The Global Courier and Delivery Services industry is indeed a thriving industry and pretty much active in all parts of the world. Statistics has it that in the united states of America alone, there are about 171,604 registered and licensed courier and delivery services companies responsible for employing about 720,124 and the industry rakes in a whooping sum of $86 billion annually.
Note that this sort of delivery business assists clients with the delivery of goods, documents, and parcels, among other things by using a driver hired on a contract basis or a driver without salary.
This is indeed a very low-cost way of starting a delivery business and you can run this type of business from anywhere as long as there is a demand and people are willing to pay for your services. However, note that starting this sort of delivery business can be a daunting task.
You will be expected to take care of a hundred things simultaneously and the stress can make things quite difficult. However, if you are still very much interested in this kind of business, read on to learn some things you ought to know before venturing out on your own.
Steps on How to Start a Delivery Business with Contract Drivers
Table of Content
Conduct Market Research
Before you start your delivery business with contract drivers, you must research other delivery businesses in your area to note the exact services they offer, their prices, and how their customers rate them. Analyze the market extensively to find what you can do to set your services apart in the market.
Note that you can choose to make available speedy deliveries, or you could create your Instacart-like delivery app where prospective customers can order an item from a local shop, then contact you via your app to pick it up and deliver it to them. There are numerous routes and concepts in this business, ensure you carry out extensive research to know how you can fit into the market in your area.
a. Who is the Target Market?
Just like a normal local delivery service business, your ideal customer will generally be people and businesses looking to make lots of quick, local deliveries.
The demographic and psychographic composition of those who require the services of delivery companies cut across individuals, corporate organizations, fast food restaurants, grocery stores, online stores, banks, students, job applicants, schools and business owners cum entrepreneurs amongst others who need their goods, documents and parcels to be delivered to a recipient.
However, your exact target audience will depend on the type of deliveries you do. Also, note that your geographic area may also define your target market. A smaller delivery business might choose to focus in a part of a city or a few towns, while more established ones could expand to cover larger areas.
b. Is Delivery Business a Profitable Business?
Yes. This sort of delivery service is genuinely profitable, easy to start, and does not require a lot of capital or investment in trucks or heavy equipment. The global courier and delivery services industry will continue to blossom because people and organizations will always want to send goods, documents and parcels to different locations.
Despite the fact that the industry seems saturated, there is still room big enough to accommodate aspiring entrepreneurs who intend opening their own delivery services companies. However, to ensure you start and run a very successful delivery business with contract drivers, you will need to hire well-trained drivers and also know how to find loads and items for them to deliver.
c. Are There Existing Niches in the Industry?
- Food delivery business: Working with local chefs and restaurants.
- Grocery delivery business: Delivery grocery from supermarkets to the customers.
- Liquor delivery business: You won’t need to start making your own alcohol; you only have to partner with breweries and stores selling alcohol.
- Meal-kit delivery service: Partner with meal-kit businesses and be their official delivery partner, handling all their delivery tasks.
- Courier service business: Start a local, more affordable courier service in selected zip codes and cities.
d. Who are the Major Competitors?
- DHL Express
- FedEx Corporations
- Central Courier
- Lone Star
- TNT Express
- United Parcel Services, Inc. (UPS)
- Red Star Express
- YRC Worldwide
- Schenker AG
- Royal Mail
- Blue Dart – Dart Courier Service
The industry is projected to enjoy 2.3 percent annual growth. It is important to state that FedEx Corporations and United Parcel Services are indeed the market leaders in this industry not just in the United States of America, but also on the global stage.
e. Are There County or State Regulations or Zoning Laws for Delivery Business?
While you can easily start this business from home, you will still want to make sure you have all the necessary permits and training required to run a delivery business and also offer dispatch services. In most states, you may be expected to hold at least a high school diploma to obtain your dispatcher’s permit. It’s also a competitive and complex industry; therefore some professional experience will be extremely helpful.
f. Is There a Franchise for Delivery Business?
