Approximately 90% of international trade happens through the global shipping industry. Without the sector, importation and exportation of affordable goods would be impossible. The world would come to a standstill economically.
Shipping entails transporting consignments from one place to another for a fee. The destinations are either local or international. It's also known as freight forwarding.
As a cargo forwarder, you'll be in charge of putting together small deliveries into bulk shipments. Transportation of the cargo to the destination is done by aircraft or ocean vessels.
If you're interested in shipping but do not know how to start a shipping business, here is a guide. Read along to learn about the logistics involved.
1. Know the Business
It can be frustrating to start a business that you've no idea about. For great success in the freight-forwarding business, study the industry. There're various procedures and parameters involved.
You'll need to have an extensive understanding of the international law. You also need to know the financial aspects of trading. Most importantly, you must learn the trade practices and theories.
Other factors to understand include foreign markets, insurance coverage, customs regulations, and warehousing. Do not forget to learn about documentation. It forms a very crucial part of doing your shipping business right.
When getting into any business, you must think about the competition. If you want to survive in the industry, you must know how to differentiate your business. Learn about the competitors' business strategy including pricing, marketing, and customer retention.
2. Decide the Delivery Service to Provide
As you think of how to start a shipping business, you need to decide the category of goods you want to handle. For a start, products fall into the following categories:
- Dangerous goods
- Perishable goods
- Hazardous goods among others
A start-up shipping business can't handle all these categories all at once. In the beginning, you want to keep your business small and manageable.
There are niches within the shipping industry that you must think about when starting. As you decide the types of goods to handle, you need to specialize in a niche. You can choose from
- Container shipping
For more info about container shipping, you can click here.
At this point, you need to come up with a list of organizations you will target. It's not possible to quantify the demographics and psychographic composition of potential clients. The usefulness of the shipping industry cuts across households, private and public sectors and communities.
A possible list of the clients you could target when starting out are:
- Corporate organizations
- The public sector
- Schools and universities
- Small Businesses
- Religious practitioners
- Sports organizations
Do not forget about individuals who want to transport cargo from one point to another. Don't despise the business they bring to your company as too small to make a difference.
3. Preparing the Paperwork
Just like every other business, you must register your shipping company. You'll need to get a business name, which must be legal. Once the business name is ready, it'll be easy to obtain all other necessary documents.
There're a couple of certifications that'll give you an edge in the industry. The more professional you are, the easier it'll be to have people trust your business. Some examples of professional certifications you should strive to have include
- Certificate in Marine Transportation
- Certificate in Shipping Business
- Certified International Trade Professional (CITP)
- Certified International Trade, Shipping and Logistics Professional (CITLP).
You don't have to acquire all the certifications all at once. One at a time is good enough if you're consistent with the process of accreditation.
Certification depends on whether your business will handle air or sea freight.
You need a tax identification number and a business license to operate smoothly. In addition to these two, there are other legal documents that you should have. Remember that the shipping industry is highly regulated.
- Shipping Clearance Certificate
- Certificate of Incorporation
- Business Plan
- Non-disclosure agreement
- Company By-laws
- Operating Agreement
- Insurance Policy
- Employment Agreement.
Avoid severe breaches in security and health by meeting the requirements for legal documents.
4. Put a Business Plan Together
Without a business plan, it's hard to tell where your business is headed. Many of the decisions you'll make depend on the business proposal. It's also a document that provides more in-depth details about the company, making it appealing to third parties.
For example, when looking for investors or business partner, they'll ask for the business plan. It'll guide them in deciding whether to work with you or not.
The business plan should have an overview of the scope of the business. Other important details are
- The competitors' skills and range of prices
- The value proposition of your business
- Financial plans
- Selling proposition Marketing strategies such as SEO tips
- Threats and opportunities in the industry
- Exit strategy
When writing your business strategy, work with figures and facts around the industry. Be more specific and look at the trends of the country you'll have your business.
A comprehensive business plan is the first step towards having a successful shipping business. It'll guide you in managing the business with purpose and precision. You'll know what needs to be done, when, and how.
The plan prepares you for challenges and expansion.
5. Financing the Company
This outline on how to start a shipping business would be incomplete without this crucial step. Funding your company will be easy or hard depending on the scale of the business. If you start small, it might not be necessary to have lots of resources.
Starting on a large scale will call for a considerable input of resources to launch the business. First, you will need a large office, furniture, and office equipment. You also have to budget for salaries for at least three months.
A large-scale business will also require you to purchase shipping equipment to make business easier.
With a good business plan, you may not struggle with getting funding for the business. You can easily convince your bank or investors to part with the money you need for the start-up. Some of the options you can explore for financing are:
- Using personal savings and money from the sale of stocks
- Loans from banks
- Contributions from business partners and investors
- Applying for business grants from donor organizations
- Soft loans from friends and family
Chances of getting finances from the sources depend on how good your business plan is.
6. Choose a Location for the Business
Consult as widely as you can in regard the location of your business. If you got everything right but choose the wrong location, you reduce your chances of success. Being in the wrong area will make you struggle to make headway in the business.
As you talk to the experts and people with experience in the business, consider these factors:
- Demography of the location
- Number of similar firms in the place
- Traffic levels and availability of parking
- The laws and regulations of the area
If possible, look for a location with plenty of open lands. You can have space to erect warehouses where to store goods awaiting shipment. The space could also serve as parking for your container storage or delivery vehicles.
One decision you need to make is whether to lease or rent office space. One factor in determining this is the size of your company. The budget available also has a role to play.
If you have enough finances, it's better to lease an office facility with open space nearby.
At this point, you'll need to hire staff to manage your fleet of vehicles, cargo, and containers. You will also need help with the office work like handling the administrative processes of the business.
Your financial capacity will determine how many employees to hire. Initially, there might not be in need to employ too many people. As a guide, you'll need ten key staff to run a medium-scale business. They include:
- Chief Executive Officer (you)
- An administrator
- Human Resource Manager
- Security Consultants
- Business Development Executive
- Marketing Executive
- Customer Service Officer
Sometimes, it will be crucial to hire experts to help you with high-profile shipping deals.
How to Start a Shipping Business - Final Thoughts
The demand for shipping services is on the rise. Shipping is the lifeline of the international economy. Without shipping, bulk transport of raw materials, processed food, and manufactured products would be impossible.
The many companies in the shipping industry can't meet the demand for the services. If you are willing to start your own shipping company get the procedure right. You need to begin by understanding how the industry works.
Look for experts in the field to teach you all you need to know about shipping. Once you have this knowledge, decide the type of services you want to provide. You also must identify your target market.
Lack of specialization will make it hard for you to penetrate the market. Prepare the necessary documents for trade. It'll be hard and illegal to operate without primary documents like business license and certificate.
Draw up a business plan, finance your company, and get a good location. You are ready for a good start. Remember to brace yourself for the challenges and success that'll come your way.
Now that you know how to start a shipping business, working with the right team is important to your success. You can post jobs here to begin creating your dream team.