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How to Start a Delivery Business?
A delivery business can be highly profitable if you know how to do it right. After all, efficiency and social distancing seem to be the norm these days. Many prefer to get their essentials, such as food and groceries, right to their doorstep. Plus, there seems to be a constant and long-term need for delivery services.
Before quitting your nine-to-five job and starting your delivery business, make sure to check out these steps.
Step 1: Decide What Delivery Business You Want to Have
Whether you’re deciding between food, grocery, or other items for delivery, you’ll need to consider how best to introduce these. You might need to do some market research in your target location, to know which products to offer.
For example, if you’re looking to cater to an apartment complex for professionals, you might want to consider food delivery. After all, these people might not have the time, energy, or spacious kitchens, to make their meals.
On the other hand, starting a grocery delivery business might work for families in the suburbs.
Besides these two, there are other ideas you can try when deciding your delivery business. Here are some:
- Laundry and dry cleaning
- Furniture delivery
- Clothing and accessories delivery
- Pharmacy delivery
You can even combine these ideas to cater to a wider market. Ultimately, make sure to learn more about your market before choosing a delivery business.
Step 2: Plan Your Delivery Business
Suppose you’ve already settled for a delivery business. In this case, start planning your next steps as soon as possible. For this step, being a self-starter tremendously helps as there are many things you need to plan and execute. Here are some:
Find your selling point/differentiator
You need to ask yourself the question, “What makes your business different?” If you’re starting a food delivery, you can offer cuisines that none of the existing businesses offers in your area. Or, there might be some family recipes you want to share with your target market.
For grocery delivery, you might want to check out how Local Roots NYC did it. As a business that delivers fresh produce, their differentiating factor is their suppliers.
Doing market research can make help you determine a unique factor your local delivery companies seem to miss. Additionally, your target market might be looking for services that none of your competitors offer. For these cases, filling these service gaps can be advantageous to your business.
Plan your logistics
Besides the actual products, another crucial thing to consider is the logistics. Here are some things you need to prepare:
For a food delivery business, confirm if your state laws allow home kitchens. Otherwise, you will need a commercial kitchen or commissary. Suppose you already have a restaurant but want to add a delivery business. In that case, make sure your delivery crew has a designated area in your restaurant. It is also crucial to have a separate prep area for your food deliveries.
For this part, you can start offer deliveries within a small perimeter. This helps you gauge how long deliveries can take. Then, as you learn more about managing logistics, you can increase your market reach.
If you’re opening a grocery delivery, you can divide your target perimeter into manageable zones. Through this, you can set up teams to handle these zones. Or, run up some strategies like allotting a day of the week to each zone.
In some delivery businesses, reverse logistics, where you need to pick up some items from customers, may be necessary. For example, you might be selling milk and need to get empty milk bottles first. You can consider this process if there are some reusable food containers you need to get from your customers.
Budget planning comes after understanding your logistics and market. Here, you will set up your budget and forecast demand and revenue. Specifically, you will identify the following:
Determining the estimated revenue can help you determine how much you need to spend upfront. Additionally, it can guide in making decisions, especially if there are some risks involved. Finally, you would want to know if sustaining the business can be profitable in the long run.
To calculate the expenses, you’ll need to consider the following:
- Vehicles and vehicle maintenance
- Licensing fees
- Gas and toll fees
Ideally, prepare your budget based on what you need to purchase at the start. Plus, get your finances ready for what you need to pay for in a three-year period. Start working on balance sheets and taking note of billing cycles.
Ultimately, you would want to have more money coming in than coming out in a 30-day cycle. Closely monitoring your earnings and expenditures can prevent future cash flow problems.
Step 3: Define Your Brand
Get people to notice your business by defining your brand. Choose a business name that is unique, short, and easy to pronounce. This way, you have a better chance of people remembering it.
You can also market your business with the help of other businesses. For example, put up posters on your delivery vehicles or ask local shops to do this for you.
If you’re looking for affordable advertising methods, you can consider the following:
- Create a website
- Social media posts
One of the best platforms to build a website with is WordPress.com.
Step 4: Open a Legal Entity for Your Delivery Business
The first thing you want to avoid is operating illegally. To set up a legal entity for your business, decide first on a business structure:
- Limited liability company (LLC)
- Sole proprietorship
Though all these are viable choices, choosing a corporation or an LLC can be more advantageous to your personal assets. In case of lawsuits against your delivery service, these two structures can protect you from personal liabilities.