- Dor-2-Dor: £9,950 + Vat
- Order Up: $49,750 – $66,350
- World Options: £32,500 (Plus Vat)
- Apple Spice Box: $225,000 – $300,000
- Time To Eat Delivery: $4,500 – $34,500
- Pack & Send: £100,000 – £120,000
- Five Star Food Express: $40,000 – $50,000
- Delivery: $67,200 – $68,700
- Inxpress: £64,500 – £125,700
- EZ Pro Delivery: $114,075 – $176,392
- DPD: £600 – £ 2,300
- TransolSameday: £25,000
- Amazon Delivery Service: $10,000
- The Ups Store: $168,885 – $398,323
- Speedy Freight: £38,500
- Relay Express: $83,700 – $195,500
- Straight Shot Express: $100,000
If you are looking towards starting a delivery and courier services company, you would have to start from the very scratch because you can hardly get a franchise of a delivery and courier services company to buy, if you do, it will be way too expensive.
g. What Do You Need to Start a Delivery Business?
- Business Plan
- Reliable Drivers and Deliverers
- Storage Space
- Route Planner and Optimization Tool
- Front-end and Back-end Process
- Business Insurance
With a delivery and courier Services Company, you should just try as much as possible to secure delivery bikes, drones, vans/trucks, build business relationship with organizations and then leverage on every marketing tool within your disposal, especially the internet to market your services.
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a delivery business are;
Creative Delivery Business Name ideas
- Trust Deliverers
- Quik Packages
- Reliably Fast
- Duty Smiles
- Fast Option
- Verified Sweet Package
- Warrior Drivers
- Mighty Carry
- Easy Speed
- Delivered In A Flash
- Bolt Run
- Just For You
- Neighborhood Deliverers
- Fast Beast
- Door to Door
- Speed Kings
- Mick Deliveries
- Protected Parcels
- Delivered in Packs
- Bear In A Box
When it comes to Choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents.
Register your Business
a. What Type of Business Structure is Best for Delivery Business?
Have it in mind that business structures come in several varieties, each with its pros and cons. Note that the business structure you choose for your delivery business will dictate your taxes, personal liability, and business registration requirements, therefore choose wisely.
Note that the most ideal to consider is the LLC. The LLC offers increased protection of your assets by establishing your business as a separate legal entity. Although the liability protection isn’t entirely foolproof, it indeed offers more protection than a sole proprietorship.
If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Delivery Business?
Truth be told, the licenses needed to start this business will depend on your niche and business location; however, here are a few basic licenses to consider.
- General Business License
- Zonal Permits
- Seller’s Permit
- Sales Tax License
- Home Occupation Permit
d. What Type of Certification is Needed to Open a Delivery Business?
There are no mandatory certifications needed to start or run a delivery business, howbeit, you should consider some delivery manager courses to add more weight to your delivery brand. Some of these courses mentioned below will provide you with certificates carrying your names.
- Certified Manager Certification (CM)
- Master Project Manager (MPM)
- ITIL Foundation
- Six Sigma Green Belt
- Computer Service Technician (CST)
- Standards Professional Certification (CStd)
- Project Management Professional (PMP)
e. What Documents are Needed to Open a Delivery Business?
- Business License
- Business Plan
- Driver Contracts
- Business and liability insurance
- Federal Tax Payer’s ID
- Terms and Conditions
- Refund policy
- Certificate of Incorporation
- Non – disclosure Agreement
- Commercial Vehicle Operator’s Registration
- Appropriate driver’s licenses for drivers (Commercial driver’s license (CDL)
- Assistant’s licenses for assistants
- Proof of ownership, proper identification and vehicle license
- Copy of license for the service support facility (warehouse) and/or a recent inspection report
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Franchise or Trademark License (optional)
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot run any business in the United States without the proper documentations.
f. Do You Need a Trademark, Copyright, or Patent?
In this line of business, aside from protecting your business logo and name, intellectual property protection might not be an issue to take very seriously. However, you must learn a few basics about copyright laws to avoid legal issues of any kind. A good place to start is with the US Copyright Office, which can teach you a lot about the basics of copyright law.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Delivery Business?
The startup costs for a communication system average around $10,000. Therefore, expect to invest around $12,500 and above to start a delivery business with contract drivers. The cost of starting this business will most often depend on your niche.
For example, starting a local restaurant and inculcating food delivery with contract drivers to the business will be entirely different from starting the back-end process as a big e-commerce company. Also, note that the design and the convenience of the back-end process will also vary and depend on whether you are making the goods yourself or you intend to have your independent contractors pick them up from a supplier’s warehouse.
However, regardless of how you intend to go into this business, note that you will need a quality communication system. Usually, a dispatcher provides drivers with incoming/outgoing phone lines and paging systems.
b. What are the Cost Involved?
