Starting a delivery business might feel overwhelming. Read this guide to learn everything you need to know, from startup costs to business insurance.
Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships
, and we adhere to strict guidelines
to preserve editorial integrity.
Want to know how to start a delivery small business but don’t know where to begin? With so many consumers turning to home delivery for convenience, you may be wondering: Is there space in the market for you?
Owning a delivery business is a great opportunity for many entrepreneurs. What’s more, you can quickly scale your delivery business as demand increases.
Keep reading for a step-by-step guide to starting a delivery business.
Why Start A Delivery Business?
One of the main reasons you should consider starting a delivery business is the steady increase in demand and market share.
According to Penske’s State of Logistics Report 2022, the market size of delivery services in the US reached $1.85 trillion in 2022, which was over 22% growth compared to 2021. This growth occurred despite the noted cost increases and uncertainty that resulted from the pandemic shutdowns in 2020.
Relatedly, same-day deliveries are projected to reach record heights in the logistics market — to be exact, $20.36 billion by 2027, as per Allied Market Research.
That’s astonishing growth; for reference, it was valued at $5.78 billion in 2019.
Types Of Delivery Services
There are many possible niches your business can fill. Consider partnering with local businesses that frequently need to deliver their products to consumers or other businesses.
Here are a few niches:
- Grocery delivery
- Pharmacy delivery
- Floral delivery
- B2B delivery
- Yard supplies delivery
- Furniture delivery
- Dry cleaning delivery
- Food delivery
- Cannabis delivery (check your state’s laws on recreational and medical usage)
How Much Does A Delivery Business Cost?
Startup expenses for beginning a delivery business vary, depending on many factors. That said, you should plan for the following expenses:
- Purchasing or leasing vehicle(s)
- Fuel costs
- Vehicle maintenance
- Time (your time and your employees’ or contractors’ time)
- Employee benefits
- Insurance costs
- Software expenses (website builder, email marketing software, CRM software, accounting software, etc.)
- Company phone service
- Marketing expenses
- Cost of operating a physical location (if you have one)
The average cost of starting up a delivery service is $19,267. The single largest startup expense will be the vehicle you buy or lease, which will cost thousands of dollars.
Take all the expenses listed above, as well as any other relevant expenses, into account. For example, with fuel, will you allow drivers to use the company credit card, or will you reimburse your employees for their gas purchases? Either way, you’ll need to factor this into your budget for your delivery business.
How Much Does It Cost To Become An Amazon Delivery Service Partner?
Maybe you are interested in starting and funding an Amazon business. Amazon delivery is one way you can start a delivery business by using an existing company’s foundation and customer base.
Perhaps you’ve seen advertisements online for Amazon’s Delivery Service Partner (DSP) program for entrepreneurs. Amazon states that you can start your own delivery business for as little as $10,000 capital. Amazon provides you with all your customers, and with very little startup cost, you can begin managing a team of 100 employees who drive a fleet of 10-40 vans.
Amazon claims that you could profit $75K-$300K per year through its DSP program. However, do your research before applying to become a DSP. In recent years, dropshipping through Amazon has become a huge part of its business. You might look into Amazon’s FBA versus dropshipping as you do your research.
Numerous reviews break down the costs of operating this type of business, revealing that according to Amazon’s numbers, you’re only likely to profit $7,500 per van each year.
And this doesn’t account for overhead and the liability you must assume, making this a very slim profit margin.
Starting A Delivery Service: The Step-By-Step Guide
Once you have an idea of the type of delivery business you want to start, it’s time to take action. Here are the first eight steps you should take to start a delivery service.
Step 1: Make A Business Plan For Your Delivery Business
The first step in starting any business is to make a business plan.
We recommend starting with a one-page business plan in which you list the following information about your business:
- The problem your business solves
- Target market
- Financial summary
- Marketing strategy
Step 2: Look For Funding
Every startup requires capital, and with a delivery business, you have to invest in a lot of equipment up front. If you don’t currently have the funds you need to start your business, we suggest looking into financing options.
