Planning to start your own shipping and freight business..?? Read this..

For any business to be successful, one needs to know the business, its model and requirements inside out.. Many businesses start with a great idea..

But there could be big gap between a great idea and a great startup and many people don’t have a clue on how to bridge this gap and may end up spending their life savings to start the business..

Forbes published an article on 10 Reality Checks Before Starting Your Own Business..

1. Are you ready for the startup lifestyle?
2. Are there customers with real pain and money?
3. Is the market opportunity large and growing?
4. Is this a crowded space already?
5. Does your solution have hidden dependencies or costs?
6. Do you have intellectual property to defend against competitors?
7. Can you build a motivated and qualified team?
8. Have you looked realistically at the costs?
9. Do you have stamina and skills?
10. Going “from” rather than “to”?

While the above is good for any business, if you are planning to start your own shipping and freight business, here are 7 reasons why you shouldn’t start your own shipping and freight business..

Yes you are reading it right..

You shouldn’t start your own shipping and freight business if :

7) You don’t understand the real role and work of the various entities (freight forwarder, customs broker, shipping agent etc etc) involved in the business

6) You don’t know the role of the HS Code or Tariff in the whole gamut of shipping

5) You don’t know the role of a bill of lading or the difference between a house bill of lading and master bill of lading

4) You don’t know your Incoterms® from your Algebra or when cargo can be shipped without insurance

3) Which means you also don’t know or understand the implications of liability and risk management involved in the business

2) You don’t know how to calculate CBM or the meaning of Freight Ton/Revenue Ton or the financial impact of the business

1) In short, you are unclear about the real processes and procedures involved in the import and export chain

You must be thinking that it is obvious that one has to have this knowledge before wanting to start this business, but you will be surprised to know how many questions I receive relating to shipping and freight business like below..

I am planning to start import and export business in a week with my friends. But I don’t know import and export procedures clearly. Please provide step-by-step guidance how to start freight forwarding business.

I want to open my own customs house agency but I am not clear on the duty calculation process, can you help me.

There are several pitfalls of starting a business you know nothing of or unsure of..

Let’s examine the reasons why you shouldn’t start your own shipping and freight business if you fall into the above category..

7) There are several entities involved in the shipping and freight industry like freight forwarder, clearing agent, NVOCC, haulier, surveyor, ships agency…………….. and many more..

So first and foremost, you need to be clear about which of these businesses you want to get into..

All these entities have varied and different roles to play in the whole chain and it is certainly not easy for a startup with incomplete knowledge to handle these functions..

In the case of 1st example above, someone wants to start their own freight forwarding business, but has no knowledge of the process..

Theoretically “anyone can become a freight forwarder” because in most countries there is no legislation stopping anyone from “calling” themselves a freight forwarder or doing business as a freight forwarder..

However, in order to operate as a true freight forwarder there are several process and procedures to be aware of and several responsibilities one needs to assume..

Assuming responsibility could also include costs involved which may fall on the freight forwarders head and he or she has to know the business well enough to ensure which costs he or she maybe held responsible for..

For example, a freight forwarder needs to know whether he or she can be held responsible for abandoned cargo or whether he or she maybe held liable for any damages to cargo routed via them and at what stage..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

6) Why should I be aware of the HS Code and tariff and why is this information important to start my own shipping and freight business you may ask..

Say for example you are planning to start a Customs Clearing business, the HS Code is the basis on which import tariffs are calculated and any duty, vat or tax is charged..

Without knowing the proper classification of the cargo and which HS code it falls under, you will not be able to handle your clients cargo effectively.. The incorrect use of the HS code may result in cargo being confiscated, fines levied, criminal penalties/charges instituted, or result in cargo being returned to the POL..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

5) The bill of lading is one of the most important documents in the shipping cycle and as a forwarder or shipping agent, you need to REALLY know and understand the role of this important document and which type of bill of lading to issue for which shipment and to where..

