How to Start a Delivery Business and Make Profit
Owning a delivery service is not only about making deliveries but also understanding every aspect of owning one. Besides deliveries and the logistic element, you also need to understand forging new customers, invoicing, and managing the day-to-day aspects of running your business. Take a look at the tips on how to start a delivery business:
1. Have the right delivery vehicle
The most important aspect to start a delivery business is to have the right vehicle to complete the deliveries.
Consider buying vehicle that allows you to transport larger packages and for more cost-effective than buying a van, you can lease one. For lease vehicle, standard maintenance packages also include the following:
- Any electrical and mechanical replacements or repairs.
- Tire replacements, some leasing companies will also cover damaged or punctured tires.
- Mobile tire fittings
- Replacement of the battery, wiper blades, cambelts, alternators, and bulbs.
Before leasing your delivery van, use a comparison site to help you find the best deals at an affordable price. Additionally, ask the leasing broker what their maintenance packages include to ensure your van is covered when leased.
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2. Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. Your business plan should analyst the costs involved in opening a delivery business.
To start a delivery business and make profit’ the largest startup cost is the acquisition of a suitable vehicle. A vehicle doesn’t need to be fancy, but it must be reliable. Such a vehicle usually costs several thousand dollars, at least.
The second-largest startup cost is often insurance. Delivery businesses might need commercial auto insurance, and they may want insurance for the packages being delivered. Without the proper insurance coverage, the business may be responsible for reimbursing any customers whose packages are damaged en route.
The other startup costs are minimal. These include any fuel, equipment costs (e.g. for a hand truck and ratcheting straps), licensure fees and marketing expenses. A cell phone is also needed to make calls, and most business owners rely on a computer as well.
Business owners who want to keep their upfront costs as small as possible can use a personal vehicle until the business’ profits support purchasing a different one.
They also can use free marketing strategies, such as door-to-door marketing and social media marketing. Fuel can’t be avoided, but only a little is needed to get a business started.
Revenue from the first delivery can be used to purchase more fuel for subsequent deliveries, which will generate more revenue. All the above mentioned should analyst in your business plan.
3. Know the ongoing expenses for a delivery business
The main ongoing expenses for a delivery service business include vehicles’ maintenance and depreciation, fuel costs and insurance premiums. All of these should be considered when determining what to charge.
4. Know your target market
A delivery service business’ ideal customer is a business that needs to make lots of quick, local deliveries. Partnering with local flower shops, cake shops and pizza places can provide steady business.
5. Register your deliver business
Whether you work as a sole trader, partnership, limited liability partnership, or a Limited company, you must register business.
As an entrepreneur, you will need to keep track of your business records and record of expenses and submit them at the end of every financial year.
Establish a legal business entity such as an LLC or corporation protects you from being held personally liable if your delivery service is sued.
You will need to register for a variety of state and federal taxes before you can open for business.
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
6. Have the right insurance
For you to start operating as a delivery driver, you will need to have the correct insurance. Courier insurance, for example, covers you for when you are in an accident that could result in property damage and injuries.
You need to be aware of the three levels of Courier insurance available:
- Third-party only: This is the most fundamental level of cover that protects you against injury or damage to a third party and does not include insuring your delivery vehicle.
- Third-party, fire and theft: You are only covered if your vehicle is stolen and if there are any fire damages to your van.
- Comprehensive Insurance: You will be covered for theft, fire, third-party claims, and vehicle damage.
It is a good idea to shop around for the type of insurance you need as a delivery driver to ensure that you are covered if anything goes wrong. The types of insurance you should consider are as follows:
- Goods in transit insurance: Provides protection against loss, damage, or theft of the goods you transport.
- Public liability insurance: Protects from accidents involving members of the public. A successful claim against you might result in your insurer paying compensation, and you can claim back your legal defense costs.
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7. Build your customer base
To build up your customer base, you must have an established website, email address, and social media channels to market your business and engage with potential new customers.
To market your business, you can start advertising your services with flyers, pay-per-click advertising, or social media advertising. As your business grows, make sure that your business can accept delivery requests online.
If you are starting as a sole trader, apply as a subcontractor with various retailers and larger delivery companies. As your business grows, you can hire employees, lease a fleet of vans, and watch your revenue increase as you establish a good relationship with existing customers.
8. Open a business bank account
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued.
