
• Partnership with numerous logistics companies both nationally and internationally
• Access to reliable transport and logistics software.

Weakness:

• Not enough existing clientele to run at full capacity immediately
• The owner is new to large scale marketing
• The owner is currently running the business solo and will need to manage construction/build out the existing business
• Lack of economies of scale.

Opportunities:

• Growing shipping, import, export, and eCommerce activities in the United States.
• Build upon existing clientele
• Online market, new services, new technology, and of course the opening of new markets.
• Increase in production activities and warehousing.

Threat:

• Loans diminish profitability until they are paid off
• The first year will be financially tight while we gain customers and pay off loans
• Competition in the area could increase
• Management of employees requires time, money, and efforts
• The maritime and shippers’ council could change its regulatory status and decide to enforce strict regulations that can strangulate our new business.

b. How Do Freight Forwarding Businesses Make Money?

Freight forwarding businesses make money by charging clients for;

• Offering expertise and advice
• Booking freight space on the modes of transportation
• Packaging, warehousing, and distribution
• Offering insurance services
• Perform documentation and custom clearance
• Consolidation and deconsolidation
• Cargo insurance and customs compliance
• Inland transportation from source and/or to destination
• Ocean or air freight transportation

c. Payment Options

• Payment via bank transfer
• Payment with cash
• Payment via credit cards
• Payment via online bank transfer
• Payment via check
• Payment via mobile money transfer
• Payment via bank draft

d. Sales & Advertising Strategies

• Introduce Your freight forwarding business by sending introductory letters alongside our brochure to importers and exporters, merchants and warehouse operators, and key stakeholders in and around your city and state
• Print out fliers and business cards and strategically drop them in offices, libraries, public facilities, train stations et al.
• Use friends and family to spread the word about your business
• Place a small or classified advertisement in the newspaper, or local publication about your company and the services you offer
• Leverage on referral networks such as agencies that will attract clients who would need your customized services
• Advertise your business in relevant magazines, newspapers, TV, and radio stations.
• Attend relevant expos, seminars, and business fairs et al to market your services
• Engage in a direct marketing approach
• Encourage the use of word-of-mouth marketing from loyal and satisfied customers
• Join local chambers of commerce and industry to market your services.

Financial Projection

a. How Much Should You Charge for your Service?

We look forward to charging our clients based on the cost of the package and it will depend on the size, weight, and destination.

b. How Much Profit Do Freight Forwarding Business Owners Make a Year?

It depends, but available reports show that on average, a freight forwarding business owner should net more than $9.8 million per year assuming they have a steady clientele and if they own their ship.

c. What Factors Determine the Amount of Profit to Be Made?

• The capacity of the freight forwarding business
• The types of related service offerings
• The location the freight forwarding business is covering
• The management style of the freight forwarding business
• The business approach of the freight forwarding business
• The advertising and marketing strategies adopted by the freight forwarding business.
• The number of years the freight forwarding business is in business

d. What is the Profit Margin of a Freight Forwarding Business?

The profit margin of a freight forwarding business is not fixed. It could range from 35 percent to 65 percent depending on the distance of the goods to be transported.

e. What is the Sales Forecast?

Below is the sales forecast for a freight forwarding business. It is based on the location of the business and other factors as it relates to such startups in the United States;

• First Fiscal Year (FY1): $450,000
• Second Fiscal Year (FY2): $750,000
• Third Fiscal Year (FY3): $1.3 million

6. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for Freight Forwarding Business?

• The demography of the location especially as it relates to eCommerce activities and shipping
• The demand for the services offered by freight forwarding businesses in the location
• The purchasing power of businesses and the residents of the location
• Accessibility of the location
• The number of freight forwarding companies in the location
• The local laws and regulations in the community/state
• Traffic, parking and security et al

b. What State and City are Best to Open a Freight Forwarding Business?

• South Louisiana, Louisiana
• New York City, New York
• Houston Texas
• East Rutherford, New Jersey
• Long Beach, California
• Baltimore, Maryland
• Pittsburgh, Pennsylvania
• Pascagoula, Mississippi
• Tampa Bay, Florida
• Hampton Roads, Virginia.

c. What Equipment is Needed to Operate a Freight Forwarding Business?

You should be prepared to purchase forklifts, loaders, shipping containers, pallets, crates et al. You will also need computers/laptops, internet facilities, telephone, fax machines, and office furniture (chairs, tables, and shelves) amongst others.

7. Hire Employees

When it comes to hiring employees for a standard freight forwarding business, you should make plans to hire a competent chief executive officer (you can occupy this position), admin, and HR manager, transport and logistics manager, marketing and sales executive (business developer), accountant, freight forwarders,  and customer service officer (receptionist).

8. Launch the Business Proper

In recent times, no freight forwarding business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.

With a proper launching of the freight forwarding business, you will officially inform people in your city that your freight forwarding business is open for business.

a. What Makes a Freight Forwarding Business Successful?

• Choose a good location and reliable shipping partners to launch the business
• Use reliable and effective freight forwarding and logistics software
• Hire only competent, hardworking, and trustworthy staff
• Be deliberate with your marketing sales approach
• Encourage the use of word of mouth to promote your freight forwarding business
• Leverage all available online and offline platforms to promote your freight forwarding business

b. What Happens During a Typical Day at a Freight Forwarding Business?

• The business is open for the day’s work
• Customer’s requests are taken and they are scheduled or attended to
• Tracking of freights and inventory management
• Warehousing activities
• Marketing/website upkeep
• Administrative duties (documentation, paperwork, and follow-up calls)
• The business is closed for the day.

c. What Skills and Experience Do You Need to Build a Freight Forwarding Business?

• Business management skills
• Customer services skills
• Interpersonal skill
• Logistics and shipping handling skills
• Bargaining skill
• Work experience in the shipping and logistics industry
• Experience in managing people
• Experience in business administration
• Experience in handling logistics and shipping software.