- Setting up a business name and corporation: $150 – $200
- Licenses and permits: $300 – $500
- Insurance: $100 – $300
- Business cards and brochures: $200 – $300
- Quality communication system: $10,000
- Website setup: $1,500 – $3,000
- Initial marketing budget: $300 – $500
c. What Factors Determine the Cost of Opening a Delivery Business?
- Ecommerce Marketplace and Management Software
- The Cost for Insurance Policy Covers
- The Cost for Registering the Business
- Source of Your Supplies and Ongoing Expenses
- The Cost for Branding, Promotion, and Marketing of the Business
- The Choice of Location
- The Necessary Licenses and Permits
d. Do You Need to Build a Facility?
Truth be told, this business can easily be started from home especially if you are looking to keep costs low, even after you add a couple more delivery drivers to your business. Howbeit, if you decide at some point that you need an office, you can find commercial space to rent in your area or even leverage sites such as Craigslist, Crexi, and Instant Offices.
As regards leasing or outright purchase of a warehouse facility, the choice is dependent on your financial standing, but the truth is that to be on the safe side, it is advisable to start off with a short term rent/lease while test running the business in the location. If things work out as planned, then you can go on a long term lease or outright purchase of the property.
e. What are the Ongoing Expenses for Running a Delivery Business?
- Advertising costs
- Software cost
f. What is the Average Salary of your Staff?
- Chief Executive Officer (Owner): $54,600/ Year
- Human Resources and Admin Manager: $48,930/Year
- Business Developer: $46,800/Year
- Information Technologist: $45,000/Year
- Accountant: $38,710/Year
- Call Center Agent: $23,490/Year
g. How Do You Get Funding to Start a Delivery Business?
- Business loans
- A business line of credit
- Friends and family
- Angel investors
When it comes to financing a business, one of the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Write a Business Plan
a. Executive Summary
Fast Option will be a new back office and dispatch service business for courier service providers in Austin, Texas. At Fast Option, we do not intend to invest in any infrastructure or resource needed to deliver these items to the clients.
Instead, we will source delivery jobs from e-commerce companies and local businesses, then match those jobs with suitable couriers to ensure speedy deliveries. We will open an office downtown where many of the eCommerce companies and businesses are located in Austin.
b. Products and Service
- Telephone answering services for courier service providers
- Providing contract or fee-basis telemarketing services for courier service providers
- Providing delivery related telephone solicitation services
- Providing customer service for our clients
- Technical support services
- Debt collection services
- Product delivery related consultancy services
c. Mission Statement
At Fast Option, our mission is to provide our clients with top-quality back office management and job sourcing services 24 hours a day. We have dedicated dispatchers who can consistently provide well-tailored services to our clients.
Our vision at Fast Option is to become a well-known brand in the Global Courier and Delivery Services industry and also create a service-based business that will not only meet but exceed the numerous expectations of our customers.
d. Goals and Objectives
- Develop a credible and dependable brand.
- Maintaining 100% customer satisfaction.
- Charging better rates than any of the competitors.
- Providing the best services in the sector.
e. Organizational Structure
- Chief Executive Officer (Owner)
- Human Resources and Admin Manager
- Business Developer
- Information Technologist
- Call Center Agent
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a delivery and courier services company, then you must go all out to employ strategies that will help you attract customers or else you will likely struggle with the business because there are well-known brands determining the market direction for courier and delivery services industry.
a. SWOT Analysis
- A well trained and carefully selected team
- Well defined and well-created brand affinity
- Good search engine rankings that will drive free traffic
- New business in the market
- Unverified branding strategy
- Budgetary limitations
- The fast-growing e-commerce industry
- The evolution of technology
- A steady increase in population
- New paid advertising channels such as Instagram and Facebook
- Several competitors are currently undercutting prices
- The website can be challenging to use on a mobile device even though mobile traffic is increasing
- Increase in the price of fuel that will impact drivers’ payments
b. How Do Delivery Businesses Make Money?