There are many ways to fund a business. One option to consider might be crowdfunding through sites like GoFundMe or Kickstarter.
Many businesses will look for business loans as a way to finance their small business. There’s a lot to consider with business loans. You can meet with your bank or use a loan aggregator to research the loan that will be the best match for your business needs. The best business loans will have a repayment schedule that works for you and a lower interest rate. There are even options for loans for businesses with bad credit. Do your research.
You may also find a business credit card that works well for your business. Look for business cards with great rewards.
Some other options might include:
- Merchant cash advances
- Personal loans
- Invoice factoring
Step 3: Source Equipment For Your Delivery Business
One of the big startup costs you should anticipate is the cost of equipment. Depending on the types of products you decide to deliver, you’ll need to choose equipment that can help deliver shipments safely and efficiently.
Here are a few examples of equipment you may need:
- Vehicles (sprinter vans, pickup trucks, freight trucks, trailers, or refrigerated trucks, depending on your shipments)
- Ratchet straps
- Moving blankets
- GPS systems
- Cell phones or radios for all team members
- Tablets and card readers for processing payments and signing off on orders
As you create a list of the types of equipment you need, you should also consider how you’ll pay for that equipment. Will you purchase it outright or use equipment financing to lease or loan your vehicle? Research to find the best equipment financing companies available.
Make sure you calculate the interest rates you pay for equipment financing into your business’s budget.
Step 4: Determine Your Rates For Delivery
Your next step is to decide how much you’ll charge for deliveries. There are a few different ways you can price your services.
Many delivery companies charge on a per-mile basis. Each mile driven costs a set amount. In another model, you can charge a base rate and then add per-mile costs on top of that base rate.
As you set your prices, you should also determine the boundaries in which you will deliver orders. You can choose to not make any deliveries outside of these boundaries or charge a distance surcharge.
Make sure that your prices account for your company’s total overhead (including fuel, vehicle maintenance, time, and other costs) to protect your profit margin.
Step 5: Register Your Business
To legally register your business, you first have to decide on a business structure. The business structure you choose depends on the amount of liability you are comfortable with and if you plan on hiring employees.
If you’re just starting up and you plan on working independently for a while, a sole proprietorship is a good option. However, if you plan on hiring employees, you should look into setting up an LLC and purchasing LLC insurance.
The next step is to register your business name, also known as a “doing business as” trade name (DBA). As you choose a name for your business, consider using keywords such as “delivery,” “same-day delivery,” or even “floral delivery.” That will help your business appear in Google searches.
During this step, you should also look into available domain names. Choosing your business name and domain name at the same time can help you create consistent branding and make your site easier to find online.
Your final steps are to register your small business with the IRS, register for business licenses and permits, get an EIN if you have employees, and register with your state’s revenue office.
Step 6: Get Business Insurance
As you set up the legal part of your business, make sure you sign up for any necessary insurance. These insurance plans protect you and your business, and they also protect your employees.
Here are some types of insurance you should purchase:
- General Liability Insurance: This insurance package covers delivery services and delivered products. This insurance protects companies against lawsuits related to delivery services. Learn more about understanding small business liability insurance.
- Commercial Auto Insurance: Commercial auto insurance covers damage or theft done to a fleet of vehicles, an owner’s vehicle used commercially, or an independent contractor’s vehicle. Also, commercial auto insurance covers bodily injury and medical expenses. If your business operates trucks, you may also need commercial truck insurance.
- Garage Liability Insurance: If you plan on storing vehicles on-site, you’ll also need garage liability insurance.
- Commercial Property Insurance: To protect your employees’ property (things they store in their vehicle while they are at work), you can also sign up for commercial property insurance.
- Workers’ Compensation Insurance: Workers’ compensation insurance is required in every state except Texas. This insurance covers medical costs and lost wages for work-related injuries.
