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India’s exports of merchandises and services is growing at an exponential pace. It’s estimated that in FY 2022-23 exports will reach a staggering amount of USD 770.18 billion (Source: pib.gov.in Ministry of Commerce and Industry). Similarly, imports are also scaling. The growth in foreign trade volumes is good news for the logistics industry, especially freight forwarders. Today, we’ll take a look at how to start your own freight forwarding business in India, for those keen to explore this opportunity.

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We’ll run through the key steps to begin a freight forwarding company, compliance and other requirements, how much it costs to start a freight forwarding business, and essential tips to keep in mind. On that note, let’s get started.

What is a freight forwarding business?

The first question we will answer is ‘what is freight forwarding’ or ‘what is a freight forwarding company’.

Let’s understand with a simple example. Company A (in India) want to import goods from Company B (in the UAE). They will need a transporter (Company C) that will carry the goods from UAE to India.

A freight forwarder is the intermediary that will facilitate the transportation of goods between the countries (i.e., UAE and India), and finally to the end customer (i.e., Company A). That is, they will collaborate and work with transporters and carrier companies, to facilitate the shipment between the seller and buyer.

Freight forwarding companies work with multiple partners across rail transport, air, water, and road transport to facilitate storage, documentation, compliance, and the movement of goods. Since they work with a wide network of service providers they can offer clients optimised prices and routes for shipment.

It’s important to note that freight forward service providers don’t directly undertake goods transportation and are involved at the coordination level.

How to start a freight forwarding business in India?

As can be understood from the example above, freight forwarding services simplify international trade by facilitating goods transportation, compliance, and logistics. Most top freight forwarding companies in India provide a host of services and customise it to meet specific requirements. Considering they work with a large network of third-party logistics service providers they can repeatedly ensure that products reach their global destinations as committed.

If you are a logistics startup and want to start your own freight forwarding business, ensure you follow these key steps before venturing out.

1. Know your market and services offered

The first step to start your own freight forwarding business is to learn about your market. This includes the top players (competitors), key industry challenges (pain points) and obstacles, the current and future potential, the processes and functions involved, market demand and supply and trends, tools and technology in use, available infrastructure, and so on.

Pro tip: The scope of freight forwarding services is extensive and as a beginner, it’s advisable to focus on key services than try to go all in.

This research is critical as it will enable you to outline your key products and service offerings, find your niche and gain competitive advantage by addressing specific pain points.

Also read: How to start an export import business in India?

2. Define your business strategy and plan for freight forwarding

Starting your own freight forwarding services business in India will require meticulous planning and strategic execution.

This means that once you are satisfied with your research on potential opportunities and threats, it’s time to build a robust business plan.

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This should outline your company’s mission and vision, target market, services, financial projections, key stakeholders (i.e., partners and owners), current assets and infrastructure, technology available, and all other details.

Pro tip: Always have a list of strategic partner names in the business plan. This can be with reference to shipping lines, technology partners, warehouse providers, etc. Do check online for recommendations and references.

A business plan will be further helpful if you are looking for funding as banks/NBFCs find greater confidence in borrowers who demonstrate signs of credibility and low risk.

3. Determine the type of business, licences, and legal compliance

The next step as a freight forward business would be to determine the type of business you want to start. For instance, a sole proprietorship, a limited liability partnership, a private limited company, or any other.

This is step is vital and must be carried out with careful consideration as it will determine the required business licences you will have to get, taxation regulations, business registration, legal compliance and more.

In order to keep your business within the legal framework, here are some licences and requirements you should consider as a logistics services provider.

  • Registering your business with the Registrar of Companies (ROC) and DGFT
  • Securing a freight forwarding licence from the Directorate General of Shipping and International Air Transport Association (IATA) and Air Cargo Agent Association of India (ACAAI) (recommended)
  • Getting a PAN card and GST registration, and/or Trademark registration
  • Since you will be involved in exports and imports, getting the Import Export Code (IEC) to stay compliant with Indian Customs

Pro tip: Keep a lookout for all relevant licences required, especially if you are offering niche services. Also, the government updates these international trade rules from time to time. Ensure to stay updated for business compliance.

Also read: Overview of freight forwarding industry in India – Market size, trends, challenges

4. Understand how much does it cost to start a freight forwarding company?

The next (and probably crucial) step to setup your freight forwarding business is to calculate setup costs and gather adequate funds. Investments in the initial stages might include – office setup expenses (e.g., lease/rent and infrastructure), software and digital tools, operational costs, etc.

