How to bundle local delivery services for first-year owners

What to take away

This is general business information for courier and local delivery operators. It is not advice on operating authority, worker classification, tax, insurance, contracts or customs. Those questions belong with several experts. They include the FMCSA, your state DOT, the IRS, and your state insurance regulator. Others are a licensed attorney, a CPA, and a customs broker.

Start with the route, not the menu

A first-year courier usually owns one or two vehicles and answers the phone personally. That constrains everything. A package you cannot dispatch at 7 a.m. with the staff you have is a promise you will break by 10.

Write the package around three things you already control: the vehicle, the delivery window, and the stop count. A cargo bike covers a two-mile downtown radius. A van covers a metro run with 20 to 40 stops. A box truck covers pallet freight that needs a liftgate.

Name the buyer problem in the package title. "Same-day medical courier, downtown, two-hour window" tells a clinic exactly what it buys. "Premium delivery solutions" tells it nothing.

The four package shapes that sell

Most local delivery revenue falls into four shapes. Each carries a different cost structure, so price them apart.

On-demand rush pays for speed, so the customer absorbs the deadhead. Scheduled routes pay for density, so a stop in a cul-de-sac costs more than a stop in a strip mall. Dedicated drivers pay for availability, which means you bill the hours whether the van moves or not.

Bulk freight pays for handling. A pallet that needs a liftgate and a two-person team is not the same job as a pallet on a dock.

Cost per stop and cost per mile

Two numbers decide whether a package survives. Cost per stop is total route cost divided by completed stops. Cost per mile is total route cost divided by miles driven.

Total route cost includes driver pay, fuel or charge, insurance allocated to the vehicle, maintenance reserve, and the dispatch time the route consumed. Write the formula once and reuse it:

A route with 30 stops over 40 miles and a route with 12 stops over 40 miles carry the same mileage cost. They carry very different stop costs. Quoting the first route at the second route's rate is how a courier loses money on a contract that looks busy.

Check contribution per vehicle hour, not margin percentage. A 40 percent margin on a two-hour route pays less than a 20 percent margin on an eight-hour route, and the eight-hour route holds the driver you need next month.

Driver pay shapes the package

How you pay drivers decides which packages you can sell. Hourly pay suits dedicated routes and unpredictable windows. Per-stop pay suits dense residential and retail routes. A 1099 arrangement suits some owner-operators with their own vehicle and authority, and it does not suit a driver you schedule, train and equip like an employee.

Worker classification is a legal question, not a pricing preference. The IRS publishes the factors it weighs, and a misclassification bill arrives with back taxes and penalties attached. Confirm your structure with a CPA before you build a package around it.

Whatever the structure, the driver needs the stop list, the delivery window, the access notes and a way to reach dispatch. A package that depends on the driver remembering a gate code is not a package.

What goes in writing

Every package needs a one-page sheet the salesperson and the dispatcher both use.

The exclusions matter most. State that you do not deliver alcohol, firearms, hazardous materials, live animals or cash without a separate agreement and the permits each one requires. State the maximum weight one driver handles alone.

Advertising those limits honestly is not optional. The FTC requires that advertising claims be truthful and supported, and that endorsements reflect real experience.

Records the operation has to keep

Delivery records do three jobs: they prove the delivery, they support the invoice, and they feed the tax return. The IRS allows any recordkeeping system that clearly shows income and expenses, provided you keep the documents behind purchases, sales, payroll and assets.

For a courier, that means several key records:

Cargo securement is a separate record. The FMCSA publishes the cargo securement rules that apply to interstate movement, including general performance duties and provisions for roll-on, roll-off and hook-lift containers. Check whether they reach your vehicle and your lanes, and train drivers on what the rules require of them.

Where the numbers come from

Four public sources do most of the work when you build a package.

The Federal Motor Carrier Safety Administration cargo securement rules set the interstate standard for tying down a load.

The FTC advertising guide for small business covers what you may claim about speed, coverage and reliability.

The IRS recordkeeping guidance explains what a system has to show and which documents back it up.

The Bureau of Labor Statistics wage tables give occupation, industry, state and metro pay estimates. Use them as one input when you set driver pay, not as the answer.

A worked example: the downtown medical route

A clinic needs specimens picked up at three sites between 2 p.m. and 4 p.m. and delivered to one lab by 5 p.m. The route is 18 miles with three stops.

Driver time is two hours at your hourly rate. Add fuel, the insurance allocated to that van, and a maintenance reserve. Divide by three stops for cost per stop, and by 18 miles for cost per mile. Add the dispatch time the route consumed, because somebody scheduled it.

If the clinic asks for a fourth site outside the window, that is a new quote, not a favor. The package sheet should say so before the request arrives.

Retire a package on purpose

Review each package monthly on three figures: contribution per vehicle hour, on-time completion, and repeat demand. When contribution falls for two straight months, check demand, capacity, driver training and data quality before you change the price.

Some packages should end. A route that only works when a specific driver is available is a staffing risk wearing a package name. A route that only works at a price the customer will not renew is already gone.

Keep the menu short enough that a new dispatcher can quote it from memory.

Common questions

How many packages should a first-year courier sell?

Three or four. Enough to cover on-demand, scheduled, dedicated and bulk work, few enough that the owner can still dispatch them personally. Add a fifth only when the first four run without the owner in the room.

Should I price per stop or per mile?

Both, then quote the one the customer understands. Dense routes quote per stop because mileage barely moves. Long-haul metro routes quote per mile because stop count barely moves. Dedicated work quotes per hour.

Do I need operating authority for local delivery?

It depends on whether your loads cross state lines and what you carry. The FMCSA and your state DOT set the requirement, and it varies by vehicle weight and cargo. Confirm your specific operation with the FMCSA and a licensed attorney before you sign a contract that assumes you have it.

What records does a delivery business keep?

Manifests, signed proofs of delivery, driver pay records, fuel and maintenance receipts, insurance certificates and invoices. The IRS requires a system that clearly shows income and expenses with the documents behind them. Ask your CPA how long to hold each type.

Once the packages are written, the next step is packaging them for the accounts that buy repeat volume. That work is covered in how to package local delivery services for accounts, which covers account pricing, service levels and the reporting a contract customer expects.