How to Start a Delivery Service

Whether you start a delivery service with a single vehicle or a fleet, you’ll want to prepare for the road that lies ahead before you hit the gas pedal.

You can start a delivery service in several ways, each requiring its own level of financial investment, time, and effort.

Types of Delivery Services

All delivery services transport goods and packages in pretty much the same ways, but they differ in the size of the investment and the kind of work you'll need to do to get your company off the ground.

The three basic types of delivery services are:

  • A small-scale, local delivery service. This business delivers merchandise and other goods or packages for local businesses like grocers, retailers, restaurants, and law firms. The deliveries vary according to the clients' needs.
  • A bread route delivery service. This business delivers baked goods or snacks from a corporate bakery like Orowheat or Pepperidge Farm to a predetermined, established set of customers.
  • A corporate courier or delivery service: These owners work with corporations like FedEx or Amazon to deliver items initially sent to Fed Ex or ordered from Amazon. They purchase a specified delivery route.

Starting a local delivery service is like starting a business from scratch, with all the risks associated with a new business. You'll have to find and build a customer base, develop a competitive fee structure, and build a reputation.

When you buy a bread route or corporate delivery service, much of that work is done for you. You get an existing business with an established customer base, and the corporate brand becomes your brand.

Some bread routes allow you to set your own fees, but others, along with corporate courier and delivery services, provide you with a fee schedule that's already been tested and proven in the market. You won't have to research market rates, and you can avoid typical mistakes like over-pricing your services, which can make you less competitive.

What Do You Need to Start a Delivery Service?

You'll need these items regardless of the type of delivery service you start:

  • A vehicle. You'll typically need a van or truck, but you can even use an SUV or other passenger vehicle if you limit your deliveries to small packages.
  • A dolly or hand truck to transport heavier items, ratchet straps to secure cargo, and blankets for delivering fragile items.
  • A cellphone with a dedicated business phone number
  • At a minimum, you'll need auto insurance, but depending on the merchandise you'll be transporting, you might also need other forms of liability or casualty insurance. Do not assume that your current auto policy, purchased with the understanding that you are driving for personal reasons, will cover you. Once you begin using the vehicle for commercial purposes, you'll likely need a commercial policy.
  • Licenses and permits. Licensing requirements for delivery and courier services differ by state. For example, some states might require delivery drivers to have a commercial driver's license or a license for transporting certain products like food. Contact the Department of Motor Vehicles and the state or local agency for business licenses to determine the requirements in your state.

If you're buying a bread route or corporate delivery service, you'll need the items above, and you'll also have to buy the delivery route, usually from the owner of the route or a business broker. Costs for a route start at several thousand dollars for a bread route, and some companies require you to purchase multiple routes that can bring the investment costs to $1 million or more.

Corporate delivery services might also require that you purchase uniforms, truck decals, hand-held computers, scanners, and software.

Planning Your Delivery Service

If you're buying a bread, FedEx, or Amazon delivery route, the delivery area, customers, and products you transport are predetermined. But if you are starting an independent delivery service from scratch, it will be up to you to decide the size and boundaries of the delivery area you service, the types of businesses you work with, and the types of products or packages you deliver.

Decide on a Delivery Area

The larger the delivery area you service, the more opportunities you'll have to sell your services and earn more income. But unless you use an electric or hybrid vehicle, servicing a larger area will also likely mean higher fuel and vehicle maintenance costs that can chip away at your profits.

You might also need additional equipment for certain types of customers, like hanging racks for delivering dry cleaning.

It's a good idea to research how many potential customers are located in the area you want to cover, and learn whether any delivery services currently operate in the area.

How Will You Get Customers?

If you're starting a delivery service from scratch, you'll need to find your own customers and market your service to them.

Getting customers isn't usually a one-and-done affair. After the initial contact, it's important to follow up regularly so potential customers regard you as reliable and trustworthy.

Start by making a list of the potential customers in the area you are servicing. You can use a variety of methods to get the word out about your service and start building your customer base, including:

Cold calling. A tried-and-true, albeit time-consuming, sales method, cold calling can be done in person or by phone. You'll need business cards or flyers that you can leave with potential customers you visit, and an email or physical address to send a follow-up flyer after a call.

