How to Start a Delivery Service

Start a delivery service by following these 10 steps:

1. Plan your Delivery Service
2. Form your Delivery Service into a Legal Entity
3. Register your Delivery Service for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Delivery Service
6. Get the Necessary Permits & Licenses for your Delivery Service
7. Get Delivery Service Insurance
8. Define your Delivery Service Brand
9. Create your Delivery Service Website
10. Set up your Business Phone System

We have put together this simple guide to starting your delivery service. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Delivery Service Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a delivery service?

A delivery business’ largest startup cost is the acquisition of a suitable vehicle. A vehicle doesn’t need to be fancy, but it must be reliable. Such a vehicle usually costs several thousand dollars, at least.

The second-largest startup cost is often insurance. Delivery businesses might need commercial auto insurance, and they may want insurance for the packages being delivered. Without the proper insurance coverage, the business may be responsible for reimbursing any customers whose packages are damaged en route.

The other startup costs are minimal, often totaling only a few hundred dollars. These include any fuel, equipment costs (e.g. for a hand truck and ratcheting straps), licensure fees and marketing expenses. A cell phone is also needed to make calls, and most business owners rely on a computer as well.

Business owners who want to keep their upfront costs as small as possible can use a personal vehicle until the business’ profits support purchasing a different one. They also can use free marketing strategies, such as door-to-door marketing and social media marketing. Fuel can’t be avoided, but only a little is needed to get a business started. Revenue from the first delivery can be used to purchase more fuel for subsequent deliveries, which will generate more revenue.

What are the ongoing expenses for a delivery service?

The main ongoing expenses for a delivery service business include vehicles’ maintenance and depreciation, fuel costs and insurance premiums. All of these should be considered when determining what to charge.

Who is the target market?

A delivery service business’ ideal customer is a business that needs to make lots of quick, local deliveries. Partnering with local flower shops, cake shops and pizza places can provide steady business.

How does a delivery service make money?

A delivery service makes money by charging customers for deliveries made.

How much can you charge customers?

A few different factors go into how much delivery service businesses charge. A typical delivery charges may include a mileage charge of $0.50 to $2.50 per mile, with longer deliveries tending toward the higher end of the range, and a fuel surcharge of 15 percent. Deliveries that take longer than normal may be charged on an hourly rate rather than a distance-based rate.

There may be additional fees assessed for waiting, rush orders, after-hours deliveries, and heavy or oversized packages.

How much profit can a delivery service make?

A national survey of couriers found that the average deliverer makes $34 per hour. According to the survey, most work part-time by choice. Working 40 hours a week at this rate would provide a weekly paycheck of $1,360.

How can you make your business more profitable?

A delivery service business can generate more revenue by investing in more fuel-efficient vehicles. Although this won’t increase revenue, it will greatly reduce operating expenses because fuel is one of the biggest ongoing expenses. The net result will be an increase in profitability.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your delivery service is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a delivery service. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Vehicle Registration

Businesses are required to register vehicles which will travel across state lines for commercial purposes. Check here for a list of state requirements.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

A delivery service business may be a good choice for someone who is physically fit and has reliable transportation. Physical fitness is necessary because couriers sometimes have to deliver heavy or oversized packages. A larger vehicle, such as a van or SUV, is less fuel-efficient, but it ensures that a courier service can accept all kinds products.

Because deliveries may be scheduled for almost any time of day, it’s difficult to start this business while working a full-time job.

What happens during a typical day at a delivery service?

A delivery service business owner spends much of their day taking delivery orders, picking up packages and dropping them off. As a business grows, more drivers may be hired. Once there are multiple drivers, a business owner may transition to overseeing the fleet of couriers. This may involve accepting orders, passing them onto drivers and ensuring deliveries are made in the most efficient manner possible.

What are some skills and experiences that will help you build a successful delivery service?

In large metropolitan areas, such as New York City, some delivery services may deliver packages via bicycle. Most delivery services, however, rely on cars to take packages from their pickup location to their drop-off point. Therefore, most delivery service business owners need to have a driver’s license. Interested business owners who don’t have a driver’s license should contact their state’s department of motor vehicles to learn about the permitting and licensure process.

Customer service skills are also important in the delivery industry, as customers regularly change their orders. They may have more packages to deliver than they originally mentioned, need a package taken to a different address or want a package delivered sooner than initially agreed upon. Being able to gracefully respond to requests will help ensure customers are satisfied with the service provided.

What is the growth potential for a delivery service?

A delivery service may be a local operation that has just a few drivers, or it might be a national company. GrubHub and Zipments are two examples of larger delivery services.