What is the difference between a freight broker and a freight agent?
This is one of the most common questions I get as a freight broker mentor and owner of a successful freight brokerage. I have trained and developed several successful freight broker agents over the years so I certainly have some insight into the pros and cons from the perspective of a brokerage owner, and agent.
The difference between a Freight Broker and Freight agent is that the freight agent works as an extension of a brokerage. While they serve the same function agent’s are hired as 1099 contractors to operate on behalf of an existing entity licensed by the FMCSA. Both Freight Broker’s and agents serve to arrange the transportation of freight between their customers and truck drivers.
Making the choice between being a broker or agent can influence the entire path of your career so It is certainly not one you should take lightly.
So in this article we are going to answer the question once and for all, should you become a freight broker, or a freight broker agent?
What is a Freight Broker?
If you’re on this page, you’re probably familiar with the job duties of a freight broker. In case you don’t know…a freight broker is essentially a matchmaker between available loads and available trucks.
Freight brokers are licensed by the FMCSA help coordinate the movement of freight by connecting shipper’s with truck drivers to move their loads. Freight Broker’s charge a premium in exchange for arranging the transaction and managing the transport from start to finish.
What is a Freight Agent?
Now a freight agent, is not much different than a broker. In fact they both serve the same purpose, and only differ in their responsibilities.
A freight agent operates under the authority of a freight brokerage. They are responsible for arranging the transport of goods between shippers and truckers. Freight agent’s are responsible for various sales duties and in most cases the operational duties of freight brokering.
Now that we know what a freight agent and freight broker are let’s examine the responsibilities of each to determine which is better for your personal goals.
Need help? take our Free Freight Broker Owner Vs. Agent Quiz and Learn Immediately Which Path is Right For You!
What are the responsibilities of a freight agent vs Freight Broker?
Freight Agent’s enjoy the benefit of operating their own business without all the responsibilities with owning a freight brokerage.
Here are some of the most common responsibilities that a Freight Broker Agent would see on their job description:
Sales Duties – Freight Broker Agents are responsible for the prospecting, onboarding, and servicing of their own customers. Agent’s can expect to make many sales calls throughout their career and develop strong interpersonal & problem solving skills crucial to bulding relationships in the logistics industry.
Operational Duties – Freight agent’s work on commission, so it is not uncommon to expect freight agent’s to get their hands dirty and stay involved in the operational duties of a brokerage. After all if an agent’s loads are not covered, that agent will not get paid. As a freight agent yourself, you should expect to take a major role in the booking of your freight.
Self Management – While as a Freight broker agent you don’t have anyone managing you, you do have one person to manage. Yourself. As a freight broker agent you have to develop the discipline to stay focused and self motivated to accomplish your daily tasks.
Now, let’s look at the Duties of a freight brokerage owner:
Business Licensing – Freight brokerage owners are responsible for registering their business with the government (local/state/ and federal) while also making sure to pay all applicable taxes every year.
FMCSA Licensing – The freight brokerage owner is responsible for filing the proper documentation with the FMCSA, the governing body that oversees logistics operations. That means that the freight broker owner takes on significant risk for running the business.
Insurance – Running a business without insurance is like skydiving without a parachute. As the business owner you will need to make sure that you have all the proper insurances to satisfy both legal requirements and your customer’s requirements in order to haul their freight.
Hiring & Firing – As a brokerage owner, it is your responsibility to find people to help you get the job done. Unless of course you try to do everything yourself. As the owner of a brokerage you will constantly be challenged with finding people to add to your team and eliminate those who slow down your growth.
Payroll/Human Resource Management – As your team grows, so do your expenses. You will be responsible for your weekly payroll and making sure that your team receives their paychecks on time and as promised. Once you have a few employees, you will need to take on some human resource duties to protect yourself from possible workplace lawsuits and to manage the general well-being of your staff.
Managing/Leadership – Leadership is essential in any aspect in life, even more so when you are the leader of a freight broker business. As the owner your employees and agents who work for you will depend on you to solve problems and stay strong in the face of adversity. You must develop a level mind, thick skin and uplifting attitude to get the most out of those who work for you.
Now in analyzing the duties of a freight broker owner vs. freight broker agent, you can start to see why some might choose one path over another. By the sheer volume of responsibilities that fall on your shoulders as a brokerage owner, you can easily determine whether you can handle that kind of stress all at one time.
Let’s continue with our comparison and examine
How Much Freight Broker’s Make vs. Freight Agent’s Salaries.
Freight brokers and agent’s perform the same activities to make money, however the source of income vs expenses that each will incur are different.
Lets start with broker agent’s. Now, we already established that broker agent’s are more or less working “underneath” a brokerage. In other words, under the umbrella of the broker and utilizes the infrastructure to work.
