The entry barrier for starting a small business varies drastically depending on the industry you will be operating in. At one end of the spectrum, you have complex endeavors, such as restaurants. To start an eatery, you often need to secure a location, obtain licenses, pass the health code, buy expensive equipment, set up a dining room, and figure out your supply chain.
Delivery business can be much easier to run because there’s less overhead and fewer hoops to jump through.
“If you want to launch a small business with minimal startup fees, a courier service or small-scale delivery service might be your best bet,” says a startup analysis from the Houston Chronicle. “You won’t need to spend much on equipment, there aren’t any education or experience requirements, and you have countless potential customers at your fingertips. To get your courier service off the ground, you need a vehicle, dolly, and cellphone.”
This guide will walk you through the key steps required to get your delivery business rolling. There are no universal road maps for this process, so it’s important to connect with a trusted mentor who can help you navigate the inevitable challenges and surprises that arise. If you don’t already have a mentor, contact your local SCORE office.
Start With a Solid Plan
It’s impossible to reach a milestone that has never been identified, so in order to set your delivery business up for success, you need to chart the road ahead. The best way to get your business plan started is to answer key questions about what you want to do and how you want to do it.
Possible questions include:
- What’s your main objective?
- What are your primary strategies?
- What’s your mission statement?
- What have you learned from your industry analysis?
- What have you learned from your market analysis?
- What have you learned from your competitor analysis?
- How will you structure your organization?
- What are your financial projections?
- What are your financial needs?
If you don’t have answers to these questions, at least you know what is required to formulate a strong plan. Gathering the information for each element of your plan requires effort. But the payoff will be the fuel that drives your business forward once you launch.
“Research and analyze your product, your market, and your objective expertise,” recommends the Houston Chronicle. “Consider spending twice as much time researching, evaluating, and thinking as you spend actually writing the business plan. To write the perfect plan, you must know your company, your product, your competition, and the market intimately.”
Armed with the knowledge gained through your research, you can craft an executive summary. This is where you’ll boil everything down to its essence and describe what makes your business special in just a few sentences.
Some business experts claim your business plan is just an internal document that could essentially be written on the back of a napkin. All that matters is that it works for you, they might say. This logic is flawed because many lenders will request to see your plan if you seek financing. If it’s polished and professional, your odds of approval go up. If it’s scrawled on a Denny’s napkin, you probably wasted your time applying for the loan.
Get Your Wheels
Your success in the delivery business is closely tied to reliable transportation. Whether you simply use your 1995 Honda Accord or have a fleet of brand new vans, make sure you’re always ready to get from point A to point B.
If you need to purchase vehicles to get your business going, do your research ahead of time. There are countless options for box trucks, cargo vans, and trucks, so look at key features such as fuel efficiency, maintenance requirements, and turn radius. Because you’ll be spending so much time driving, it’s also great if the seats are comfortable and you like the styling.
In addition to vehicles, you’ll need to think about other equipment. You’ll likely need to buy hand trucks, moving dollies, or appliance dollies. Having the right moving equipment available empowers you to take on a wider variety of jobs. These tools will also help protect your cargo and decrease the risk of bodily injury.
Speaking of cargo protection, don’t even think about transporting cargo if you don’t have a full set of ratchet straps and other tie-downs. Always wrap items in moving blankets to prevent damage.
Take Care of the Startup Essentials
You could have the largest van fleet in the lower 48 states, but your business probably won’t move an inch if you don’t acquire your Employee Identification Number (EIN). The IRS requires most business owners to apply through their website before they begin to operate a business.
Curious if you’ll need one? Here’s the questionnaire provided by the IRS. If you answer yes to 1 or more of these questions, you’ll need to get an EIN.
- Do you have employees?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
- Do you withhold taxes on income, other than wages, paid to a nonresident alien?
- Do you have a Keogh plan?
- Are you involved with any of the following types of organizations?
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Nonprofit organizations
- Farmers’ cooperatives
- Plan administrators
Once you’ve taken care of your EIN, you’ll be ready to open a bank account for your business. Check around to see if any of your favorite banks are offering incentives for opening new accounts. These bonuses can be a great way to earn extra perks for simply carrying out a task you needed to do anyway.
Your other option is to set up a business account with the same bank where you already hold personal accounts. This approach is the easiest route because that bank will already have all of your personal information on file. Because you’ve established a relationship with them, you’ll likely be able to breeze through the application phase.
Next, you’ll need to think about insurance, which is a major expense for delivery businesses. Even though you’re going to do everything in your power to safeguard your vehicles and cargo, it’s advisable to have commercial auto insurance and coverage for the cargo. This kind of protection gives you confidence in your daily tasks and could save your business if disaster strikes.
Hiring an accountant can be a proactive way to anticipate business threats, figure out financial strategies, and make the best financial decisions. Many new businesses make dozens of unforced errors in the first year of business, so it’s worth the cost to have an experienced adviser who can help you make the most of your money.
Decide on Your Location
Every business needs a home. In some cases, the business literally resides in a home. If your delivery business is small enough, this option might be right for you. Just be sure to check out your area’s zoning ordinances to ensure you don’t run into any issues.
Other times, you’ll need to rent office space and a warehouse for your delivery business.
“For many professionals, their office is their second home,” says Forbes. “Most people spend the majority of their waking hours working, so as a business owner, the office you choose for your business matters. One critical piece of the puzzle is your office location. It needs to be easily accessible to local commuters and your clients, but it should also be in a building or neighborhood that offers desirable amenities for your employees.”