As an agent on whom the shipper or consignee depends on

you need to be aware of how the bill of lading must be consigned and to whom
of course it would also help if the shipper or consignee knows about the process of export or import especially if they are exporting for the first time or importing for the first time
you also need to know the various intricacies involved in issuing a house bill of lading vs a master bill of lading
you need to ensure issuance of the correct type of bill of lading such as Sea waybill instead of Original and vice versa
you need to ensure that the bill of lading is issued correctly in terms of the transport mode such as Multi-Modal or Combined Transport or Port to Port

Incorrect issuance of the bill of lading can cause severe financial implications not to mention delays at the port of discharge for the client to secure their cargo..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

4) Incoterms® rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods and is designed to help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers..

Incorrect interpretation of Incoterms® by an agent has many a times resulted in several cases of money and business loss for both the agent and their customer..

Misinterpretations and incorrect use of the Incoterms® such as the use of FOB for containers, continues in the market purely based on previous practices..

As an agent involved in the shipping and freight business, you really need to understand these terms in depth so that you may provide sane advice to your customers and others who may not be aware of the differences in the terms and where and how it should be applied..

You will require this in-depth knowledge especially when it comes to quoting a customer based on the Incoterms® he provides you.. If you are not aware of this, you may very well end up missing to quote vitals elements such as duties, taxes and some other important charges..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

3) This brings us to the question of risk management associated with the shipping and freight industry.. There are several identified risks as below, all of which can apply in the shipping and freight business..

Using proper SOPs
Arranging proper insurance cover
Counterparty risks
Jurisdictional risks
Contractual carriers

An agent must be able to advise their clients on these risks and must also be fully equipped to deal with these risks and be aware of how to mitigate them if and when it arises..

Another point that most businesses in the industry seem to forget is the usage of proper and comprehensive Trading Conditions that must be incorporated in all communications and this simple act has been known to mitigate several losses to the people involved..

Insurance and risk management cover does not apply only to the cargo, seller, buyer etc, but also applies to a forwarder or clearing agent who must have their own cover to protect themselves.. There are many entities which provide liability insurance and related risk management services to the international transport and logistics industry..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

2) Any shipping and freight business (any business for that matter) will be started with the intention of making a profit.. However, if you are not aware of the basis on which your service must be charged, then you would start losing money from the beginning..

For example if you want to start a freight forwarding or a clearing agency business you DEFINITELY need to know how to calculate the dimensions of the cargo and be able to work out the CBM and charge the customer basis Revenue Ton or Freight Ton because that is the main basis of charging for many forwarding, warehousing and clearing agency businesses..

If you are not aware of how this works, then it is going to be very difficult for you to be able to charge your customer..

My post on how to calculate CBM and Freight Ton is the one of the most popular posts on this resource which shows how many people are still learning this and how popular this calculation is..

So don’t miss learning this crucial point which can affect you financially..

Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

1) The last but most important point is if you are not aware of the processes and procedures involved in the shipping and freight business, then you would be better off not to start your own shipping and freight business..

It is absolutely vital that you have at least a good 5-7 years experience in a similar “working” position in the industry and handling shipments before you even consider starting your own shipping and freight business..

What I have mentioned above are only a few main points, but there are several other points one needs to consider before embarking on your own shipping and freight business..

Like for example, the process and procedures involved in insuring yours or your client’s cargo or what happens if cargo is shipped without insurance..

Last but not least : Remember the shipper or consignee is dependent on YOU to provide proper information and guide them with their shipments..

Conclusion

The shipping and freight industry is highly volatile as it is and as you may have seen, many shipping lines, freight forwarders, 3PL companies, and courier companies have merged and strengthened their positions through these mergers and acquisitions..

All these companies have been around, doing the shipping and freight business for yonks and know the workings of the business and yet they have had issues..

