Brick-and-mortar locations are struggling to remain competitive with the convenience of online marketplaces like Amazon, which could be a boon for the savvy entrepreneur. Online shopping is altering customer habits as more consumers prefer to shop for everyday necessities online. COVID-19 exacerbates the move away from physical shopping because customers want to remain safe in isolation during quarantine. Every holiday season promises a peak for sales and deliveries, but this year will be especially intense and unprecedented for freight and courier businesses. Supply chains will be overburdened with excessive demand as brick-and-mortar reopenings remain on hold in much of the nation’s major cities. To fill the gaps, newcomers to the delivery business can capitalize on this years' record sales by entering the market as delivery proprietors.
What is The Best Way to Manage a Fleet?
The first step to becoming a delivery proprietor is to review industry and motor vehicle regulations. The second step is to establish your business as a sole proprietorship or limited liability company. The third step is to focus on your business plan which outlines your strategy for generating revenue, keeping costs low, and gaining loyal customers. Here’s how you do it:
Reviewing Industry Regulations
- To look up your state's regulations, check out SEMA.org which provides advice on how to stay up-to-date with auto regulations
Founding Your Business
- Check with your local county clerk's office
- Consult an attorney to see if an LLC or Sole Proprietorship would be best for you
Building Your Business Plan
Once you've gotten legal details and structure figured out, decide how your business will create value for customers. For your customers, your value extends beyond just shipping goods. You are also saving them the time of shopping, exposure to health risks during the pandemic, the headache of empty shelves, and their own cost of travel. For this reason, some proprietors maintain healthy balance sheets by adding a margin to purchased items in addition to their shipping fees. Food delivery for a pizza that normally costs $11.99 can be sold to customers for $15 for example.
It's standard industry practice to establish a baseline price for courier delivery services and then add on additional charges determined by the hour or mile. When delivering via light vehicles (meaning cars, pickup trucks, or minivans), expect to pay your drivers around $30 per hour. Smaller vehicles offer the flexibility to keep startup costs low. On the other hand, cargo vans, box trucks, and pickup trucks are the best vehicles to use for deliveries. These larger vehicles, better equipped for longer routes, will also increase driver costs as drivers can expect to earn as much as $36 per hour, so it may be helpful to add fuel or mileage surcharges on your customers’ bills.
Pro Tip: Fuel efficient vehicles are recommended as you will be racking up a lot of miles on your delivery routes!
Once your overall revenue plan is determined, adjust your plan to incorporate advertising costs, vehicle maintenance, insurance for vehicles and cargo, and perhaps liability insurance.
Finding a Customer Base
Now that you've considered the legal ramifications, established a pricing plan, and have made a detailed list of expected and potential costs, it's time to determine your customer base. Narrowing your customer base will allow you to budget more accurately and cap your fuel expenses. A great way to narrow your customer base is to first determine your delivery boundaries. Then decide which days you're willing to work and for how long. This will also go a long way towards making sure you maintain the appropriate work-life balance. This is crucial if you want to stay in business for a long time.
Thinking practically, most grocery customers place orders with markets nearby which allows couriers to include routes that don't add too many miles to their mileage counts. Try and be thorough when you theorize potential retailers who might need your services. In addition to grocery stores, restaurants, and malls, consider law offices or dry cleaners. Then begin to advertise. Post fliers in your service area and create an online advertising strategy that allows you to target potential customers in an area using Facebook ads.
After you get your delivery business up and running (or should we say driving) you'll want to create a loyalty program. You don't need to overthink your loyalty program. You can get started by offering free deliveries for a certain amount of deliveries or package deals. Figure out what makes the most sense for your customers and provide it for them.
Once you have your trucks or vans, it’s time to start thinking about what equipment you need. The main tool for delivery drivers is a hand truck or dolly. There are different types to choose from, however, such as a moving dolly or an appliance dolly. Deciding which tools to purchase depends on what kind of operator you choose to become. The more tools you have, the more jobs you'll be able to take on and fulfill.
Securing the cargo is very important to ensure that you don’t deliver damaged items. For this reason, multiple sets of ratchet straps are necessary for every delivery professional. For additional tie downs, consider keeping extra bungee cords nearby. Moving blankets are also a recommended purchase because cushioning cargo with blankets is much cheaper than having to replace a broken item. For used furniture deliveries and moving, it's helpful to wrap items in stretch wrap for extra protection. If you have a pickup truck, use a strong tarp to protect items from rain.
Money-Saving Routing Software
As a startup, it's recommended to rely on a network of independent contractors. Utilize an appropriate app, like Straightaway, which does an excellent job of automating logistical planning. Drivers can take a photo of their manifest, which lists all of their dropoff locations, and the app will create the most efficient route for drivers. It's recommended that entrepreneurs spend time on the right software and right capabilities.
To make the deliveries as fast as possible, a digital service like Straightaway is invaluable. Moreover, by using digital tools to create the most efficient route, delivery proprietors can reduce work hours for their employees and spend less on fuel.
After you’ve done the hard part of acquiring customers, the real work begins. In order to keep your customers, a success rate of 95% just won't cut it. One of the keys to Jeff Bezos' strategy was investing the capital and funds that would have normally been allocated for marketing and advertising back into operations. By improving the supply chain obsessively and promising one-day shopping, Bezos reached new heights..
Of course, mistakes happen. With a service like Straightaway, if a human error is made, you have greater flexibility to track items and resolve any disputes with customers more efficiently. It's critical to establish failsafe processes early on so only a fraction of deliveries involve wrong items, damaged goods, or delayed drop-offs.
Seize the Delivery Gold Rush!
The world is going through a period of immense transition. The spectre of automation and the challenges facing retail foreshadow a new world; one unlike the one we all remembered before the pandemic. This is great news! The truth is simple: opportunities will present themselves as the world changes. Seizing these opportunities requires education, some courage, and thinking outside of the box. Operating as a delivery proprietor allows entrepreneurs to invest in a growing industry and there’s no better time to get started than right before the holiday season is underway.