With the rise of online shopping among consumers at the international level, the demand for cargo and shipping industry has increased.
From small items to huge orders, manufacturers rely on the services of the shipping companies to deliver the goods across the globe.
However, it is not an easy job to run a cargo business. You have to look at certain factors to run your freight company successfully.
Here are the six crucial aspects you should know about a shipping business.
- Types of Shipping Business
Before starting a shipping business, you must know its basic types to understand what works best for you.
The two types of freight business are Freight forwarding and Freight brokerage. The freight forwarding business handles the product starting from picking it up from the client to its delivery to the destination.
On the contrary, the freight brokerage business holder acts as a middleman and connects clients with the shippers based on their sound knowledge.
You must work in the industry and gain experience to know which types of freight business are feasible to you according to available resources.
You can start a shipping business that covers all the services, but it costs you more than a single service. The realistic way to establish your own shipping business begins with your awareness of the industry and budgeting.
- Selection of a Niche
The best way to excel in the freight business is to select a niche. It would help you stand out among the competitors and develop expertise in a particular line of products.
For instance, to carry out sensitive technical equipment such as computers, laptops, cellphones, etc., the shipment company is responsible for handling these products with great care and packaging.
You must know everything, such as learn more about freight class codes to offer the best bids and deliver the products safely to the destination at the end of the day.
In this way, manufacturers of digital devices feel more comfortable doing business with you and rely on your services to deliver their products across the world.
Depending on your progress, you can extend your services to other industries with time. Start with researching industries and manufacturers that require shipping to geographical locations where freight companies are limited.
Furthermore, you can also examine the products that require special care while delivering.
- Working on Your Budget
The majority of businesses fail to sustain their operations in the long run due to limited finances. The budget is the most important aspect of the shipping business.
When you plan to start a freight company, the quality of services you provide depends on the financial resources you have.
The number and quality of the staff are also revenue-driven. The more money you have, the more chances you get to expand your business and hire staff accordingly.
It is vital to estimate your finances before getting into the huge industry of shipping that needs more money than other businesses in general.
According to a rough estimation, you need $10 million to purchase a big enough cargo ship, $750 to register your shipping business in the US, and $5,000 or above to get licenses, permits, and insurance.
Additional costs may include $50,000 for a rented workplace or warehouse in the US and $15,000 for office or shipping equipment.
This is a huge amount of money you need to run a shipment company, so it is better to consider all the factors before setting up your shipping business.
- Recruitment of Staff
The success of every business is primarily based on the quality of the human resource it exhibits. Due to the technical nature of the shipping business, you must be vigilant and careful while hiring the employees.
Develop a sound and comprehensive recruitment policy to hire the best available resource. Invest your time in getting to know the industry professionals.
You may face difficulty in finding the right resources initially. For instance, you need experienced captains to sail your freights, technicians to fix the errors in the system or the ships, order handlers, warehouse supervisors, inventory managers, etc.
The quality of the staff defines your services in the long term so consider hiring the staff with support. You can take professionals onboard to hire a team.
- Knowledge of Regulations
The shipping business isn’t an easy process. It requires a lot of documentation and involves approvals from regulating authorities depending on your operational areas.
You must comply with laws and regulations to make your business operations legal.
The International Maritime Organization (IMO) is an agency of the United States that regulates the international trade conducted by the shipping industry.
In the United States, the Federal Maritime Commission (FMC) is responsible for providing a safe and competitive international shipping system and protecting people against unfair practices.
You have to register your shipping business with local authorities and get relevant licenses to establish your freight company.
Use government websites to understand what you need to have for a shipping company in your country. The requirements may vary for the different types of shipping businesses; freight forwarding and freight brokerage.
- Understanding of Insurance
Some insurance that any freight business should consider to have are public liability insurance, product liability insurance, professional indemnity insurance, and employers liability insurance.
Additional insurance may include certain freight insurance policies, for example, logistic liability coverage, cargo insurance, and surety bonds.
Insurance packages are also available for brokers and forwarders. The freight broker liability insurance is for brokers, while the freight forwarders liability policy is for forwarders.
Make sure to register for VAT if applicable for the nature of the products you are shipping.
In the case of a freight forwarding business, you must consider some additional measures. Develop an understanding of the legal standardization system for transporting freight, duties, and procedures involving importing and exporting products.
Apply for and acquire international trade documentation such as air waybills, CMR consignment notes, and bills of lading. Make sure your storage facility or warehouse follows global health and safety standards.
As the shipping business requires technical knowledge and legal documentation, you must work in the industry to get experience before setting up your freight company.
You can decide on crucial aspects of your business if you have prior experience in the industry. If you don’t get any chance to be a part of any freight company, opt for training from any reliable institute.