Starting a delivery business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful delivery business.
Importantly, a critical step in starting a delivery business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Delivery Business:
- Choose the Name for Your Delivery Business
- Develop Your Delivery Business Plan
- Choose the Legal Structure for Your Delivery Business
- Secure Startup Funding for Your Delivery Business (If Needed)
- Secure a Location for Your Business
- Register Your Delivery Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Delivery Business
- Buy or Lease the Right Delivery Business Equipment
- Develop Your Delivery Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Delivery Business
- Open for Business
1. Choose the Name for Your Delivery Business
The first step to starting your own delivery business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your delivery business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your delivery business.
2. Develop Your Delivery Business Plan
One of the most important steps in starting a delivery business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your delivery business.
- Company Overview – this section tells the reader about the history of your delivery business and what type of delivery business you operate. For example, are you a courier service, package, postal, or food delivery business?
- Industry Analysis – here you will document key information about the delivery industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract new customers to your delivery business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your delivery business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding startup costs?
3. Choose the Legal Structure for Your Delivery Business
Next you need to choose a legal structure for your pickup and delivery business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the delivery business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a delivery business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the business owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a delivery business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a delivery business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your delivery business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Delivery Business (If Needed)
In developing your delivery business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a delivery business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a delivery business that they believe has high potential for growth.
5. Secure a Location for Your Business
The best way to find a location for your delivery business is to do some market research to see what areas have the most potential for your type of business. See where most of your target customers are located and consider whether it will be efficient to deliver packages to those areas.
There are a few factors you will want to consider when choosing the right location for your delivery business.
First, you’ll need to decide what type of delivery business you want to start. Will you be delivering food, packages, or flowers? Are you offering same day deliveries? Once you have decided on a niche, you can start thinking about specific locations.
Next, you’ll want to consider the demographics of the area. Is there a high population density in the area? Is the area affluent or low income? These are important factors to consider when choosing a location for your business.
You’ll also want to think about the competition in the area. Does your chosen niche have a lot of competitors in that area? If so, you may want to find an alternate location or niche instead.
Finally, you’ll need to consider the traffic in the area. Is there usually a lot of foot traffic? Will most deliveries be made by car?
6. Register Your Delivery Business with the IRS
Next, you need to register your new business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your delivery business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your delivery business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
There are several licenses and permits that may be required to start a delivery business, depending on the nature of your business. For example, you may need a business license from your local government, a food handler’s permit if you will be handling food, and a commercial driver’s license if you will be driving a delivery vehicle. You should contact your local licensing authority or business licensing agency to learn more about the specific licenses and permits that are required for your business.
10. Get Business Insurance for Your Delivery Business
In running your delivery business, you need to ensure that your business is adequately insured.
Delivery Business insurance policies that you should consider include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Delivery Business Equipment
To start a delivery business, you will need a vehicle to transport the products. You can purchase a delivery van or truck or use your own vehicle if it is large enough to transport your products. You’ll also need some supplies to package products for delivery. You will need packing supplies such as boxes, packing tape, and bubble wrap.
12. Develop Your Delivery Business Marketing Materials
Marketing materials will be required to attract and retain customers to your delivery business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your delivery business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional delivery business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media platforms will help customers and others find and interact with your delivery business.
13. Purchase and Setup the Software Needed to Run Your Delivery Business
To start a delivery business, you will need software to manage your deliveries. This software can help you keep track of deliveries and schedule and manage your delivery drivers. Some examples of delivery management software include Delivery Manager Pro, ManageBiz, and Sendy.
14. Open for Business
You are now ready to open your delivery business. If you followed the steps above, you should be in a great position to build a successful package delivery business. Below are answers to frequently asked questions that might further help you.
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How to Start a Delivery Business FAQs
Is it hard to start a delivery business?
It's not hard to start a delivery business. Compared to other types of businesses, it takes a lot less investment, expertise, and startup capital to get a delivery business up and running. In other words, you don't need some huge warehouse leased for months on end with tons of working capital to get going. All you really need is a car, a phone with GPS, and some gas money.
How can I start a delivery business with no experience?
First, you'll need to research the industry and learn everything you can about starting a delivery business. Next, you'll need to create a business plan and financial projections. This will help you determine if your business is viable and how much money you will need to start. Finally, you'll need to find funding for your business and build a great team of experts who can help you. With hard work and dedication, you can start a successful delivery business with no experience.
What type of delivery business is most profitable?
There is no definitive answer to this question as it largely depends on the type of products or services that a particular business offers. However, local businesses that offer delivery services for items such as food, groceries, and pharmaceuticals are typically more profitable than those that only offer delivery services for packages or documents.
The reason for this is that food, groceries, and pharmaceuticals are items that people need on a regular basis. Therefore, once an individual becomes familiar with the reliability of a delivery service they will most likely use it for all convenience purposes. It takes several months to build up this type of loyalty; however, it is extremely profitable in the long run.
How much does it cost to start a delivery business?
The upfront costs you'll need to start a new business will depend on the type of delivery service you want to offer. If you're planning to offer a basic delivery service, you'll need a vehicle (pickup truck or box truck), insurance, and some basic supplies. However, if you're planning to offer a more specialized service (like same-day or rush delivery), you'll need to invest in additional equipment and supplies.
The total startup cost will be anywhere from $500 to $10,000 and up to start a delivery business.
What are the ongoing expenses for a delivery business?
The ongoing expenses for a delivery business can vary greatly depending on the size of the business, the type of delivery service offered, and the geographical area serviced. Some common expenses include vehicle and equipment leases or purchases, gasoline, repairs and maintenance, insurance, advertising, and wages and benefits for employees.
How does a delivery business make money?
A delivery business makes money by charging a fee for delivering a package. The fee is typically a percentage of the total cost of the package, and it is paid by the person or company that sends the package. In some cases, there may also be a fee for receiving packages.
In order to make money from deliveries, a company typically needs to hire employees or purchase vehicles and other equipment. These things cost money, which is why most delivery businesses charge customers in order to cover costs and earn a profit.
Is owning a delivery business profitable?
There are many factors to consider when deciding if owning a delivery business is profitable. The most important factor is the demand for your services. You'll need to research your local market to see if there is a demand for delivery services. If there is a demand, you'll need to determine if you can offer a competitive price while still making a profit. You should also consider the cost of running your own business, including insurance, gas, and vehicle maintenance.
If you're able to offer a competitive price and you have a reliable vehicle, owning a delivery business can be very profitable.
Why do delivery businesses fail?
There are a number of reasons why delivery businesses fail, but the most common ones are: not having enough customers, not making enough deliveries to cover expenses, and high costs associated with running the business.
Delivery businesses have a large range of financial responsibilities. As a result, the number one reason delivery businesses fail is that they cannot obtain enough customers to cover these costs. Another common reason for failure is not being able to generate enough income from deliveries.
Finally, the costs of running a delivery business can be overwhelming. The primary cost is fuel. Delivery trucks generally get very poor gas mileage, which results in large fuel expenses. Repairing and maintaining vehicles can also be extremely expensive compared to what it would cost for an ordinary car.
Because of these reasons, businesses need to make a large number of deliveries to make a profit. This can be done by capturing as much available business as possible, delivering for multiple companies at once, making deliveries as quickly as possible, and using fuel efficient vehicles.