How to Start a Shipping Business [Business Plan]

A shipping services company is a company that handles the shipping and transportation of cargo (goods), while also offering advanced warehouse management, inbound freight coordination, and order fulfillment. The international shipping industry is responsible for the carriage of around 90% of world trade.

It is interesting to note that not every shipping company has its own ships as most of them operate ship charters. The global market size of the shipping industry was put at USD 168.56 billion in 2020, and it is projected to reach USD 188.57 billion by 2028, growing at a CAGR of 1.43% during the forecast period (2022-2028).

Steps on How to Start a Shipping Business

1. Conduct Market Research

If you are considering starting a shipping services business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your shipping services 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, give you reliable information of what your potential market will be looking out for from a shipping service, and also help you operate your shipping business with less stress.

a. Who is the Target Market for Shipping Business?

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

b. Is Shipping Services Business a Profitable Business?

Yes, the shipping services business is quite profitable because available data shows that container shipping pre-tax profit for 2023 and 2022 could be as high as $300 billion, according to Drewry, an independent maritime research consultancy., the industry is forecast to make $150 billion. That’s a new record. In 2020, the industry brought in $25.4 billion, according to The Journal of Commerce.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to the shipping services business.

d. Who are the Major Competitors?

• Mediterranean Shipping Company
• Maersk
• CMA CGM
• COSCO
• Hapag-Lloyd
• Ocean Network Express (ONE)
• Evergreen Marine Corporation
• Yang Ming Marine Transport Corporation
• Zim Integrated Shipping Services
• Wan Hai Lines
• Pacific International Lines
• Zhonggu Logistics Corporation
• Korea Marine Transport Corporation
• IRISL Group
• Shandong International Transportation Corporation
• X-Press Feeders
• Antong Holdings (QASC)
• Sinokor Merchant Marine
• Matson, Inc.

e. Are There County or State Regulations or Zoning Laws for Shipping Services Business?

No, there are no county or state regulations or zoning laws for the shipping services business. Players in the 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 Shipping Services Business?

No, there are no franchise opportunities for the shipping services business.

g. What Do You Need to Start a Shipping Services Business?

• A Feasibility Report
• Business and Marketing Plans
• Business Licenses and Permits
• Ships or Collaborate with Ship Owners
• Insurance
• EIN (Employer Identification Number)/Federal Tax ID Number.
• A Corporate Bank Account
• Employees
• Shipping Containers and Equipment

2. Memorable Shipping Business Names

• Ship It© Shipping Company, Inc.
• Queen Carrier® Shipping Company, LLC
• Barry Whyte© Shipping Line Company, Inc.
• The Patriots® Shipping Company, Inc.
• Transport King™ Shipping Company, Inc.
• Golf Liner™ Shipping Company, LLC.
• Richard Clinton and Co© Shipping Company, LLC
• All About® Shipping Company, Inc.
• Star Line© Shipping Company, Inc.
• Adolphus MBA© Shipping Company, Inc.
• Safe Hands® Shipping Company, LLC
• Moon Line® Shipping Company, LLC
• Carry Go™ Shipping Company, LLC
• Kenny Black© Shipping Company, Inc.
• Sun Rise® Shipping Company, Inc.
• OH, La™ Shipping Company, Inc.
• Ship Link™ Shipping Company, Inc.
• Bright Monday© Shipping Company, Inc.
• Queenetta® Shipping Line Company, LLC
• Eagle Line™ Shipping Company, Inc.

3. Register Your Business

a. What Type of Business Structure is Best for Shipping Services Business?

When it comes to the business structure of a shipping services 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 any 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 Shipping Services Business?

• General Business License
• Zonal Permits
• Shipping Related Permit
• Operational State Facility Inspections for your ships and yards (warehouse)

d. What Type of Certification is Needed to start a Shipping Services Business?

You don’t need any certifications to start a shipping services business.

e. What Documents are Needed to Open a Shipping Services Business?

• DBA
• EIN
• Business and liability insurance
• Federal Tax Payer’s ID
• State Permit and Building Approval (For your parking)
• 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 shipping services business, usually you may not have any need to file for intellectual property protection or trademark. This is so 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 Shipping Services Business?

The startup cost for a shipping services business is not uniform, some factors can influence the cost. But basically, a standard shipping services business will cost several million dollars.

For example, in March 2010, the average price for a geared 500-TEU container ship was $10 million, while gearless ships of 6,500 and 12,000 TEU averaged prices of $74 million and $105 million respectively. The only reason why you will spend less is if you don’t intend to own a ship but partner with ship owners.

b. What are the Costs Involved in Starting a Shipping Business?

• The total fee for registering the business in the United States of America – is $750.
• Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $10,200.
• Marketing promotion expenses – $5,000
• The cost for hiring a business consultant (writing of business plans inclusive) – is $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) – is $250,600.
• The cost for facility remodeling and installations – is $20,000.
• The cost for the purchase of a ship: $10 million
• 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 for our grand opening party – $10,000
• Miscellaneous – $25,000

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

• The size of the shipping services 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 shipping services business
• The cost for furnishing and equipping the facility
• The cost for insurance policy covers
• The cost for registering the business
• Cost of recruiting and training your staff
• The cost for the purchase and customizing of uniforms

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 shipping services 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 Shipping Business?