Pro tip: Since freight forward companies are not directly involved in the transportation of goods, actual investment in vehicles and warehouses will not be required.

Sample cost to start a freight forward business:

  • Office space rent: ₹30,000 – ₹50,000 per month
  • Operational expenses (internet, phone, electricity): ₹5000 per month
  • One-time infrastructure setup (laptops, internet connection, workstation, etc.): ₹2,00,000 – ₹3,00,000
  • Software licences and tools: ₹15,000 – ₹50,000 per month
  • Salary to resources (max. 2): ₹50,000 – ₹1,00,000 per month
  • Miscellaneous: ₹20,000 – ₹30,000 per month

You will also need to be familiar with financial management practices such as cash flow management, budgeting, cost control, etc. You may need to hire resources internally or externally for this and even get required tools.

There are some expenses you will have to make upfront – for instant specific licenses, software, infrastructure and resources – and others that you can add as your business expands. Also, there are fixed and variable costs that will eventually have to be included when doing logistics cost analysis.

As a new freight forwarder, calculate your overall costs and add it to the business plan, if you are looking at securing funds from banks/NBFCs, or get government loans for logistics.

Pro tip: When billing your customers, remember to add your freight forwarding services charges which usually ranges between 15% – 30% profits.

Also read: Freight forwarders vs 3PLs – What’s the difference between them?

5. Get the right technology tools and prepare the marketing plan

Role of technology:

There can be no second guesses about the role of technology in logistics and supply chain. As a start-up freight forwarding company in India, you will need to build your IT infrastructure to track cargo, manage documentation and invoicing, customer communications, and other operational requirements.

Considering the advancement in the sector there are existing cloud-based freight management software to manage the entire operation. This saves time and enhances productivity, efficiency and performance, enabling the organisation to scale consistently.

Pro-tip: You may not find one software that caters to all business requirements. Based on your business model, strategic partnerships, services, and client base, consider investing in 2-3 different software as per need. For example, you may invest in separate tools for customer communications, data analysis, and billing.

Marketing and Sales

As a new business, prioritising marketing initiatives is non-negotiable. Based on your target audience, it should be a mix of digital and traditional marketing practices. Examples would include:

  • Having a freight forward logistics website to attract customers and share information about your services
  • Investing in social media, SEO, content marketing to generate leads and increase sales in logistics
  • Focusing on customer satisfaction, through regular feedback, providing prompt respond to queries/complaints, personalised customer service in logistics for customer retention (Note: You should also have policies for the same)
  • Attend industry seminars and events to promote your business and network
  • Build quality marketing collaterals with details on competitive pricing, niche or diverse freight forwarding services, case studies and customer testimonials, to attract new clients

Pro-tip: You may even consider joining relevant associations for better networking opportunities. Examples include: Federation of Freight Forwarder’s Association in India (FFAI), Agri Exchange, etc. This will also help you to stay updated on trends, industry news, and more.

6. Find your niche and distinguish your brand

Whether you want to be a specialist or generalist this should not be a random decision, but one that’s based on thorough market analysis and study of opportunities and competition.

There are thousands of freight forwarding companies in India and if you want your start-up to stand out you will have to find your niche and differentiate yourself from competition. For example:

  • Specialise by the type of cargo your company manages, such as perishable goods, pharmaceuticals, fashion and apparel logistics, electronic equipment, etc.
  • Focus on specific geographies and markets, understand the import-export trends and regulatory compliances specific to those markets, build strategic partnerships and alliances with 3PLs and 4PLs in those markets, to offer end-to-end services

Pro-tip: Strategic focus on niche markets and cargo type also helps to cut competition, increase brand awareness, and build a loyal customer base.

Tips before you start your freight forwarding company

Logistics is a growing sector, which naturally makes it a competitive sector as well. As a new freight forwarding business, you can either distinguish yourself through your services or through innovation.

Implementing the best practices in logistics management, investing in skill development, and automating processes are reliable and trusted ways to scale your business.

Moreover, before you start your business, form a deep understanding of the industry and practices in international trade. Knowledge on how to calculate freight rates and cargo load, the different documents required (e.g., bill of lading), etc. will enable you to build credibility and confidence.

Logistics on Tata nexarc is one of the most effective ways to get reliable, efficient PTL logistics for your business. We work with verified logistics service providers, offer competitive rates, and delivery across multiple locations in India. To book a shipment, visit Tata nexarc today.

Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.