Step 5: Purchase Equipment & Hire Your Team
After planning and getting your business registered, it’s time to prepare for the operations.
Get the right tech
The right equipment and technology are an investment geared towards success. You and your team will be using these, so make sure to settle for quality. Getting these at a bargain is just an added bonus.
Assemble your dream team and train them
Your dream team will be with you at the start of your business venture. Their role is vital to your business success. As such, you want to hire people you can work closely with and help you make smart decisions.
To help you choose, here are some skills you might want to consider on your team members:
- Customer service
- Tech skills
- Critical thinking
- Communication and people skills
You would also want someone teachable as you provide training on using route optimization software.
Choose the packaging that aligns with your brand
Besides your actual products, packaging may leave a lasting impression on your customers. It can even affect their choice whether to order from your store again, or otherwise.
Considering that, you can include your packaging design in your market research. Find out how best to present your products and your market preferences. For example, if your business offers an organic meal, you might want to consider biodegradable packaging.
Step 6: Create Your Business Website
Besides promoting your business, there are other reasons why creating a website can be beneficial. Here are some:
- It confirms your business’ legitimacy.
- Facebook and other social media accounts are not the same as a business website.
- You can provide customers with added value through website content like blogs, FAQs, and feedback forms.
Step 7: Take a Test Run
Despite all the planning, there are some things that might go amiss when you finally launch your business. After all, you want operations to go smoothly on your opening day. To prepare for possible problems, you can take a test run among your closest clientele.
By running a test run, you can track how long deliveries take, including the ride and stops to customers’ locations. You’re looking to gather more concrete data to improve your routing and scheduling. Additionally, you can prepare for a better capacity plan to help you accommodate higher demands.
Finally, through a test run, you can get insights and feedback from prospective customers. These include food pricing, options, and services they liked.
Step 8: Register for Taxes
Make sure to register for taxes before opening your delivery business. To do this, apply for an Employer Identification Number at the IRS first. Then, depending on your business structure, learn more about your taxation options.
There might also be some specific state taxes that you need to register for your business. Confirm these and complete the requirements before your launch date.
Step 9: Launch Your Business
As your opening date comes closer, hype up your business marketing to get the word out.
The referral system can be an excellent tool to get more people to learn about your food delivery service. Adding a referral bonus or discount to your email campaigns can attract more potential customers.
Step 10: Get Efficient Marketing for Your Delivery Business
Efficient marketing can help you reach a wider market. Fortunately, you have many options to do this. Here are some examples:
Social media engagement
Through your business social media account, you can post fun content that encourages audience engagement. Use high-quality photos and include simple questions.
If people liked your posts enough, they are more likely to share them. This spells free marketing for your business.
You can also hire influencers in your area to promote your business. Say, someone with hundreds of thousands of followers on TikTok, YouTube, or Instagram can make content about your business.
Step 11: Scale and Expand Your Delivery Business
Optimizing your business so that all processes run at peak efficiency is your ticket to success. Through this, you can increase your client base while saving time, money, and manpower.
Here are some tips to optimize your business:
- Use advanced technology suitable for your business.
- Plan deliveries as early as you can.
- Have a growth mindset and prepare for success.
- Be updated on market trends.
Alternatives to Starting a Delivery Business
In case you prefer working with a delivery company rather than starting your delivery business from scratch, here are some of the best companies to consider:
DoorDash is one of the most popular food delivery service providers in the United States. As a Dasher, you’ll need to accept customer requests through the mobile app, visit selected restaurants, and deliver food orders to your customers’ doorsteps.
When it comes to DoorDash earning potential, you can earn $25 per hour, which could easily total $1,000 per week.
Like DoorDash, Instacart is also a delivery service provider. But unlike DoorDash, Instacart focuses on delivering groceries. In fact, working with Instacart, you’re more like a personal shopper. As an Instacart personal shopper, you’re visiting grocery stores, buying items in your customers’ orders, and delivering them to their homes.
With Instacart, you could average $1,500 per week by shopping for other people.
GrubHub is another excellent alternative to starting a delivery business. Just like DoorDash, GrubHub is a food delivery platform that focuses on delivering food orders from local restaurants.
As a GrubHub delivery driver, you can expect to earn on average $12 per hour. However, you can increase your earnings by getting tips for great service and saving your expenses.