You can start your delivery business in one of several ways, depending on the investment in time and money you are willing to make.
How much time and money you want to invest in getting your delivery business off the ground will determine the type of delivery business you choose. The options are:
A local delivery service. These businesses service grocers, retailers, restaurants, professional services firms like lawyers, and other local companies. 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. These businesses deliver products from established bakery and snack companies, like Sara Lee or Wise, to groceries, convenience stores, and other 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 franchise. These businesses contract with large, established retailers like Amazon or courier services like FedEx to deliver goods 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. It can be very costly to buy these franchises, depending on the territories served and services included.
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:
You'll also need to obtain insurance policies that cover your vehicle as well as loss, theft, or damage to the merchandise you deliver; and you might need a commercial driver's license and other permits, depending on the goods you deliver. (Keep reading for more information on insurance and licenses.)
Bread routes and corporate franchises provide a predetermined delivery area, customer base, and products, but if you start a local delivery service from scratch, you'll have to plan out all the elements of your service including:
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, the greater your opportunities to sell your services and earn income. Keep in mind, though, unless you are using an electric vehicle, you might pocket less revenue with a larger delivery area because you'll have to spend more on fuel and vehicle maintenance.
The research you do to determine your delivery area will also help you choose the types of products you deliver. For example, you might decide on specializing in delivering food if the area you've selected includes a lot of busy restaurants.
If you are using a small van or you don't want to hire employees, you might want to steer clear of furniture and appliance stores. If your vehicle is a passenger car, you might limit your business to restaurant deliveries or transporting documents for accountants and lawyers.
You can find potential customers by researching neighborhood and trade directories and the internet, and by putting in some legwork in the neighborhoods you've targeted.
Start your marketing efforts by announcing the opening of your business, and consider offering discounts to encourage first-time customers to try your service.
It might take some time to develop your customer base because business owners want to be sure that you'll be a reliable resource who will treat their customers well. Using more than one method to market your business might speed up the process and help to convince customers that you are a serious and dedicated professional.
Some of the marketing strategies you might consider include:
Cold calls. Contact potential customers in person or by phone to introduce your business. Follow up by sending business cards or flyers following your visit or call.
Mailers. Mail flyers, postcards, or brochures to potential customers and post them on local bulletin boards in groceries, community centers, and the like.
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.
Newspaper advertising. If there's a community newspaper in your delivery area, consider using the classified advertising section to promote your delivery service.
As an independent business owner, you can set your own prices, but before setting your prices it's important to take into account 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.
Don't forget about the other delivery services that operate in your chosen territories, and make sure your rates are competitive. For example, if you make restaurant deliveries, find out what other services like DoorDash charge and consider offering a lower price.
The process for setting prices is different for bread routes and corporate services. Bread route owners typically buy goods from the manufacturers at wholesale prices and sell them to retailers at a markup that varies depending on the market. Some bread routes work on a commission basis and pay you a percentage of what you sell.
Corporate delivery franchises set the delivery charges. In your franchise contract, you'll have to specify the percentage that you keep.
Local delivery services are often owner-operated businesses (the owners also serve as delivery drivers) with just one delivery vehicle (though there's nothing to stop you from expanding if your business grows).You might need to hire additional employees if you are delivering heavy or large loads.
Your accounting system can be as simple as a handwritten ledger or a spread sheet on your computer, or you can use accounting software such as QuickBooks. Your system should track expenses, payments due and received, revenues, and profits.
At a minimum, you'll need a navigation app like the one available free on most cell phones to find the locations of your delivery stops. Once your business grows, and you're making more than ten stops a day, consider using a fee-based route planner that will plan out the best ways to organize your day's deliveries and the most efficient routes.
Each state has its own requirements for setting up your business. Information and requirements are usually available on the website of the Secretary of State.
As a rule, you'll have to take the following steps to set up your business:
You can structure your business as a sole proprietorship, a limited liability company (LLC), a partnership, or a corporation. Some corporate franchisors and bread routes have rules requiring you to use a particular business structure, usually a corporation.
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.
The owners of sole proprietorships and partnerships are personally responsible for the debts of their business. For example, if your business goes bankrupt, creditors can come after your personal assets to collect the money they're owed. You are also personally responsible for paying taxes on your business income.
LLCs and corporations must register their business with the state. You can usually find information on the process required and register your business online using the website of the Secretary of State.
You are not required to take any formal steps to register a sole proprietorship or a partnership. States recognize these entities by default when they begin operations.
Choose a business name that describes your business, such as Joe's Delivery Services, so that your customers can readily identify what you do. You'll usually have to choose a name that's not already in use by another company, and your state might have other requirements for naming your business.
For sole proprietorships and partnerships, the names of the owners automatically become the legal name of the company. If you want to operate a sole proprietorship or partnership under a different name from your own, you must register a DBA (an abbreviation for ‘doing business as'), also called a fictitious business name, with the appropriate state agency.
Licensing requirements for delivery and courier services vary by state. Some states 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 learn the requirements in your state.
An EIN is like a social security number for businesses, issued by the IRS. You'll need one to apply for a loan, hire workers, or apply for permits.
At a minimum, you'll need auto insurance. Your personal auto insurance policy won't cover you once you begin using your vehicle for commercial purposes, and you'll need a commercial policy. Understand that car insurance covers the vehicle only. Insuring the contents of the car is done via your homeowner's renter's policy, but those policies do not insure other people's items that happen to be in your car. The same goes for items belonging to others that you transport—it will be up to your clients to insure their merchandise against loss, theft, and fire while being transported by you.
Additional types of insurance you might want to consider include:
Sole proprietors and general partnerships 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.