Of course that is not to say that smaller operators will be unsuccessful, and if you surely know how the business is run and confident of avoiding pitfalls like above, by all means go ahead and “Start your own shipping and freight business“.. Good Luck.. 🙂

I am sure that there are some readers who run their own shipping and freight business successfully or some readers who have not been able to run their own shipping and freight business successfully..

In either case, pls share your experiences so many others can learn what to do and what not to do in order to start and maintain their own shipping and freight business..

29 COMMENTS

Satya July 29, 2022 At 10:01 AM

I am gulf return. Planning to start shipping business close to chennai, Indià. Can anyone advise me the steps and investment required.

Massi February 8, 2022 At 11:32 AM

I don’t agree with that, anyone who is scared from competition will fail in advance. And I have a lot of experience in using shipping companies. And I ll tell you that I have good deals with small companies that big companies. Usually big companies they have all the policies that govern the pricing so the shippers don’t have that power of negotiating because they deal with an employee that has no power in giving reducing the price. But small companies, you deal with the owner who has the power of changing the price, so offering a better price.
You may need a capital to start, but if you have the right mind set and you are a good negotiator, you are going to bring miracle to your reality. I believe in the the self determination and the respect that mind set, and we are in time that there is nothing such impossible. Guys you instead of the title of this article which is negative I suggest you changed to the 7 things you should learn to succeed in this business. We don’t need anyone to scare us and put fear in us from achieving our dreams, but we need someone with knowledge to encourage us that nothing can stop us. Guys it’s all about the power that everyone has in him. Go for your dreams and believe I. Yourself. Nothing is out of our reach. We just need the right mind set to take the necessary steps needed to starlet your road towards your destination. Good luck and gif bless you all

Irmawati October 27, 2021 At 7:36 AM

Hi, we are looking for agents in Germany and US to control shipments.
Now, we are currently doing locally at Jakarta, Indonesia and will have some biddings to Europe and US.

- Ash June 21, 2022 At 9:02 AM
  
  Hi. Please forward your contact details for further communication
Alpha Lombel August 21, 2021 At 1:36 PM

Hi.
I want to start being shipping agent or forwarding agent for my customers in Finland to Africa especially to West Africa. Thank you.
Best regards;
Alpha.

- Johnson June 30, 2022 At 2:35 AM
  
  We are Freight Forwarding Agent here in west Africa we clear Air and Sea shipment in all west Africa country include Nigeria as well..You can contact us on whatsapp+2349156507816
Alpha Lombel August 21, 2021 At 1:31 PM

Hi.
I want start shipping agent or forwarding agent for my customer in Finland to Africa especially to West Africa. But I don’t know how to start or begin doing it from Finland to Africa. I will really appreciate if you can give me some essential advice how start. Thank you.
Best regards;
Alpha.

- Anandhu Anilkumar May 6, 2022 At 5:35 AM
  
  shoot me an email at an4ndhu@gmail.com
Tanka franco June 2, 2021 At 1:20 PM

Hi!
what are the necessary document needed to start freight forwarding business ?
can any one help?
Thank you

Rose-Marie February 22, 2021 At 2:43 PM

I love your newsletter which us always accurate and succinct. I had my own customs brokerage company that I opened only after my own 20 years of experience and ran for 22 happy years. I cannot tell you how rampant ignorance runs in all phases of this entire business from top to bottom, including within the ranks of Homeland Security. A simple course will not make you an entrepreneur with knowledge. I applaud this article in full, do not become a provider unless you have full knowledge and deep pockets to start.

- Hariesh Manaadiar February 22, 2021 At 6:50 PM
  
  Glad to hear you echo my sentiments Roese-Marie..
Mohd Younes February 17, 2021 At 1:23 PM

Dear Sir,
I m very thankful for your Articles its very helpful for improve my knowledge in Shipping Industry as a Charter

Emma Wanjiru February 16, 2021 At 3:28 PM

The reasons why one should not start a freight business are real. I would also like to add that if you don’t have a clue about customs procedures and law that you should just walk away.

