If you’re starting a courier service business, figuring out what to charge for each delivery job can be a challenge. You don’t want to overbid and lose potential new customers. Underbid and you could get stuck with customers who expect cheap prices for every delivery.
The goal is to price your delivery jobs so you get paid what you need to stay in business. Of course, you want to make a fair profit and add new customers. Here’s a checklist to help.
1. What do your competitors charge? Call the courier and delivery services in your area to check their rates. If there are several, use an average to determine a competitive rate. For example, if there are 3 competing courier services in your area charging $16, $20 and $22 for the same delivery, the average is $19.33. This gives you a target rate to aim for. Beware of the temptation to charge less than everyone else to get an edge, as it can backfire. Potential customers may wonder why you are so cheap, and be reluctant to hire you. Worse, you may have underestimated your overhead and find you are unable to make a decent profit at a low rate.
Remember if your competitors are charging $XX for a delivery, customers are willingly paying that price. When you charge about the same price, you’ll be able to make a profit and grow your business.
2. Charging by the hour. In order to quote a price to a customer, you’ll need to know your hourly rate. Here’s how to determine an hourly rate. Let’s say the competition charges $15 for a cross-town pickup and delivery that takes 20 minutes. That’s $45 an hour. Get at least 3 rate quotes to verify that your hourly number is correct. Now you can quote prices to customers, using an hourly rate. If you plan to charge $45 an hour, for example, that’s 75 cents per minute. If a delivery takes 30 minutes, your quote would be $22.50. A 15 minute delivery would be $11.25, and so on.
Although most couriers charge by the job, it’s not uncommon to charge by the mile, especially for longer deliveries. For example, $1.50 per mile if you are using a car, $2.00 per mile if you need a pickup or van because of the size of the items.
3. Heavy or bulky Packages. Speaking of size, most courier services charge extra for heavy or bulky loads. An easy way to compute this charge is to have an overweight fee. Foe example, your standard delivery charge would apply to items under 50 pounds, and items over that weight would pay 10 cents per pound for items over 50 pounds.
4. Rush orders & after-hours orders. While most deliveries will be scheduled during the business day/week, you will get occasional jobs that require extra attention or speed, such as rush orders that must be delivered right away, or after hours. It’s normal to charge extra for these deliveries. For example, an after-hours delivery, such as after 5 p.m. or before 8 a.m. could carry a $15 surcharge.For a late-night delivery, between 8 p.m. and 5 a.m, an extra charge of $20 might be appropriate. Likewise on weekends and holidays, with a $15 surcharge.
5. Waiting charge. What if you arrive to pickup a package for delivery and have to wait because the customer does not have the package ready? This definitely slows down and could put you off schedule. If you have to wait under 5 minutes, no surcharge. Over 5 minutes, consider charging your hourly rate, 75 cents per minute, for each additional minute.
These general guidelines will help you get started with your courier service business, and insure you make a profit from day one. As your business grows, you’ll be able to adapt your rates to better fit your customer’s volume and scheduling, as well as your own schedule. For more information, read How to Start a Courier Business.