Starting a courier business can be a lucrative endeavor if you are an entrepreneur. Courier services are in demand and offer an opportunity for people to work while traveling the world. However, there is more to running a courier business than just driving around. To succeed, you need to provide excellent customer service and have the right skillset. This guide covers everything you need to know about how to start a courier business and how to run it successfully.
Analyze the competition
Research how your competitors are performing by making a few deliveries for them. Take note of their process and watch out for any possible improvements that you could make, such as speeding up delivery or avoiding traffic jams in the area.
- Look into how long it takes them to deliver and whether there are any issues along the way.
- Look at how they communicate across various platforms – like live chat, email, social media, and phone calls.
- Know what other customers have to say about the company and see if their experiences are consistent with your expectations.
- Consider the pricing structure of this company to see how it compares with what you were thinking for yours.
The purpose of a competitor analysis is to compare your own business strategy with that of your competitors. This will help you recognize where there are gaps in the market and how you can use those opportunities to enhance or change your own business strategy.
The legal framework of a courier company
To know how to start a courier business that is legal and professional, you need to understand the legal framework. In the United States, courier companies are regulated at the state level. As long as your company is operating within its state’s regulations, your company complies with federal law.
If you do not have employees and operate out of your home, this should be considered a small home-based business and not a courier service. To be seen as a legitimate player in the market and avoid any potential legal issues, it’s best to register as a corporation or LLC and file any necessary documents with your state.
Registering as an LLC or an Incorporate
There are two ways to register your courier business
- As an LLC or
- As an Incorporate.
A limited liability company, or LLC, is a hybrid business model in the U.S. that secures the owners from personal responsibility for debts of the company and at the same time offers some tax advantages when compared to other types of businesses such as corporations or partnerships.
Incorporation is the process by which a legal entity, called a corporation, separates the assets and income of its owners from that of other investors. A corporation can be created globally and has many different names depending on where it was formed.
Incorporating means to legally declare an enterprise as separate from its owners or investors; for example if Company ABC’s shareholders approve incorporation they want to protect themselves against liabilities incurred by management decisions made without their consent.
If you’re on a tight budget, registering as an LLC is a great way to start out. But if you have the money to invest in your business, registering as an Incorporated is the best choice because it gives you some protection from lawsuits.
Find a niche for your company
Establishing your unique “niche” is an essential step to take if you live in a metropolitan area while figuring out how to start a courier business. Even living in a small town will give you an advantage and make marketing easier when you have customers.
Talk to your prospects, whether they are lawyers needing same-day document delivery or caterers needing prepared meals delivered every day at a specific time- to find out what they want and then offer it at reasonable prices.
One of the best niches one can establish would be filling up those gaps that UPS/FEDEX has by providing local businesses with same-day local deliveries.
Here are some common models of courier services that you can choose from according to your skills and available equipment –
- Bike courier
A bike courier is more environmentally friendly and cheaper than cars, but scaling becomes difficult with limited storage space for packages.
Your service area will likely be smaller since you can only transport so many packages before taking a break to rest.
- Special delivery
If your community has its own unique demand for special services for hazardous materials, medical supplies, or products that require climate-controlled trucks, you can purchase special equipment needed.
These services are also called white-glove logistics. They are used for products that are more valuable and fragile. Certain equipment you might need for setting up a service as this includes –
- Padded vans
- Temperature and climate-controlled trucks
- CCTV monitoring for valuable items
This business can be really profitable if you make it your unique selling proposition or USP. You can have big corporations and organizations that need such services on a daily basis as your loyal clients. However, it can be an expensive business to start with.
- Truck deliveries
Larger vehicles allow you to take advantage of economies of scale by opening your service area or increasing the potential customer base. You can also collect more orders at once and make a lot more profit than smaller deliveries.
Consider starting with a van- or truck-based delivery service for a quick launch and quicker profit. You will have an excellent opportunity to become the community courier that local businesses can rely on for their transportation needs around town.
Once you get started, take note of any niches in your community and specialize accordingly!
There is a certain range of services you could specialize in –
- Same-day shipping
- Next-day delivery
- Large volume pallet shipments
- Delivery of luggage
- Commercial package delivery
- International shipping services
Setting up your business
If you know everything you need about how to start a courier business, there are a few things you need to do first.
- You should set up an account with USPS or UPS, or both. This will allow customers to send their packages through you instead of through the post office or a shipping company.
- Proceed with setting up the space for your courier company where customers can approach you, drop off, and pick up their packages. It’s cheaper to keep your office at home – rather than pay for rent, utility bills, and the overhead of a separate office. You should also explore how much does it cost to start your business so that you can allocate your funds appropriately.
- To get your company up and running, you’ll need to purchase the necessary equipment. Don’t waste thousands on a new delivery truck if you have a vehicle to make pickups and deliveries.
Choose a name for your company
There are many things to consider when picking a name for your company. It needs to be memorable, instantly recognizable, and most of all truthful. You need to make sure that this is a company you want to spend the next few years of your life building.
What are your long-term goals? Are you looking to grow into a large, nationwide operation or will you be satisfied with staying small? Do you want to target a specific service or industry? All these factors should be taken into account when coming up with a name for your courier business.