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

f. What is the Average Salary of your Staff?

• Chief Operating Officer (President) – $9.8 Million Per Year
• Captain – $120,800 Per Year
• Admin and HR Manager – $68,000 Per Year
• Shipping and Logistics Manager $65,000 Per Year
• Marketing and Sales Executive (Business Developer) – $62,000 Per Year
• Accountant $58,000 Per Year
• Material Handlers / Yard Spotters / Forklifts Operators – $33,000 Per Year
• Customer Service Officer (Receptionist) – $30,100 Per Year

g. How Do You Get Funding to Start a Shipping 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 handle shipping and transportation, while also offering advanced warehouse management, inbound freight coordination, order fulfillment, and outbound shipping and delivery. Every function of supply chain management is available, and close collaboration is essential to us.

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

• Shipping and transportation
• Advanced warehouse management
• Inbound freight coordination
• Order fulfillment
• Outbound shipping and delivery

c. Mission Statement

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

Vision Statement

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

d. Goals and Objectives

The goals and objectives of a shipping services business are to transport goods within long distances across the sea without difficulty, making it the ideal option for freight-hauling jobs.

e. Organizational Structure

• Chief Operating Officer (President)
• Captain
• Admin and HR Manager
• Shipping and Logistics Manager
• Marketing and Sales Executive (Business Developer)
• Accountant
• Material Handlers/Yard Spotters/Forklifts Operators
• Customer Service Officer (Receptionist)

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.
• Reliable and efficient ships and service.

Weakness:

• Not enough existing clientele to run at full capacity immediately
• The owner is new to large scale marketing
• We will need a loan to build our facility and to purchase our first ship
• 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 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 their regulatory status and decide to enforce strict regulations that can strangulate new businesses.

b. How Do Shipping Services Businesses Make Money?

Shipping services businesses make money by charging clients for moving their goods from one location to another and the customer pays the voyage expenses such as fuel, canal tolls, and port charges. The shipowner pays all vessel operating expenses such as the management expenses, crew costs, and vessel insurance.

c. Payment Options

• Payment via bank transfer
• 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 shipping services 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 an 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 our business in relevant magazines, newspapers, TV and radio stations.
• Attend relevant expos, seminars, and business fairs et al to market your services
• Engage in 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 Product/Service?

We look forward to charging our clients based on the size, weight, and destination of their package.

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

It depends, but the available report shows that on average, a shipping services 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 shipping services business (number of ships owned)
• The types of related services offerings (advanced warehouse management, inbound freight coordination, order fulfillment, and outbound shipping and delivery et al)
• The location the shipping services business is covering
• The management style of the shipping services business
• The business approach of the shipping services business
• The advertising and marketing strategies adopted by the shipping services business.
• The number of years the shipping services business is in business

d. What is the Profit Margin of a Shipping Services Business Product/Service?

The profit margin of a shipping services 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 shipping services 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: $20 million
• Second Fiscal Year: $60 million
• Third Fiscal Year: $80 million

6. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for Shipping Business?

• The demography of the location especially as it relates to eCommerce activities and shipping
• The demand for the services offered by shipping businesses in the location
• The purchasing power of businesses and residents of the location
• Accessibility of the location
• The number of shipping services businesses 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 Shipping 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 Shipping Services Business?

You should be prepared to purchase forklifts, loaders, shipping containers, pallets and 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 shipping services business, you should make plans to hire a competent chief executive officer (you can occupy this position), captain, admin, and HR manager, transport and logistics manager, marketing and sales executive (business developer), accountant, material handlers/yard spotters/forklifts operators and customer service officer (receptionist).

8. Launch the Business Proper

No shipping services 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 if you are operating on a low budget or you can go for a grand opening party.

The bottom line is that with a proper launching of the shipping services business, you will be able to officially inform people in your city that your shipping service is open for business.

a. What Makes a Shipping Services Business Successful?

• Choose a good location and reliable ship or shipping partner to launch the business
• Hire only competent, hardworking, and trustworthy staff
• Be deliberate with your marketing sales approach
• Encourage the use of word of mouth to promote your shipping services business
• Leverage on all available online and offline platforms to promote your shipping services business

b. What Happens During a Typical Day at a Shipping Services Business?

• The business is open for the day’s work
• The ships and containers are cleaned and ready for deliveries
• Loading and offloading of ships
• Schedule maintenance of ships are carried out
• Marketing/website upkeep
• Supply ordering
• Administrative duties
• The business is closed for the day.

c. What Skills and Experience Do You Need to Build a Shipping Services Business?

• Business management skills
• Customer services skills
• Interpersonal skill
• Logistics and material 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.