Peter Williamson June 11, 2019 At 12:26 PM

Great article. Thanks for sharing it with us. Keep it up!!!!

Lililan March 7, 2019 At 10:16 AM

Thank you for sharing this information I believe I have learned a lot. May you keep helping most of us who are struggling in this field. Be blessed

Lekgotla November 3, 2017 At 7:22 PM

Got a few questions?
1. How do you determine TEU capacity in an Container Terminal?
2. Is there a benchmark Revenue/Ton and or Revenue/TEU that is used in Terminals?
3. What about a benchmark for ICT costs, Marketing Costs etc in Terminals?

Adit November 1, 2017 At 3:13 AM

Reason no. 8 : Shouldn’t start freight business without sufficient capital and good cashflow management. As starter, you most likely have no good deal with carriers and should pay all freight in cash against doc. While in return, you get your invoice paid by client in weeks later. And for sure, with low margin in this very tight competition against mature players.

- Vishwas dixit March 17, 2019 At 9:44 PM
  
  biggest reason
Aamir Sheikh October 27, 2017 At 3:47 PM

Hi, Kindly give me suggestion for my Carrier Which institute and which course help me to do for shipping in Mumbai?

Mr. Serguei Sokolov October 27, 2017 At 10:55 AM

Very great article that helps people to make a right decision. Thank you.
I would add that before opening a door of your own bureau everyone needs to gain adequate professional experience not only to close the deals clearly (to keep Customers satisfied) but also to take a very careful attention on the global environment, to gain market scent. Interpreter must to know how keep even kiel of his boat and avoid economical and political rocks. Basically, a good shipping specialist is like the Rambo in a jungle. One of my businesses has been collapsed over the economical sanctions of 2015. I did underestimated a political risks in my business plan.
Good luck everyone!!

Tasha October 26, 2017 At 1:49 PM

4 paragraphs from the bottom: it says for ‘yonks’
What is a yonk?

- Hariesh Manaadiar October 26, 2017 At 4:13 PM
  
  Hi Tasha, it means “for a very long time”.. Its an informal version of “eons”..
Gugu Mthethwa August 26, 2017 At 3:06 PM

Thanks to this article I have broaden my knowledge of shipping requirements
I would also like to open a clearing and forwarding business. I have been in a shipping position for 6 years but feel I need to know more to start my own business
Please enlighten me. Would appreciate any help.i am from South Africa

Tom February 3, 2016 At 12:28 PM

It is always good to have some knowledge prior to start shipping and freight business so I think your valuable advice can help people.

stan menams & associates December 2, 2015 At 1:11 PM

Thank you so much for giving previledge to be part of this blog.I feel elated because i would be equipped on freight forwarding and being an agent abroad through this medium.please keep loading me with information.

Thank you sir

- Hariesh Manaadiar December 2, 2015 At 1:54 PM
  
  Glad to be of help Stan..
Santan December 2, 2015 At 1:49 AM

Dear sir,
Thank u very much for your valuable advice. I am new to the industry & I always wanted to start shipping biz on my own after some years of experience. Articles like these always helps the readers like me. I am a regular visitor to your blog. I would like to know the freight forwarding,documentation(Docs required in India for clearance etc) procedures in India. Once again I am very thankful to you for enhancing my knowledge. Hope this blog keeps on helping the new comers like me. I appreciate your efforts in running this blog more effectively. Thank you & All the best.

- Hariesh Manaadiar December 2, 2015 At 8:15 AM
  
  Hello Santan, thank you for your comments.. What you have mentioned is precisely the purpose of this blog in general and this article in particular.. Pls do share with others in the same position as you.. Good luck.. 🙂
- hassan December 10, 2015 At 1:26 AM
  
  frist of all i would like to thank you for your valuable knowledge , i think if any one want to make a business like this
  need a Hugh funds and good relationship with many agent from all over the world , but how i guarantee a safe way with
  deal with a new agent ?