Leasing is obviously the more expensive and complex route, but it can pave the way for greater opportunities by giving you room to expand your operations. Just be mindful of your budget and don’t get into a situation that will strain your business too much.
Choose Your Name and Structure
If you don’t believe that business names matter, just ask the owners of ISIS Chocolates or the masterminds behind Qwikster. Start your name selection process by making a comprehensive list of possible names. After narrowing it down to a handful of top contenders, take the time to see if they’re all currently available. You can research industry directories, conduct Google searches, and check with the US Patent and Trademark Office (USPTO).
Before you move forward with a name, workshop it with your friends and family members. They’ll help you spot any issues such as unfortunate double meanings that could cause embarrassment later on.
In order to have an internet presence, you’ll need to purchase a domain related to your business name. Sometimes your domain will be your exact name, such as apple.com. In other cases, you may need to get creative. What matters is that your domain is short, memorable, and easy to recognize.
This step is a great time to also lock down your social media accounts. You may not plan to use every social channel immediately, but you can create accounts on Facebook, Instagram, Twitter, LinkedIn, and YouTube just to make sure you own the name. That way, it’s available when you decide to make it active.
After choosing a name that truly shines, you can tackle the process of setting up your business. You have several legal structures from which to choose. This decision is a prime example of when your accountant will come in handy, as they’ll be able to help you understand the benefits and limitations of each one.
“Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company,” says Entrepreneur. “Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.”
Two of the most popular legal structures are sole proprietorship and limited liability company (LLC). A sole proprietorship is ideal for lean operations with a single owner. Given the minimal scope associated with this option, the setup is among the most streamlined and affordable. One potential drawback of a sole proprietorship is that it offers no protection from business debts. Any liabilities will fall directly on your doorstep.
An LLC earns its name from the fact that it provides the type of liability protection absent from a sole proprietorship. The setup is more involved and the tax situation isn’t always as favorable, but LLCs can be ideal structures for many delivery businesses.
Other common business structures include:
- C corporation
- S corporation
- Limited partnership
Carefully review all of these options with your accountant or other mentor and then identify the structure that best aligns with your business’s operations and goals.
Find the Best Financing
Running a business involves myriad expenses. In addition to previously mentioned costs such as insurance, vehicles, equipment, rent, and incorporating your business, you may also need to budget for licenses, permits, professional fees, marketing, payroll, and supplies.
Just as there are multiple business structures with their own strengths and weaknesses, you’ll have a vast array of financing options. The 10 most popular for delivery businesses include:
- Startup loans
- SBA loans
- Business term loans
- Short term loans
- Business lines of credit
- Equipment financing
- Merchant cash advances
- Commercial mortgages
- Accounts receivable financing
- Business credit cards
You might also be able to supplement your financing with a microloan. As the name implies, these loans are substantially smaller than options like an equipment loan, which can provide you with up to $5 million. But microloans offer the advantage of being fast to fund and easier to qualify for. Start by checking out the options from Kiva, Opportunity Fund, and Accion.
Grants can also provide a helpful financial jolt for your delivery business. While they can be notoriously hard to acquire, they offer the unbeatable advantage of never needing to be repaid.
You can look for possible federal grant opportunities on Grants.gov, then move on to private sources such as Amber Grant, Idea Cafe Grant, Halstead Grant, or National Association for the Self-Employed (NASE) Micro-Business Grants.
The application period is crucial for any of the financing options listed above. Any errors on your part will likely sink your chances for approval, so take time to ensure every element aligns perfectly with the requirements.
Getting the Word Out to Customers
As part of your business plan creation, you should have already thought about marketing strategies for your delivery business. Before you launch any initiatives, it’s important to build a network of support within your industry. You can meet possible partners through LinkedIn or by attending industry events.
The exact marketing strategies you employ will depend on your location, customer profile, experience level, budget, and other factors. Here is a handful of possible ideas to consider:
- Use an introductory offer: People love trying out a service before signing on for more. Perhaps you could offer a discount for anyone trying your delivery services.
- Make it newsworthy: Put together a press release for your business and share it with news outlets in the area. Getting articles published provides some cheap marketing opportunities and makes your business appear more legitimate.
- Find a partner: Draw on the network you’ve developed, and look for other businesses within your industry you could collaborate with. As long as they aren’t competitors, it can be mutually beneficial to work together and reach each other’s customers.
- Use social ads: You’ve already created accounts on Facebook and other social networks, so you can leverage the affordable advertising these platforms provide. It’s a great way to spread the word early on without breaking the bank.
- Reward loyalty: Offer some kind of incentive for your most loyal customers. Perhaps they can qualify for discounts or extra promotions based on how much they use your delivery service. The point is that you should recognize your customer base and do everything you can to keep them engaged.
- Offer premium service: While not exactly a marketing tactic, it’s an essential way to get the word out about your business. If you consistently go above and beyond for your customers, they’ll talk about it with their contacts. Word of mouth is one of the most powerful ways to reach new customers.
There are countless marketing strategies you can employ for your delivery business, but don’t get overwhelmed. The best approach is to carefully select your critical few and then focus your efforts. It’s much better than diluting your time and money across a wide range of marketing ideas.
Another easy way to reduce the burden of marketing is to use digital tools. Check out resources like Mailchimp, Hootsuite, and Marketo, which help you consolidate your efforts and automate many of the most time-consuming aspects of marketing.
Your delivery business will undoubtedly encounter some challenges in its first year. But if you lean on your network and commit to treating your customers right, you’ll set the course for a bright future.