How to Start a Logistics Company Keeping in Mind the UK Laws
Many entrepreneurs are interested in learning how to start a logistics company.
UK demand for cargo transportation is high, especially after the COVID-19 pandemic. This profitable industry is attracting many newcomers. But apart from getting your UK business license for logistics, there are a couple more things you should know about this sector.
How to Start a Logistics Company in the UK
If you’re looking to start a freight or haulage company, you need to know about the two most common types of businesses available: freight brokerage and freight forwarding.
A freight brokerage company is essentially an intermediary for hauling and shipping. With a logistics business license and knowledge of the sector, you could connect clients with interested carriers. In this case, your entire revenue model is commission-based and relies on making deals with clients and carriers.
The other alternative is to get a freight forwarding license. UK businesses with this license can take cargo from clients without their own means of transportation. Your responsibilities, in this case, are often client pickups, warehouse storage, and planning the shipping process.
You may decide on the mode of transportation, which carriers to use, or deliver the freight yourself in some instances.
Which Option Is Better for You?
Choosing a logistics business involves more than just knowing what business licenses UK regulations make easy to obtain. Your capital will play a big role in the decision-making process, as will your expertise, the risk you’re comfortable taking, and so on.
For example, a brokerage has a very simple task. It only connects a client with the carrier. What happens after that is no longer the brokerage’s business.
In contrast, with a freight forwarding license, you directly handle and store the clients’ freights. You have more responsibilities regarding insurance, keeping good records, arranging customs clearance, and organising the shipment. It’s a more complex business model that may, but not always, require logistics qualification and experience.
On the surface, a freight forwarding business may seem too difficult and expensive to start. However, the upside is that it’s more profitable and often more consistent. Brokerages depend on brokering deals. But not all clients have the logistics to work directly with carriers. That’s why they might prefer a freight forwarder who can handle everything.
Furthermore, if you’re talking strictly about the costs of business licenses, the UK isn’t a cheap country. A freight forwarder license cost can be expensive. But unlike with a brokerage business, being a forwarder gives you substantial control over the operation and quality of shipments.
This means you have the opportunity to establish long-term relationships with clients. Brokerages don’t always care as much about the quality of service clients receive from carriers. They also can’t control it, meaning you could spend more time looking for new clients and slowing down your cash flow.
The good news is that in terms of freight forwarder license requirements, UK laws are pretty easy to navigate.
In addition, a freight forwarder license cost is easy to compensate for if you focus on the quality of service and client satisfaction. And establishing multiple relationships will lead to a steady cash flow influx into your company.
Freight Forwarding Business Costs
Freight forwarding is the better choice if you want to have a nice balance of control of the operation and profits. But before moving forward, let’s look at the costs you should consider.
When starting a company in this industry, it’s recommended to have at least one truck or van to collect shipments. The size and vehicle type will differ depending on what niche you want to specialise in.
If you want to minimise the startup costs, you could be a solopreneur and drive the vehicle yourself until you can afford employees. If that’s not the case, you must consider hiring one or more drivers as initial costs or investments in the company.
Since you often need to store the client’s merchandise in transit, having a warehouse or any storage facility will be crucial to your success.
Additional costs can include packing materials, as not all shipments come packed. Then, vehicle tracking software and CRM software will be necessary to stay on top of your shipments. This will allow you to spot inconsistencies, find better routes, and keep clients informed of their shipment status.
And like with any other business, you have to factor in the costs for obtaining a UK business license for logistics.
Obtaining a UK Business License for Logistics
The good news is that your logistics qualification doesn’t matter when obtaining a UK business license for logistics.
For a freight forwarding license, UK laws are pretty relaxed. However, that’s not to say that having prior experience won’t benefit you or speed up your application process.
That said, there are certain legal freight forwarder license requirements you must check.
First, it’s essential to understand what licenses you need. These can be slightly different between various local authorities. Ensure you’re getting the right paperwork by talking to the local council. You may also want to look into the right freight forwarding license UK authorities grant for international transportation, so you can scale your business in the future.
After you identify the required logistics business license for your niche, you have to get insurance. This means public liability insurance, indemnity insurance, products and employer’s liability insurance, and specialist freight insurance as a freight forwarder.
In addition, you will have to register with the Companies House.
Once you’re done, you might want to seek legal counsel to ensure you understand all of the legal standards that apply to transporting freight.
Freight Forwarding – The Bottom Line
Here’s the number one thing you need to remember when wondering how to start a logistics company. The UK offers immense opportunities in this field, but choosing the right business model is the key to success.
In terms of freight forwarder license requirements, UK laws are straightforward. You may need more capital than experience and knowledge to start your company. But no one’s stopping you from starting small and slowly scaling as you learn the industry.
Forwarding comes with a higher initial investment cost but also offers the highest profitability, more control, and potential for long-term client relationships with guaranteed revenue streams.
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