Guides
Price local delivery services: test an offer against your floor
Price local delivery services from your own cost per stop, then test a retailer's offer against that floor and counter with a surge and breakdown clause.
What to take away
- Price from cost per stop plus cost per mile, not from a competitor's quote.
- Test every offer against your floor before the meeting. A lower number needs a counter, not a yes.
- A route that pays $4.50 a stop at 12 stops an hour clears more than $9.00 a stop at 5.
- Charge holiday parcel volume as a separate line, not a discount on the base rate.
- Put the surge threshold and the breakdown terms in the contract, and keep the cost worksheet, the quote and the signed rate card together.
Find the floor before the meeting
Your floor is cost per stop plus the margin you need, worked out before anyone names a price. Cost per stop is everything a driver costs you for one address, including paid time, payroll burden, the vehicle share and the failed attempt.
Cost per mile covers fuel, maintenance, tires, depreciation and insurance. Together the two numbers set what a route has to earn.
Cost per stop floor
- $3,600weekly operating cost
- 900stops completed per week
- $4.00cost per stop floor
- 30%margin added
Divide weekly operating cost by stops completed. A van running 900 stops a week on $3,600 of cost carries a $4.00 floor before any margin. If the owner wants 30% above cost, the floor becomes $5.20 a stop. Then check the result against what retailers in your market actually pay.
New owners underprice because they price the first month, when the vehicle is new and the driver is fast. Price the twelfth month instead.
Test the retailer's offer against it
The retailer offers $4.75 a stop. Run the offer through four steps before you answer, and use your own figures rather than the ones here:
- Take the offered rate per stop.
- Subtract your $4.00 cost per stop and note what is left for margin.
- Compare what is left with what the $5.20 floor would keep.
- Ask what a breakdown week or a holiday surge does to the gap.
Accept or counter the offer
Your floor
- Rate per stop
- $5.20
- Margin
- 30%
- Risk
- covers breakdowns
Retailer offer
- Rate per stop
- $4.75
- Margin
- 16%
- Risk
- loss on surge weeks
Accepting means the van runs at a 16% margin, and any week with a breakdown or a holiday surge runs at a loss. The counter is either $5.20 flat or $4.75 plus a per-parcel surge rate above 180 stops a day.
Counter with a number and a reason: the floor price flat, or the offer plus a surge rate above the stop count the offer was built on.
Run that arithmetic with your own figures before the meeting. The break-even work shows how much a thin week costs. If you are still deciding whether to take the contract at all, how to start a local delivery business walks through the capacity question first.
Price surge and breakdown as separate lines
Holiday parcel volume is the line most first-year owners give away. A retailer shipping 400 extra parcels in December needs a temporary rate, a cutoff date for booking it, and a stated limit on how many you will take.
Charge surge volume per parcel above your contracted daily stop count. Set the threshold in the contract, not in a phone call on December 12.
A vehicle breakdown mid-route is the other unpriced event. State what happens when a route fails. The contract terms should cover each of these:
- The surge rate per parcel and the daily stop count it starts above
- The cutoff date for booking surge volume and the limit you will take
- Whether the customer pays for the recovery run
- How fast you promise a replacement vehicle
- Who calls the consignees
Pick the charging method that fails least
Every method breaks somewhere, so choose the one whose failure your routes are least likely to meet. Dense retail routes and open-ended work do not fail in the same place.
Four courier pricing methods
Per stop
- Rate
- $4.50-$7.50
- Unit
- per stop
- Breaks when
- long rural runs
Per route
- Rate
- $180-$350
- Unit
- per day
- Breaks when
- route grows stops
Per mile plus stop fee
- Rate
- $1.10-$1.75
- Unit
- per mile
- Breaks when
- mileage only heard
Hourly with minimum
- Rate
- $45-$75
- Unit
- per hour
- Breaks when
- fast finish early
What it looks like
- Per stop
- $4.50 to $7.50 a stop on dense retail routes
- Per route
- $180 to $350 for a fixed daily run
- Per mile plus stop fee
- $1.10 to $1.75 a mile, stop fee on top
- Hourly with a minimum
- $45 to $75 an hour, two-hour floor
Where it breaks
- Per stop
- Long rural runs at the same rate
- Per route
- A route that grows stops without repricing
- Per mile plus stop fee
- Customers who only hear the mileage number
- Hourly with a minimum
- Efficient drivers earning less for finishing early
Those ranges are illustrative. Substitute your own cost per stop and cost per mile, then set the rate so the worst route in the week still clears. How to present the tiers so the retailer compares your routes, not your headline rate, is covered in packaging services for accounts.
Who owns the number
Give one person authority over the rate card. In a small courier operation that is usually the owner, with the account manager holding quotes at the published rate.
Drivers and couriers report the exceptions: a stop that took twenty minutes, a gate code that never worked, a consignee who refuses twice. Fleet leads report the vehicle cost. Without those reports the rate card drifts one quote at a time.
Review cost and margin by service family monthly with the monthly KPIs. If margin falls, check whether volume grew faster than capacity before you blame the price.
What to check before you quote
The records behind the cost side of the worksheet are ordinary business records. The IRS notes that purchases, sales, payroll, and other transactions in your business generate supporting documents, so keep them with the worksheet.
For driver pay inputs, the U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics tables publish wage estimates by occupation, industry and metro area. Use them as one input, not as your payroll number.
The FTC's Advertising FAQs governs what you can say about a price. Claims must be truthful and supported, and any testimonial must reflect real experience.
Common questions
How much should holiday parcel volume cost?
More than the base rate, priced per parcel above a contracted daily stop count. Set the threshold and the cutoff date in writing before December. Giving surge volume away at the standard rate is the most common first-year margin loss.
What do I do when a vehicle breaks down mid-route?
Have the recovery terms in the contract before it happens: who pays for the second run, how quickly a replacement vehicle arrives, and who notifies consignees. Pricing the failure after the fact means you absorb it.
What if the retailer will not move off its first number?
Trade rather than concede. Accept $4.75 only with the per-parcel surge rate above 180 stops a day, so a normal week and a surge week are each priced on their own.
How often should the rate card change?
Whenever driver pay, fuel, insurance or vehicle cost moves enough to change your cost per stop. For most small couriers that is at least twice a year. A rate card reviewed once a year is a rate card that is wrong for six months.