With that known, lets get into how agent’s actually get paid.
Freight broker agent’s are typically hired on a contractor basis. Utilizing a 1099 agreement, a broker agent is hired as an independent contractor who’s services can be terminated anytime by the brokerage owner. Now there are some pro’s and cons to this arrangement but we’ll cover those in another article.
Agent’s are paid a commission share on loads that are executed and paid by their customers. Typical split’s are between 30% and 70% of the net profit on a load.
Example:
If you move a load for $1000 and your cost is $500. The brokerage profit would be $500 meaning that on a 50% commission split, you would earn $250 for that work. The broker owner would be responsible for paying you that split on your distribution check based on the agreement you make with them.
The advantage here is that the brokerage back office will take on the task of collecting payment from your customers, where you wil be able to simply solicit more business and grow your book.
The disadvantage here is that some brokerage’s may not have enough liquid cash to pay you until your customer pays them. This creates some issues as you depend on your agreement, you may have to wait weeks until you see that payment reflected in your checks.
As far as How much do broker agent’s make?
Broker agent’s can comfortably make anywhere from $60000 per year up to $1000000 per year based on industry experience, their network and agreement with their brokerage.
In my experience I have seen both sides of the spectrum. I have had agent’s who make $0 in 6 months and I have seen some go from $0 up to $500k per year extremely quickly. Everything is relative to your skillset and willingness to develop yourself.
The only way you can fail as an agent is if you quit.
Now let’s examine how does a Freight Broker get paid.
A freight Broker gets paid by drawing either a salary or distribution from their companies profits. A freight broker must analyze expenses such as payroll and taxes and issue payments to themselves in a way that will not put a financial strain on the business.
Unlike agent’s who only need to worry about getting more business and collecting commission, Freight Broker owners have a responsibility to make sure that they can cover all expenses for overhead such as:
– License fees
– Insurance
– Freight Spend
– Technology
– Payroll
– Taxes
– And more
This means that the owner of a brokerage’s salary might vary based on the financial health of the business at any given time. Freight Broker’s have contractual obligations that they must satisfy before they take any salary for themselves.
So, while the actual percentage of profit might seem higher for a brokerage, the actual fraction of that they will “take home” will be a lot less than that of the agent.
Let’s go back to our $1000 load example from the perspective of the broker owner:
Ex. If you move a load for $1000 and your cost is $500. The brokerage profit would be $500 meaning that on a 50% commission split, you would earn $250 for that work. From that $250 we can reasonably assume that 25% will have to be allocated to operational costs like we mentioned above and another 20-30% will go to taxes. This means that while the agent is earning $250, the brokerage owner may only keep $150 of that money.
Should I be a Freight Broker or a Freight Agent?
Now that you understand the differences between a Freight Broker and a Freight agent, you can use this information to assess your own goals and decide which path would be right for you.
Now, a lot of people ask me for my opinion and what I think, so rather than just tell you “do whatever you want” this is my honest take on the question.
If you want to be a business owner, it is completely different than wanting to make commission as a sales agent, so the answer is not so cut and dry. If your goal is to own a business, be your own boss, grow a team and have financial freedom, the only path towards that goal, is to open your own brokerage.
The feeling of being a freight broker agent, will never fill your desire to be a brokerage owner, no matter how much money you make because you will never truly be in full control of everything.
Now as far as financial and risk is concerned, being a freight agent is absolutely the better option and has a far higher success rate than those who open their brokerage. Becoming an agent means that you are sacrificing a little bit of control and cutting a learning curve in half to accelerate the amount of money you make.
If you are new to the industry, my advice would be to start as a freight agent, and later when you fully understand all of the risks, and responsibilities you would have as a broker owner, you can assess whether you should make the leap or go all in to maximizing your results as an agent.
The stress of a brokerage owner is not something that you will ever understand until you experience it for yourself. With that said, it is a very rewarding endeavor for those who see it through.
And that is my take on the subject
Now I’d love to hear your thoughts. What made you choose being a brokerage owner over an agent? If you had to do it all over again, would you? Let me know your thoughts in the comments.
P.S. Whenever you’re ready… here are 3 ways I can help you grow your Freight Brokerage:
1. Join our Freight Broker Accelerator and get RISK FREE training If you’d like to work with me directly on your brokerage growth plan Check out the Freight Broker Accelerator the number 1 brokerage training program on the internet. Join the Freight Skills Academy Risk Free for 30 Days
2. Watch my free Webinar It’s the roadmap to growing your freight brokerage past 6-figures: Watch our FREE Webinar
3. Join the Freight Broker Network and connect with Brokers who are scaling too. It’s our new Facebook community where smart broker’s learn to get more income, impact, and independence.: Join Our Free Group