Step 7: Get Your Accounting And Payroll In Order
There will be no shortage of numbers you’ll need to manage and track for your delivery business. Do your best to scrutinously organize the cash that flows in and out of your delivery service.
Choosing the best accounting solution for your business will curb the financial risks that come with the volumes of orders, invoices, payments, miles, times, and operational costs you’ll have to juggle. It’s even possible to find a free accounting program.
You can also track tax-deductible expenses, such as fuel, repairs, and new equipment.
For payroll specifically, there are options available that are seriously budget-friendly and even free. Check out our articles on cheap payroll software and the best free payroll software.
Don’t forget, you’ll need to have payroll taxes sorted out, too.
Step 8: Find The Best Web Platforms For Your Delivery Service
Finding the right software for your delivery business can streamline your day-to-day operation and even reduce the number of people you have to hire to get things started.
Here are a few software recommendations that you should consider adding to your business:
- Square: If you choose to accept digital payments — which you probably should — consider Square for your credit card and payment processing. This all-in-one platform can be used to manage payroll and inventory in addition to handling payments, though it does charge a small fee on transactions. Its base service starts out with zero subscription costs, and you can scale up from there. (If B2B deliveries will be your niche, read about the best B2B payment processors here.)
- Shopify: Shopify offers multiple ways to put delivery services to work. The company partners with local delivery services for same-day delivery, so it will likely have opportunities for you if you have transportation ready. Shopify’s Local Delivery Service app allows you to give delivery status updates, use GPS, and communicate with customers. If you’re simply looking to sell a product and have deliveries handled, the platform puts you in contact with shipping carriers to manage and fulfill your business’s orders.
- Wix: Every business needs a website, and with Wix, you can build a fully functioning website from scratch. It boasts straightforward customizability, making it an appealing option for business owners who don’t have much experience with web development.
- Squarespace: Like Wix, Squarespace is an easy-to-use website builder. We recommend Squarespace over Wix for businesses looking to sell services online.
- QuickBooks: QuickBooks is a highly integrable accounting platform that allows users to track and manage income, mileage, receipts, and invoices. Users can also file tax forms through the platform. Multiple product versions of QuickBooks exist, but these mentioned benefits are common.
At the very least, this should help give you an idea of what you need to have your bases covered. Each aspect of your business should be addressed before it could lead to frustrated customers and drivers.
For example, if you need to track customers’ contact info and interactions, customer relationship management platforms (CRMs) such as Salesforce or Zoho will help. Time tracking software can help you manage your vehicles’ drivers, too.
Step 9: Create Your Online Presence & Marketing Plan
The next step you should take in starting your business is to create a solid online presence and marketing plan.
Your business’s online presence is the overall impact of your brand’s website, review pages, and social media interactions. Essentially, your online presence is made up of everything your brand has done online.
Work to create a strong online presence from the very beginning by building a beautiful and easy-to-navigate website and registering your business with business directories, such as Google My Business and Yelp.
Mobile-friendliness can’t be understated, either — 63% of online searches take place on phones and similar mobile devices, per Statista. If your site struggles with mobile formats, you’re missing out on business opportunities.
Finding & Keeping Customers
As you build up your business’s online presence, you should also consider the ways you will draw customers to your business. Make a plan for acquiring and retaining clients. Will you purchase online advertisements or claim an ad spot on the radio? Will you place ads on billboards or in the local newspaper? Will you partner with local businesses and rely on them for new customers?
No matter what you decide, make sure you have a plan for your marketing approach. And if your attempt doesn’t pan out, adjust your marketing strategy, and try again.
Is Starting A Delivery Business Right For You?
Does starting your own delivery service business still seem right for you?
Are you prepared to handle the challenges of planning delivery routes, and are you ready to face the competition of the ever-popular delivery apps? If you’ve answered yes, we’re here to support you as you begin. From business startup costs to equipment financing, we can answer any questions you may have about your future as a small business owner.