How to Start a Delivery Service

You can start a delivery service in several ways, each requiring its own level of financial investment, time, and effort. As you start building your business, you'll need to consider which type of delivery service makes sense for you and how to set one up.

• Types of Delivery Services
• What Do You Need to Start a Delivery Service?
• Planning Your Delivery Service
• How to Set Up a Delivery Service

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 client's needs. Local delivery services typically cost less to open than other options, but you'll have to build your company from the ground up.
• A bread route delivery service. This business delivers baked goods or snacks from a corporate bakery like Sara Lee or Pepperidge Farm to a predetermined, established set of customers and retailers. The cost to buy a bread route is typically higher than starting up a local service, but you'll get a ready-made roster of clients, a proven business model, and a well-known brand name from the get-go.
• A corporate courier or delivery service. These businesses contract with established retailers like Amazon or courier services like FedEx to deliver items and packages on their behalf. Like a bread route, you won't have to find your own customers and you'll get a proven business model, sometimes with support services such as accounting and HR. But it can be very costly to buy these franchises, depending on the territories served and services included.

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 overpricing your services, which can make you less competitive.

What Do You Need to Start a Delivery Service?

Corporate and franchise delivery services often include the equipment you'll need in the franchise or route price. (The more equipment and services provided, the higher the franchise or route fee, and many require an investment of $100,000 or more.) You might also be required to purchase uniforms, truck decals, hand-held computers, scanners, and software.

By comparison, if you already have a vehicle, the startup cost for a local delivery service is typically less than $5,000. The equipment you'll need includes:

• 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.
• 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.

You'll also need to obtain insurance policies that cover your vehicle as well as loss, theft, or damage to the merchandise you deliver. Depending on the goods you deliver, you might need a commercial driver's license and other permits.

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're starting an independent delivery service from scratch, it'll be up to you to decide what your business looks like. You'll need to establish 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

Choose a delivery area that contains busy commercial districts and many businesses that might need your services. Visit the business owners to learn about other delivery services that already operate in the area and the services and prices they offer. Doing some market research upfront will help you determine what you'll need to offer to compete.

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.

Choose the Product Types You Want to Deliver

The research you do to determine your delivery area will also help you choose the types of products you deliver. Consider whether it makes sense to specialize in one area. For example, you could market yourself as a:

• meal delivery service
• laundry delivery service, or
• furniture delivery service.

If there are a lot of restaurants in your area, then sticking to delivering from restaurants and coffee shops might make the most sense. If you're using a small van or don't want to hire employees, you might want to steer clear of furniture and appliance stores. If your vehicle is a passenger car, consider limiting your business to restaurant deliveries or transporting documents for accountants and lawyers.

You should also consider whether you want to market yourself as a same-day delivery service. With some products, like meals and groceries, people will expect this speed. But with other products, same-day delivery can give you an edge.

Market Your Delivery Service

As mentioned earlier, if you're starting a delivery service from scratch, you'll need to find your own customers and market your service to them. Start by making a list of the potential customers in the area you're servicing.

Getting customers isn't usually a one-and-done affair. You can kick things off by announcing the opening of your business and offering discounts to encourage first-time customers to try your service. After the initial contact, it's important to follow up regularly so potential customers regard you as reliable and trustworthy.

You can use a variety of marketing strategies to get the word out about your service and start building your customer base.

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 to leave with potential customers you visit, and an email or physical address to send a follow-up flyer after a call.

Mailers. Mail flyers, postcards, or brochures to potential customers and post them on local bulletin boards in grocery stores, community centers, and the like. You might have to follow up with in-person meetings with business owners. Any time you make a delivery on behalf of a business, you're representing that company, and the business owners will want the added assurance of knowing you are reliable.

Social media. Post announcements about your business on neighborhood social media apps and sites like Facebook. You can also use these sites to advertise to local businesses for a fee. (For more, see our article on social media marketing for businesses.)

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.

Delivery services typically charge according to the distance traveled, an hourly rate, or a combination of the two. For example, you might charge a flat $25 fee for deliveries within a certain radius and apply additional charges or an hourly rate if the delivery is outside the area, above a certain weight, or a rush job. Consider adding a fuel surcharge for longer distances and travel times.

Consider the competition. Another thing to consider is the competition in your chosen area of operation. For example, if you make restaurant deliveries, find out what other services like DoorDash charge and consider offering a lower price. Knowing what those services charge will help you set a competitive pricing structure.

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

Negotiating your cut of set fees. 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

Your accounting system can be as simple as a handwritten ledger or a spreadsheet on your computer. Your system should track:

• expenses
• payments due and received
• revenues, and
• profits.

Alternatively, you can use accounting software such as QuickBooks or hire a bookkeeper.

Plan Your Routes

At a minimum, you'll need a navigation app like Google Maps to find the locations of your delivery stops. But you'll have to manually organize your deliveries to optimize your time and fuel use.

Once your business grows—and you're making more than ten stops a day—consider using a fee-based route planner. These applications figure out the fastest way to organize your deliveries and avoid traffic congestion. They 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. Each state has its own requirements for setting up your business. Information and requirements are usually available on your state's secretary of state website.

In general, you'll have to take the following steps to set up your business. (For more guidance, read our article on how to start your own business.)

1. Decide on a Business Structure

The most commonly used business entity types are:

• sole proprietorships
• general partnerships
• limited liability companies (LLCs), and
• corporations.

An LLC or corporation provides the greatest protection from personal liability if your business goes bankrupt, is sued, or incurs other debts or obligations. You pay taxes on only the income that your business distributes to you (such as wages), and your business pays taxes on its profits. 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. However, 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 might require their delivery services to operate as corporations.

2. 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. Many states have additional naming requirements and restrictions, such as requiring LLCs to include the ‘LLC' abbreviation in the company name.

For sole proprietorships and partnerships, the owners' names automatically become the company's legal name. If you want to operate a sole proprietorship or partnership under a different name from your own, you'll probably have to register a DBA (an abbreviation for "doing business as"). Your state might refer to a DBA as a "trade name," "fictitious business name," or "assumed name." You'll usually have to file your DBA with your state or county.

3. Get an Employer Identification Number (EIN)

An EIN is like a social security number for a business. An EIN is a nine-digit number issued by the IRS for federal tax purposes. An EIN isn't required for all business entity types. But you'll typically need an EIN for any business entity to:

• apply for a loan
• hire workers, or
• apply for permits.

You can apply for an EIN on the IRS website.

4. 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.

Working With a Lawyer to Start Your Delivery Business

Starting a delivery service can get complicated and it pays to do your research. At one point or another, you might have legal questions specific to your business and situation. Alternatively, talking to a lawyer can provide you with reassurance that you're covering all of your legal bases.

If possible, try to find a business lawyer who's worked with other delivery businesses. They might have experience or expertise that can benefit you and streamline your startup process. You can work with an attorney from beginning to end or hire an attorney for one particularly complicated task.