Start a local delivery business: van or bike by density

What to take away

What the first route has to earn

A local delivery business is a capacity business: you sell hours of a vehicle and a driver, and you buy those hours whether the route runs long or short. Cost per stop governs everything.

Everything else exists to make those hours predictable. This includes the van, the scanner, the insurance, and the dispatch software. The decisions that decide whether you last are narrower than a startup checklist suggests: what you charge per stop, and what happens when a van dies at 2pm with eleven stops left.

Build the floor from your own figures:

Divide the total by stops delivered. That is your floor, not your price. A route quoted at the floor loses money the first time a customer is not home.

Van or bike: let stop density decide

The right vehicle depends on your stop density, not on which one looks more professional. A cargo van and a cargo bike have wildly different cost-per-mile profiles, so compare them on the route you will actually run.

A used cargo van typically costs 15,000 to 30,000 dollars. A cargo bike or e-bike setup runs 2,000 to 6,000 dollars. Lease versus buy turns on your annual mileage and how long you keep vehicles.

Stop density is stops per square mile, and it decides whether a cargo bike, a van, or a second van is the right capacity. Compare the options in five steps:

Put a mileage number on the route

Start vehicle cost from a published rate rather than a guess. The IRS lists the 2026 business mileage rate at 76 cents per mile for self-employed and business use.

A 60 mile route therefore carries 60 times that rate in vehicle cost before any labor.

Add wages and overhead, then divide by stops. The margin above that floor depends on stop density and waiting time.

Cost per mile is the second number, and it needs tracking monthly. A van that sits in traffic and a bike that stays in a dense grid do not drift the same way, so the mileage rate is a starting point, not your final figure.

Track four route numbers before buying software

Track stops per hour, stop density, time-window adherence, and cost per stop by route. These four show whether a route is paying and whether it is the vehicle or the sequence that needs work.

Dispatch software such as Onfleet, Circuit, Routific, or Samsara handles sequencing, proof of delivery, and driver communication. Pick the tool after you know your stop volume, because a subscription you do not use adds to overhead without raising on-time percentage.

Price the longest realistic day

Price every route against the longest day it can realistically run, not the average. A route priced on the average loses money on the days that decide whether you survive: the days with closed consignees, returned parcels and a vehicle that will not start.

Run the floor arithmetic twice, once on an ordinary day and once on the longest. If the quote clears the floor only on the ordinary day, the margin is borrowed. Build the rate card from the longer day, and keep the ordinary day for tracking how the route is really performing against it.

Plan for the breakdown and the peak: a two-van year

A courier opens with two used cargo vans, one full-time driver and the owner driving the second route. A handful of retail accounts, mostly same-day parcels within the city.

The first route runs clean. The second runs forty minutes long because two consignees are closed and the parcels come back. That is normal, and it is the reason the owner priced each route at cost per stop plus a margin, not at a flat per-delivery rate.

In month five, one van throws a transmission fault mid-route with eleven stops left. The owner had kept the second van unassigned two days a week during peak season, so the remaining stops move to it and the day is saved at the cost of one rescheduled route.

By November, holiday parcel volume fills the calendar past what two vans can carry. The choice is route software and a third van, or turning work away. Either is fine. What kills the business is accepting the volume without either, because the service drift that follows costs the retail accounts that made year one work.

Find the first accounts

Retail accounts come from a list and a walk-in, not from a website. Start with the businesses on your own street that already ship same-day.

Write a one-page rate card: per stop, per mile, and a flat rate for a standard zone. Hand it to the manager, not the cashier.

Offer a thirty day trial on one route. Track on-time percentage and claims. Ask for the next introduction after every clean week.

Two or three anchor accounts cover a van's fixed costs. Add accounts until the route is full, then add capacity.

Paperwork is a separate checklist

Licensing starts with the business entity. Register with your Secretary of State and get an EIN from the IRS. For interstate operation, FMCSA issues the USDOT number and MC operating authority; for intrastate routes, your state DOT issues the permit. The guide to which licenses apply lists each one.

The IRS page on starting a business links basic federal tax information for people starting a business. Worker classification, whether a driver is W-2 or 1099, is an IRS question with real penalties attached, so ask a CPA or enrolled agent before your first hire, not after.

The load is part of the paperwork too. FMCSA cargo securement rules set the performance standard for tiedowns and load restraint on interstate runs, so check whether they apply to your vehicle class before your first load.

Count your tiedowns against the aggregate working load limit before every run; a load that shifts in a turn is a claim, a citation, and a lost customer in one event.

Commercial auto and cargo insurance usually need a down payment before the policy issues. Get written quotes from a licensed broker for the exact vehicle class, radius, and cargo value you will run before you promise a delivery window.

Common questions

Should my first vehicle be a van or a cargo bike?

Whichever gives the lower floor per stop on your own route. The answer turns on stop density, so map a real day before you buy anything.

How do I price a delivery route when I do not know my costs yet?

Start with the arithmetic in named variables: driver hours times wage, plus miles times vehicle cost per mile, plus overhead divided by stops. Revise monthly once you have real numbers.

What happens if a driver is hurt or a van breaks down mid-route?

Have a written contingency: one driver on call, or one vehicle held unassigned during peak weeks. Workers compensation coverage and commercial auto coverage are state-regulated questions, so confirm requirements with your state insurance regulator and a licensed broker.

When should I add a vehicle or route software?

When your current capacity cannot absorb your peak week without dropping service quality. Route software pays for itself when dispatch time or missed windows become the bottleneck. Add the vehicle when the software is no longer the constraint.