Most often, this sort of delivery business makes money from commissions, either prepaid or by the number of load/freight/jobs closed within a week. On average, you can comfortably handle around 3 to 5 couriers at a time from home, with each earning you an average income of $1000/month, so that’s around $3000 to $5000 monthly.
c. Payment Options
- Payment via bank transfer
- Payment via credit cards / Point of Sale Machines (POS Machines)
- Payment via online bank transfer
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Posting job ads on social media platforms like Facebook and LinkedIn
- Attending local networking events to meet drivers and staffing professionals face to face
- Putting a “qualified drivers wanted” sign in front of your building
- Asking for driver referrals from other business owners who work with drivers
- Working with a staffing agency
- Posting job ads on industry-specific job boards, like everyowneroperatorjob.com
- Generate interest by offering prizes for customers who complete a certain action, such as your first delivery is free!
- Experiment with text, color, size, and position of calls to action such as “Schedule Now”. This can sharply increase purchases.
- Put up eye-catching signage on your website
- Distribute flyers in your neighborhood and at industry events
- Offer your services at local markets, trade shows
a. How Much Should You Charge for your Service?
In this line of business, what you charge will vary massively depending on the size of the load, and the distance. You will have to estimate the time for each delivery route and charge about $40 to $45 per hour. You will also have to consider the cost of fuel, however, always strive to aim for a profit margin of about 70%. Also note there may be extra fees charged for waiting, rush orders, after-hours deliveries, and heavy or oversized packages.
b. How Much Profit Do Delivery Business Make a Year?
Depending on too many variables, the owner of a delivery business with contract drivers can make profits as high as $130,500 and as low as $15,000.
c. What Factors Determine the Amount of Profit to Be Made?
- Customer Base
- Number Of Drivers And Couriers
- Marketing And Customer Retention Strategies
- Business Agreements
d. What is the Profit Margin of a Delivery Business?
According to industry reports, the profit margin in this line of business is about 70%.
e. What is the Sales Forecast?
- First Fiscal Year (FY1): $98,000
- Second Fiscal Year (FY2): $280,000
- Third Fiscal Year (FY3): $420,000
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for Delivery Business?
The truth is that this type of business does pretty well when it is strategically positioned. Places like campuses, school districts, passport offices, immigration centers, licensing offices and recruiting centers are ideal for this type of business.
Your business location is very important because it can impact your taxes, legal requirements, and even your revenue. Most often, delivery businesses register their business in the state where they live, but if you’re planning to expand, you might have to consider other options, especially since some states might provide better delivery services. When choosing a commercial space, here are necessary factors to consider:
- A flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
- Central location accessible via public transport
- The demography of the location
- The demand for delivery and courier services in the location
- The purchasing power of the residents of the location
- Accessibility and road network of the location
- The number of delivery and courier services companies in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
If you are a novice in the dynamics of choosing a location for your delivery and courier Services Company, then you should feel free to talk to a business consultant or a realtor who has a full grasp of the city and perhaps country you intend starting your company.
b. What State and City are Best to Open a Delivery Business?
- Atlanta, Georgia
- Chicago, Illinois
- Dallas/Ft. Worth, Texas
- Riverside/San Bernardino, California
- Philadelphia, Pennsylvania
- Riverside/San Bernardino, California
c. What Equipment is Needed to Operate?
In this line of business, you are not expected to provide the equipment a contractor needs to carry out the work. When you hire an owner-operator, you also won’t have to bother about buying a truck, buying insurance for the truck, fueling the truck, or paying for its repairs.
Have it in mind that the contract driver is tasked with these costs and responsibilities as part of running his business. At the very least, you will need a reliable computer and a printer connected to the Internet. Basic computer skills are essential. Invest in a quality phone system so you can effectively communicate with drivers, suppliers, and partners.
You may need a customized logistic and deliver software, tracking device and software apps, Point of Sales (POS) Machines and other relevant software applications. As the link between your drivers and clients, you must be able to set up truck routes, review drivers’ logs and create billing reports. Ensure you know the software inside and out.
You will definitely need distribution vans/trucks, bikes, drones, computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst other and all these can be gotten as fairly used.
The Global Courier and Delivery Services industry has a moderate to low level of capital intensity. Players in this industry spend on average $0.17 in capital investment for every dollar spent on labor. Bigger cargo aircrafts and trucks are needed to transport packages to their intended destination, while technology is employed to track the packages while in transit.
To find reliable contractors or delivery drivers, consider posting job openings on websites like ZipRecruiter, Monster, & Indeed. You can also leverage your brand’s social media platforms to inform potential independent contractors or drivers about the open position. You will have to check whether:
- The contracted driver have their own vehicle;
- If they have commercial driver’s licenses & driving experience
- How long is the contract for?