If you’re running an international service, it might help get it translated into other languages and use it as the company name. People searching for couriers in their native tongue will first find your company.
Legal paperwork and permits
First, you’ll need to establish your business with the proper legal paperwork. This includes getting a business license and insuring your vehicle. Once you have these, you’ll need to get all the necessary permits. These might include parking permits, loading zones permits, and more. You should also purchase a marker with your company’s logo and register your vehicle in your name or the business’s name.
According to the SBA, the registration requirements for a business vary depending on where it operates and its activities. If you want to register your business, checking with both the state and municipality will be necessary. There’s a list of business licenses and permits from the SBA that you would need to read thoroughly to continue your process of how to start a courier business legally.
To get licensed, you’ll need to submit some paperwork to your city hall along with any permits that may be required in your area. You also can become certified through the National Safety Council, which can help boost your credibility as a professional driver and reduce liability exposure by ensuring that all drivers adhere to best safety practices.
When running a new courier company, it’s important to remember that you are responsible for the items you promise to deliver. Sometimes this could be as simple as delivering paper folders and other times it might involve large cargo or expensive materials.
To mitigate any potential problems, you should select the best insurance coverage for the type of courier services you offer. One such example is liability coverage that protects against bodily injury and property damage during transport.
Take out time to insure –
- Cargo items
- Business equipment
This will secure the entire process of how to start a courier business. Through the right insurance models, you will not need to worry about financial liabilities that come through accidental issues in your business.
While it is possible to start a courier business with as little as $900, your startup costs depend on the expected profit and both one-time and ongoing expenses.
The Small Business Association suggests looking at their list of startup expenses, determining what you need based on those that are necessary for your business type, and sorting them by one-time and recurring expenditures.
Once you have done this they say to use those expenses in order to determine how much funding you need from external sources or whether savings will be enough.
Then use two calculators designed for this purpose: Startup Funding Calculator (which offers some guidance about minimums), or Cash Flow Worksheet Calculator which helps estimate revenue streams generated from potential customers; when each customer pays; whether there are discounts offered if paid early).
Once this is done you can obtain funding for your business. When you are looking to fund your venture, there are a few options. You can either open up a bank account and self-fund or look for potential investors like venture capitalists and banks.
As a final note, it would be best to talk to an accounting specialist that can help you make the cash flow plan of your funding needs with more certainty.
Set a pricing structure
Setting your rates may not be as simple as deciding on an ideal income. You should consider all the costs that contribute:
- operating costs,
- insurance premiums and
- transportation services among others.
Each of these factors contributes to your bottom line.
It’s important to have a definite pricing structure in place that you can show your customers. Let them know they won’t be liable for any surprises through contracts or invoicing systems.
Many new couriers mistake charging less than they should cover all their costs, as they are unaware of any little fees such as a business permit renewal fee.
The best way to determine your rate is to add about 30-35% on top of the wages you will be paying yourself. After a few months, look again and see if these rates are what you want by looking at your net hourly rate. It still provides you with profit and satisfies customers.
Once everything is set up, you have to start looking for clients! Your clients will include e-commerce sites, retail businesses, and other companies that need their products delivered.
You can solicit customers by cold calling them or advertising through Google Adwords or Facebook Ads. You want to ensure that you post pictures of yourself on social media so potential clients know who they will be working with if they hire you for courier services.
You can also offer delivery services for restaurants and other food establishments. To do this, ensure that you take pictures of what was delivered so that people can see what they’ll be eating when they order from that restaurant again in the future!
Here are the steps you can follow –
- Build a website
Your customers will likely book your services with one click. Make it easy for them to become your customer by having an instant booking website that is also e-commerce enabled so they can pay for your service and track their deliveries.
- Be active on social media
Pick a couple of social media accounts to post on and interact in. People will get a sense of your values and brand through those platforms. It can also become an audience you then sell to later!
- Ask for emails
Every time a new customer signs up, ask for their email address to subscribe to your newsletter. Email them information like promotions from your company and helpful content, so they remember who you are when they need a courier. Be sure you have the customer opt-in.
- Maintain good customer service
If you give your customers great service, they’ll come back to you again and again. And as a result, soon enough, you won’t have any more customers to handle – because all of them will be coming in!
For example: if it takes two hours for the customer service team to respond each time they get a call or email from their clientele; aim for 90 minutes and make sure that the response is on-time every single time. Your clients will appreciate this level of professionalism and recommend their services to others too.
- Automatic delivery notifications
Text messages are a great way to get real-time updates on deliveries because people can easily see when they have arrived. They’re better than email notifications that just get lost in their inboxes!
Customer acquisition is about getting as many high-value, in-market consumers in the door. It allows brands to build a client base, enable customer loyalty programs and minimize costs to increase ROI.
If you put some thought into starting this kind of business and finding software that supports you within 7 days or so, there’s no reason why this can’t be profitable for everyone involved.
Starting a courier business is a good way to supplement your income and pursue something new. If you’ve been wanting to start your own business, this is a great way to dip your toes in the water.