Mailers. Mailing flyers, postcards, or brochures to potential customers can help you to gain recognition for your business, but you might have to follow up with in-person meetings with business owners as well. Any time you make a delivery on behalf of a business, you are representing that company, and the business owners will want the added assurance of knowing you are reliable.

Social media. You can post announcements about your business on neighborhood social media apps as well as sites like Facebook, usually at no cost, and you can also use these sites and others to advertise your business for a fee.

Newspaper advertising. Local community newspapers usually feature classified advertising sections that allow you to promote your services.

Set Prices for Your Service

The pricing structure you set for a local delivery service will depend on your business expenses and the prices charged by competitors.

You can use the distance travelled or an hourly rate to set prices for your service. For example, you might charge $1 per mile for deliveries within a certain radius and apply additional charges or an hourly rate for deliveries outside the area, for heavy loads that require additional time, or deliveries that take place during heavy periods of traffic. Consider adding a fuel surcharge for longer distances and travel times as well.

Another thing to consider is the competition in your chosen area of operation. If you make restaurant deliveries, find out whether other services like DoorDash or Uber Eats operate in the area. Knowing what those services charge will help you set a competitive pricing structure.

Bread route delivery companies typically purchase products from the manufacturer at wholesale prices and sell them at a markup to the retailers located on their route. The amount of markup added depends on what the market will bear. Other bread route contracts work on a commission basis.

When you operate a FedEx or Amazon delivery service, those companies typically set the fees, and you'll have to negotiate the payment you receive when you set your contract.

Will You Need to Hire Employees?

It's common practice for the owner of a local delivery service to also serve as the delivery driver. A service that consists of a single delivery vehicle won't need additional workers unless the job calls for hauling especially large or heavy merchandise.

But if you purchase multiple routes or your local business grows to the point that additional vehicles are needed, it's likely that you'll have to hire additional drivers to handle the workload.

Set Up an Accounting System

You can set up a simple accounting system in a hand-written ledger or on your computer to keep track of your expenses, payments due, and your revenues; or you can use accounting software such as QuickBooks.

Plan Your Routes

If you're making only a few deliveries a day, using free mapping applications available on your phone (like Google maps) can help you navigate your delivery route. But you'll have to manually organize your deliveries to optimize your time and fuel use.

Once your business gets going, and you're making more than 10 stops a day, you might want to consider using one of the many fee-based route planners on the market.

These applications figure the fastest way to organize your deliveries and avoid traffic congestion, provide navigation, GPS tracking, and other features.

How to Set Up a Delivery Service

Just as you would with any business startup, you'll need to follow your state's requirements for setting up your delivery service, regardless of the type of delivery service you have. You can usually find the requirements for setting up a business in your state on the website of the Secretary of State.

You'll be required to:

Decide on a Business Structure

The most commonly used business entity types are sole proprietorships, limited liability companies (LLCs), general partnerships, and corporations.

LLCs and corporations offer the greatest protection from personal liability for debts and obligations incurred by the business, and, as the business owner, you only pay taxes on the income or profits you receive from the business. If you choose these business entity types, you'll have to register your business with the state.

The owners of sole proprietorships and general partnerships are personally responsible for the business's debts, and for paying taxes on the business's income. They're not required to take the added step of registering their business.

Most business owners can choose the type of business structure most beneficial for their needs, but some corporations, like FedEx, require their delivery services to operate as corporations.

Choose a Name for Your Delivery Service

If your company is structured as an LLC or corporation, you'll have to choose a name for your business when you register it. The name you choose must be unique to your company, and some states have additional naming requirements and restrictions, such as requiring LLCs to include the ‘LLC' abbreviation in the company name.

If you set up your company as a sole proprietorship or a partnership, your name (and those of other owners) automatically becomes the company's legal business name.

Sole proprietors and partnerships that want to do business under a different name from the company owners must register a DBA, a fictitious business name, with the state.

Get an Employer Identification Number (EIN)

An EIN is like a social security number for businesses that's issued by the IRS. They're not required for all business entity types, but you'll need one for any business entity if you want to apply for a loan, hire workers, or apply for permits.

Get a Business Bank Account

Sole proprietors and general partnerships aren't required to use a business bank account—they can use their personal bank accounts for their business. But having a business bank account can simplify recordkeeping, and you'll need one to apply for a loan regardless of your business entity type.

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