The shipping industry presents numerous investment and business opportunities for those willing to put in the time, research, effort and capital to be successful in this sector. Shipping containers are used to move large amounts of freight, and it is possible to start a shipping company using containers through a variety of techniques. Certain aspects of running a business in this industry are essential to consider, including insurance, finances, employees and facilities.
Roles Within the Shipping Industry
Potential roles for a savvy entrepreneur in the shipping container industry include acting as:
- Carrier: Doing the actual shipping work of transporting shipping containers by air, sea, rail, and truck
- Freight forwarder: Responsible for getting freight from warehouse to dock (and vice versa) and optimizing the logistics of where to ship from/to
- Shipping container leasing business: Owning the actual containers and selling or leasing them to carriers and shipmasters
- Shipping broker: Connecting shipping container owners to carrier lines and other contacts
Each of these opportunities necessitates capital to get off the ground, a solid business plan and making contacts within the industry as well as familiarizing yourself with the entire shipping ecosystem and vocabulary.
Considerations for Shipping Companies
Before taking advantage of container investment opportunities, there are some considerations to keep in mind. First, while the shipping sector presents many opportunities for solid and long-term income, the industry as a whole is also very sensitive to fluctuations in the global economy. However, with so many businesses importing and exporting, the need for shipping corporations is constant and often rising, with many companies, such as FBABEE and C.H. Robinson, making sales on the order of billions of dollars.
Another consideration is the large amount of industry knowledge required. At minimum, shipping container business owners should familiarize themselves with standard shipping container dimensions and uses; the Incoterms rules and standards; bills of lading and freight bills; and taxes, tariffs, customs rates and laws related to shipping in your desired areas.
What Is a Shipping Container?
The basic premise of a shipping container is that it can be loaded at a warehouse, sealed and then shipped as a unit by air, sea, rail or truck without needing to be opened until it reaches its destination. This allows for quick and easy loading, unloading and logistics.
Shipping containers come in a number of sizes standardized by the International Organization for Standards so that container shipping can be seamless between any countries in the world. Standard sizes include 20-foot, 40-foot, 45-foot and 53-foot lengths as well as a 40-foot cube model.
Additionally, there are different types or configurations of shipping containers, including open-end, open-side, open-top, half-height, flat-rack, refrigerated, liquid-build (tank), modular and standard dry storage containers. Familiarize yourself with the configurations and uses of each.
Types of Freight for Shipping Containers
The containers are then transported by one or more of the four types of freight. To get into the shipping business, you will need to either own or lease a freight vehicle or have strong contacts with owners and shipmasters. The modes of transport for freight containers include:
- Cargo ships: These are the most common type of international freight. These ocean-going ships, known as liners, travel set routes on fixed schedules.
- Air freight: This method is faster but carries less freight per trip, making this method more expensive and less environmentally friendly.
- Rail freight: Trains can move a lot of freight over land from a port to an inland or cross-continental destination. If you set up a shipping container business with a dock or warehouse, make sure that the property includes rail spurs — short lengths of rail track from a main line to your loading docks — so containers can be loaded with goods from your warehouse or so containers can be moved by crane from storage or from a ship onto a train and then transported inland.
- Truck freight: Trucks are a more flexible but very small-scale method to transport freight over land. A tractor-trailer can be loaded with a shipping container from a ship or railroad car without the container ever being opened.
Owning vs. Leasing Containers
As part of your shipping business, you will need to understand the costs, advantages and disadvantages of each freight method. Purchasing high-quality logistics software is a must, as is familiarizing yourself with common calculations related to owning and leasing containers. For example, it's common for an ocean vessel operator to not own all its containers. In case of a downturn in business, any unused containers will need to be stored, which takes space and money.
You might own or long-term lease about 65% of your fleet to cover your forecasted average volume of business. Constantly using owned containers is cheap and ideal, but you also need to account for surges in business. You can form agreements with container leasing companies to quickly lease or "on hire" containers and potentially "off hire" them in a different port. Experience and logistics software will help you balance these calculations.
Bills of Lading and Shipping
A second vital set of information is being familiar with bills of lading and freight bills. A bill of lading is a legal document and is essentially the shipping contract, while the freight bill is the invoice for the cost of shipping goods. You will need to be aware of how the bill of lading must be consigned and to whom as well as the details of issuing a house bill of lading as opposed to a master bill of lading.
Other considerations include issuing the correct type of bill of lading, such as a sea waybill instead of original, and issuing the bill of lading correctly in terms of the transport mode, such as port to port, combined transport or multimodal.
International Commercial Terms
In addition, you will also need to familiarize yourself with the Incoterms, or International Commercial Terms. These are predefined commercial terms relating to international commercial law and are published by the International Chamber of Commerce.
Maritime and Shipping Insurance
Finally, you will need to know about maritime and shipping insurance, how to operate your vessel around specific ports, what legislation applies to onboard crew members, how to operate communication equipment and how to handle dangerous goods.
Shipping Industry Business Structures
Once you've familiarized yourself with shipping container standards and logistics, you can follow the steps to actually set up a business. First, decide what goods you want to handle. Then, define your business's identity, including naming and branding that reflects the type of shipping work you intend to do.
Study the industry and the competition. Define the structure of your business with the help of an attorney or financial adviser. The usual choices are either a corporation or a limited liability company.
Shipping Industry Business Plan
Once you have the basics of your business formulated, sit down to write a detailed business plan. This will take what you've learned about running a successful shipping company and structure it into a document that can be shown to investors. Your business plan should include an overview of your business and your competitors, including your target market, your unique selling points, your core competencies and your prices.
The business plan should also include financial and marketing plans and planned funding sources, a SWOT (strengths, weaknesses, opportunities, threats) analysis of the shipping industry in your country and sector and your exit strategy. You can now use your business plan to attract investors and other sources of funding.
Registering Your Business
Make sure to register your business with the appropriate local agency and obtain all the necessary licenses and permits. Select a site for your business, hire employees and purchase containers, equipment, trucks, a warehouse with plenty of open land and software for shipping logistics and tracking management.
The warehouse will also provide a place to do repairs on containers and equipment. You will need high-lifts and a loading crane to load railroad cars and tractor-trailers.
Finally, start obtaining shipping contracts or "letters of intent," aiming to get long-term contracts with a few companies to raise capital for more containers and equipment. Your container shipping business will then be on its way.
- Cogoport: A Step-by-Step Guide to the International Container Shipping Process - Export
- Profitable Venture: How to Start a Shipping Company from Home
- Finsmes: 5 Things To Consider When Starting a Shipping Business
- World Shipping Council: About the Industry
- Wall Street Journal: A Storm Is Gathering Over Container Shipping
- Look at leasing equipment and land, and writing the lease payments off for income tax purposes. This will lower your start-up capital requirements. Also, buy used containers. This will indicate to investors that you are conscious of capital expenditures.
- Raising capital from investors will require special securities documents and you can only solicit capital from "accredited investors" -- investors earning $200,000 per year with one million dollars in assets excluding their home. You must also comply with state "blue sky" laws and the Securities Act of 1933 and 1934, as well as regulation D. Use a qualified business and securities attorney.
Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, Wordsmyth Creative Content Marketing (www.wordsmythcontent.com) and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.