- The number of stops or number of hours to work every day.
Despite investment by companies in machinery and other reliable technologies, manual labor is still needed. This labor includes drivers, pilots and delivery personnel who work alongside and operate the machinery. With the amount of manual labor required, wages are expected to account for 28.5 percent of the revenue generated in the industry.
When it comes to hiring employees for a standard delivery and courier services company, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Transport and Logistics Manager, Warehouse Manager, Sales and Marketing Officer, Dispatch Riders, Delivery Van Drivers, Accounting Clerk and Cleaners.
These are some of the key employees that you can work with. On the average, you will need a minimum of 5 to 10 key staff members to run a medium – scale but standard delivery and courier Services Company.
Launch the Business Proper
The demand for commodities and services to be delivered at the doorstep is expected to keep propelling industry growth, even shortly. After you must have chosen your niche and figured out what you intend to be delivering, you have to set up an efficient last-mile process. Note that the way your front-end process flows makes or breaks the impression you are already trying to create as a brand.
Understanding the needs of the front-end process and how it relates to your business is very critical. Also, note that the front-end process often has different requirements when compared to the back-end process. Your niche will also impact how you design your front-end delivery process.
a. What Makes a Delivery Business Successful?
Starting and running this sort of business will require strategy and determination. Your contract drivers will be looking to you for motivation and guidance as your team strives for operational excellence. Note that holding your drivers to a set of standards and metrics will be very useful, as package deliveries are expected to meet strict timelines and be carried out near-perfectly.
Once you hire a set of delivery drivers for your company, it will be ideal you provide them thorough training. Even after the required training, ensure the drivers are fully fitted with the right set of tools and guidance to help keep them safe and healthy while doing their jobs. To guarantee success, it should be a protocol to keep doing specific things to ensure they are staying vigilant, safe, and healthy on the job.
b. What Happens During a Typical Day at a Delivery Business?
Although this will surely vary depending on your niche, here are a few daily activities to expect;
- Finding loads/freight and negotiating rates with brokers.
- Arranging package pickups and deliveries.
- Picking out the best routes for drivers.
- Managing daily schedule of drivers.
- Conducting team meetings.
- Logging records.
- Generating invoices.
- Keeping up-to-date with weather conditions.
- Managing your resources to sometimes deal with large increases in seasonal volume demand.
When it comes to the delivery of goods, parcels and documents, there is no hard and fast rule about it. Basically, it is the duty of the marketing and sales team to help the organization source for clients. They go out there to source for organizations, schools, online stores, restaurants and other enterprises that are regularly sending stuffs to their clients.
Once a delivery deal is sealed, the delivery drivers either load their vans/trucks or bikes directly from the clients’ location or from their warehouse, if the goods are brought to the warehouse, and then the goods are delivered to the expected location, they either collect money on delivery from the receiver or they get paid by the sender. Usually, there is a business agreement with the sender or receiver as regards who will pay for the services.
It is worthy to mention that swiftness and safe delivery is very important in this industry, hence the need for all delivery and courier services companies to install trackers on the delivery vans, bikes, trucks and also leverage on reliable logistics and software apps. This will enable them keep track of the goods, parcels and documents that are on transit and also give almost accurate timing of delivery.
c. What Skills and Experience Do You Need to Build a Delivery Business?
- Previous industry experience
- Geographic knowledge of the area
- Organization skills
- Attention to detail
- Customer service skills
- Troubleshooting skills
- Adaptability Skills
- Accounting Skills
- Creativity Skills
- Strategy Skills
In order to successfully run a delivery and courier services company, you must establish good business relationship with transport and logistics companies and even airplane services and of course organizations and businesses that are always sending goods, parcels or documents to their clients.
You would need steady supply of deliveries from these organizations and businesses in order to remain in business. If you are just starting out, you might not have the capacity to own a plane or fleet of delivery vans or even drones that will make your job easier.
This is why you should look towards partnering with key stakeholders such as logistics and transportation companies and airline companies who have the capacity to deliver goods to any part of the world within the expected time frame.
9. Insure your Delivery Business
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your delivery and courier Services Company.
Here is some of the basic insurance covers that you should consider purchasing if you want to start your own delivery and courier services company in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Risk Insurance
- Credit insurance
- Motor vehicle insurance (comprehensive insurance)
- Deposit insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance