How to Start a Shipping Business
While it might not necessarily stand out as the most exciting business sector to get into, the shipping industry is easily one of the most important for domestic and international commerce. Quite frankly, there has never been a better time to start a shipping company either.
Studies show that around 90% of international trade relies on the freight industry. When you know how to start a shipping business in style, the opportunities to generate significant financial returns while simultaneously helping companies and consumers around the globe are fantastic.
This guide will help you learn the various steps for starting a shipping business in 2022 and beyond. Let’s get ready to deliver the goods.
Why Start a Shipping Company?
Before looking at how to start a shipping company, you need to be properly motivated to enter this arena. First off, you should know that the shipping industry was valued at $14 trillion in 2019 and continues to show a steady improvement year on year. For the companies that get it right, there is an opportunity to see very sizable ROIs.
While the proposed financial gains are rightly the first item on the agenda, it’s worth considering some of the industry’s other attractive features. They include but are not limited to:
- Flexibility - whether you start an international or domestic shipping business, there are many different niches and clients that you may work with. Likewise, you can run the venture from various settings and consider multiple staffing arrangements.
- Stability - it’s existed for generations, but the industry is now truly thriving. For example, stats from 2013-19 show that the volume of goods carried by ships rose by almost 35%. Unlike many business sectors, this industry runs 365 days per year without any dead periods.
- Importance - the shipping industry isn’t only one of the world’s longest-existing sectors; it’s also a vital cog in the engine of society. From cars to food and consumer goods to raw materials, global trade is dependent on freight companies like the one you plan to launch.
- Responsibility - the chance to make a difference in the world is something many entrepreneurs aspire to do. Carbon emissions from the shipping industry have been reduced, and industry leaders aim to reach a 50% reduction by 2050. You can play a significant role in this development.
- Engagement - every business owner enjoys a challenge, and starting a shipping company will present new ones daily. From building your business strategy to overcoming financial and logistical obstacles, this is an industry that offers a chance to dive deep.
Furthermore, studies have shown that the volume of shipments for B2B, B2C, and C2B parcel delivery across 13 major countries has grown from 43 billion units in 2014 to 131 billion in 2020. Given the way our consumer habits have changed during the pandemic, the figures are only climbing.
Starting a container shipping business isn’t for everyone. For the right candidates, though, it delivers an unparalleled opportunity to achieve great results and upscale over the years to come.
A Word of Warning About Shipping Freight Business Concepts
Telling yourself that you want to start a shipping business is a good starting point, but it’s equally important to familiarize yourself with the issues that could potentially hold you back. As with any business venture, you’ll need to be disciplined, capable of managing a workforce, and competent in handling financial matters. After all, one in five startups fail within the first year, with capital being the main source of problems.
There are several unique challenges you’ll face when starting a freight company. Some of the key issues that you must consider include:
- The need to calculate the CBM and freight tonnage to work out the costs (and, therefore, the profit margins) of all shipments.
- Learning how to determine whether a House Bill of Lading (HBL) or Master Bill of Lading (MBL) is required.
- The need to research when cargo can be shipped without insurance and which kind of insurance is needed when it can’t.
- A deep understanding of the HS Code or Tariff and how it’ll impact your domestic or international shipments.
- An ongoing demand to manage logistical factors that could impact shipping containers in multiple countries.
If you don’t have all the relevant experience and information at the start of your journey, you can educate yourself on the state of the shipping industry before officially launching your business. However, you must be honest with yourself regarding your ability to commit to the work even during stressful times.
How to Start a Shipping Business
It will require a lot of hard work to force your way into this crowded industry, but it is possible. However, the versatility and self-control inherent in the industry will offer you many options. As such, your research can even extend to ideas like how to start a shipping business from home - a concept that will help reduce some of your financial exposure.
In some ways, the shipping industry is no different to any other, not least in the sense that you must find your own path. Nonetheless, the following steps should point you in the right direction.
#1. Research the Market
Knowing that you want to start a freight company is one thing, but knowing the exact type of venture you wish to operate is another. There are several niches within the industry that you may wish to pursue, such as:
- Cargo shipping
- Container shipping
With 90% of goods being transported by sea, there are so many categories of shipping you can get into. You may also find that your future lies with a niche like hazardous goods, in which case you’ll also need to consider your clients. They could fall under the category of B2B, B2C, or C2B, ranging from small contractors to major organizations.
Getting into a niche that you feel passionately about is advisable, but you must also check out the relevant regulations, ranging from international laws and customs regulations to insurance coverage. The findings should influence your subsequent decisions.
#2. Build a Business Plan
A strong business plan is one of the most valuable documents that you can have during the early stages of planning and launching your shipping business. Aside from being a tool that can help you gain funding from banks or guide your team, it’s also something you can always look to for a better understanding of your company and where it’s headed.
It’s technically possible to write a one-page business plan, but when looking at a shipping business international venture, you’ll probably benefit from a more comprehensive business plan and proposal. It should set out:
- The objectives of the business, its challenges, and strategies
- The resources you require and whether or not you’ll still be able to profit
- The value of your proposition and potential exit strategies
All information should link back to the industry, which is another reason to know your competition and the state of the market, along with any anticipated developments and how they might influence your freight venture.
#3. Register Your Shipping Business
Conducting the necessary research and planning how to start a cargo business will build a solid foundation. However, you can’t truly begin following your dreams until the company has been registered. This means formally registering its name and checking trademarks.
In addition to registering the business, you’ll need your tax identification number and will also benefit from having a:
- Certificate in Shipping Business
- Certificate in Marine Transportation
- Certified International Trade Professional (CITP) status
The legal requirements for this industry are more stringent than for many small retail businesses. But whether you open a sole proprietorship or - more likely - an LLC, getting this paperwork under control is essential.
#4. Access Funding
Knowing how to start a shipping container home business counts for very little if you don’t have the capital, especially as you’ll be dealing with large sums of money. Buying a cargo ship can cost over $10 million, and even the alternative methods like setting up a UPS franchise will require significant funding.
Large operations will need an office, furniture, and office equipment. Even when looking at how to start a shipping business from home, there will be staffing costs, vehicle rentals, containers, and shipping equipment that can easily cost tens of thousands of dollars. Some options for funding the business include:
- Business bank loans and personal funding
- Private investors who can also offer mentorship and contacts
- Crowdfunding or loans from people you know
Your state may also offer business grants for startups, which is another route that’s always worth pursuing.
#5. Get Insured and Organized
There are many administrative tasks that must be completed before you start trading, such as getting a bank checking account and applying for your Employer Identification Number so that you can pay your employees. Having already completed your Certificate of Incorporation, you’ll also need Operating Agreements and Insurance Policies.
Joining the National Customs Brokers & Forwarders Association of America (NCBFAA) is another key responsibility, while you’ll also need to protect intellectual properties with copyrights and patents. You must also:
- Organize your freight, maritime, and shipping supply chain management
- Handle your employment agreements and non-disclosure agreements
- Seek the right insurances, such as general, risk, health, and workers’ compensation
You must also need to establish policies and contingency plans to overcome any problems that may occur while running the company. Maintaining compliance while also serving employees and clients in the right way is essential at all times.
#6. Decide on Your Location
The location of your business will be important for many reasons, not least your convenience. Even if running a home-based company, you’ll want to know that your cargo and shipments come in or out from a nearby port. You’ll also want to consider where your warehouses are stationed, while also looking into trucking logistics.
Knowing that your warehouses, your parking lot for fleet vehicles, and your containers are kept on one site can be beneficial, not least for managing costs. Be sure to consider:
- Accessibility to the site and getting to shipment locations
- The strength of competition from other freight companies in the area
- Any local regulations or laws that could affect your cargo business
Location is particularly vital when you want to start a domestic shipping business. That’s because 44% of customers will wait two days for fast delivery, but under 25% will wait for four days. Given the demand for fast solutions, this is one of your most important decisions.
#7. Assemble Your Team
You cannot expect to run a shipping container company alone, even if it’s a small one. While nearly two-thirds of companies state that retention is harder than hiring, finding candidates with the knowledge and experience to drive the business forward is key.
Many hands make light work, especially when their talents can fill the skills you might be lacking personally. Your workforce will inevitably include:
- Office, administration, and HR staff
- Truck drivers, shipment packers, and warehouse teams
- Engineers and cargo ship workers
If you don’t need to hire all of those people right away, delay it until you do. This will free up more capital while also allowing you to invest more time in the employees you have. Still, you must keep one eye on this to promote smooth long-term growth.
#8. Build Business Relations
While managing your in-house teams is important, you must also establish strong relations with partners. As a startup, it’s almost impossible to handle every aspect of the freight shipment journey without other companies. You’ll need to have strong connections with:
- Sellers, who will essentially be your clients
- Freight forwarder companies once shipments arrive at the destination country
- Buyers, who may sometimes come directly to you rather than a seller
You may also find that you need the help of various tech and software companies to maintain safe, trackable operations at all times.
The necessary business relations will depend on whether you ship by land or sea, as well as the nations you export to. Nonetheless, strong connections with the companies whose items you’ll ship should reduce delays and errors.
#9. Establish Your Brand
Branding might not feel like that important a step for a shipping business, but the right company image is as important as understanding the features of the NVOCC, like bills of landing or securing the right certifications. Having a solid brand inspires trust from clients and provides peace of mind for workers.
Many of your branding issues will be solved instantly if you take on a franchise. However, when starting from scratch, some of the key responsibilities to consider are:
- Ensuring that the brand personality aligns with your shipping niche
- Designing a website that engages your audience and inspires trust
- Getting placements in the right directories, publications, and online outlets
Above all else, you need to know that your branding is consistent. Meanwhile, customer care can be incorporated into your branding. Once you’ve been operating for a while, testimonials from your biggest clients can be a key step to winning more contracts.
#10. Start Operating
With all your preparations now complete, you’ll finally be able to start trading as a shipping business. Whether you’re using maritime or freight shipments, securing leads will be vital. You’ll need to embark on a full and thorough marketing campaign to properly establish yourself.
Winning clients is one thing, but keeping them is another. Finding the best CRM software will be pivotal, as you can use this program to manage all your communications and identify consumers’ behaviors. To provide a tailored service, you should focus on:
- Updates and tracking information on all shipments
- Quick invoicing and easy payment facilities
- Automated orders to streamline client operations
Of course, there’s nothing like experience to help improve your company over time, but the aforementioned steps should ensure that your venture gets off on the right foot. If all goes well, your shipping business will be set for years of success.
The Final Word
The freight industry is one of the longest-standing and most stable business sectors, and it can certainly accommodate new startups. As long as you know how to start a shipping business with compliance, convenience, and cost-efficiency in mind, there’s no reason why you shouldn’t discover a smooth road to success.
Firstly, you’ll need to research the market to determine whether you want to ship over sea or land, as well as choosing between starting a new business or buying a franchise. Following this, your next steps will involve recruiting a team, building partnerships, and gaining the licenses required to operate internationally.
Write a business plan and find a niche you can work in. Finance the venture and build a solid brand that will target B2B or B2C clients. Following this, work out which aspects of the supply chain require outside help. You’ll also need to find the right location, which will improve your chances of success dramatically.
Very. There are many variables that will influence the profit margins of shipments, but the largest industry player - AP Moller-Maersk A/S - made operating profits of $4.5 billion in 2021. So, if you can manage your business in an effective manner, success can be exceptionally profitable.
You can expect to pay $3,000 for a 40’ shipping container from China to neighboring countries. When looking to ship to the US, those prices will increase to around $5,000-$10,000 depending on your exact location.
Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.
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