Delivery services have been established for decades now and as per studies in 2017 companies have started stepping into the same-day delivery wave. The studies also show that top 500 retailers are coming up to start their one delivery service and out of those 14% of the retailers are involved in the groceries, food, or beverage business. Seeing the benefit, the rate of hiring third-party delivery services shot up to 36% which was just 20% in 2016.
Hence, delivery jobs have the potential to generate decent revenue for your small business. The plus is, you can provide sustainable delivery service to your customers irrespective of the fact that you cannot offer them the goods at wholesale price.
Estimating your delivery service may seem quite tricky, but it is not that complex. Both overcharging or undercharging is harmful to the growth of your business finances.
To make this pricing guide easier to understand and simple we have added a list of steps to know how to price your delivery jobs perfectly. Take a look!
Pricing guide for delivery jobs
To get you out of a business dilemma and support you with a decent profit after every service you offer, we have listed the following pricing guidelines. Check it out to learn more on this!
Analyze the market trend to be at par:
Pricing is an art! Proper utilization of pricing techniques not only helps you generate revenue but also holds your existing customers. If you want your customers to keep coming back and want to invite new ones, design your service rates effectively. Pricing for delivery jobs for small businesses may seem simple, but jumping into the process without proper market research can result in various kinds of business losses.
Check out the websites of your competitors to have an insight into this business field. Learn how much they charge for delivery service. Know how they fix their prices depending upon various parameters. Prices are not the same for all delivery service companies as they fix their rates depending upon various business factors. Pricing lower than the market rates does not always help you to get more clients. Rather, it may raise doubts among your potential customers. Hence, price your services to cover all your business overhead.
Figure out how long it takes to deliver:
Delivery jobs for small businesses need to be charged considering the time consumed for sending out the deliverables. Some companies specify their rates for a particular distance and mention the additional charges for each kilometer traveled extra. If you are running a small business you can try out this method. Or else, you can figure out how long it will take for a product to be delivered to a specific location in Google Maps to estimate the drive time and charge accordingly.
Chalk out your hourly rates:
Determine your hourly rates wisely. Pricing for your services is tricky, but it has one thumb rule for pricing for your business, whether small or big. Include your overhead expenses and other business expenditure while you fix your service charge. While setting your hourly rates you must consider all such factors to maintain a smooth-running business. Analyzing competitors’ websites can help you a great deal on this.
For example, if a company charges $16 for half-n-hour, the hourly rate would be $32. Now you can set your price depending upon the distance covered or time consumed. Make sure that you add your overhead and other deliverable costs along with profit margin while fixing your hourly rates. A business setup involves certain expenses like administrative staff salaries, office rent, supplies, marketing, and other utilities. Besides, it also includes the delivery costs like vehicle maintenance, insurance, labor cost, gas, etc. Your service charges must add up these costs to provide you a steady cash flow for your business maintenance.
Finally, keep room for adding your profit margin as well. If after adding all your expenses you discover that you have minimal space for profit, then you need to cut down your additional costs. Arrange your hourly rates in such a way that you offer the best service without compromising on your business profit.
Charge extra for added loads:
All small businesses that work on delivery jobs have a certain benchmark for the product weight that they deliver. But being a small business professional your profit margins are limited and not as same as any big company. Hence, you cannot afford to offer your clients a price relaxation for added loads. In such cases where you find out that the product exceeds your benchmark, charge your customers for extra weight. For example, for an increase of one pound after the net weight, charge 10 cents per pound.
Charge extra for after-hour orders:
Running a business will make you come across certain situations, you were not at all expecting. Hence your small business needs certain precautionary business measures to be ready for everything. It accounts for your delivery jobs as well. Orders may be placed after-hours or may demand urgent delivery. What do you do in such a case? Charging normal rates would add no benefit rather would put you out of business. Charging extra for after-hour orders or emergency deliveries will eventually compensate for your added expenses. Some companies keep separate hourly rates for orders placed on weekends, holidays, or post working hours. Research well before you fix your prices.
Include waiting charges:
Your business demands commitments and dedication. You have a daily to-do list to fulfill, and therefore, you cannot afford to bear extra hours at any point. But what if your delivery person has to wait to pick up the package? The wait could be 15 minutes or over an hour as well. Hence, it is safe to include a policy that you will charge zero fees for up to 5 minutes of wait, post that an amount of 50 cents (approximately) would be charged for each minute spent waiting.
Running a few errands may seem tedious for some business owners, and that’s when delivery services come into the picture. Formulate strong pricing strategies to make your small business afloat!
Tips for an effective pricing strategy
While charging for delivery services, you should take into account certain expenses. Check out the below section to know more!
The operation cost of vehicles:
Vehicle operation cost is something that may get overlooked easily. This involves your vehicle maintenance, fuel cost, toll charges, parking charges, etc. Sum up the yearly cost and divide it by the number of deliveries made in a year to get the average vehicle operation cost. Keep room for additional costs like long-distance delivery or deliveries made outside the normal service area.
Figure out the labor cost:
Products that you deliver are not the same. Each product is different from others in terms of weight, time is taken to deliver, difficulty level, etc. For example, delivering a particular product to a customer is much easier than assembling the products at the customer’s location. Hence, to get your job done for the second case you need to spend some amount on labor. Determine the average labor charges and the time needed to prepare such hefty deliveries. Multiply the amount of time consumed with the number of labor involved to calculate the maximum wage for the labor. Account to this expense while you price your delivery job to suffer unwanted losses.
Keep your costs at par with the competitive market:
Sum up the vehicle cost and the labor cost to calculate the delivery fee for each stock. But make sure that your prices are not out of the market. Research your competitor’s website for a thorough knowledge about the prices charged for the deliverables depending upon various factors.
Know the taxes you are liable to:
In most cases, deliverables are not subject to any sales taxes. But research a bit to know whether your goods are liable to any local taxes or not. In some cases, where customers receive their purchases at their location, they may need to pay certain state and municipal sales taxes. These taxes are added not at the point of purchase, rather at the point where it is received. Know before you charge your customers to avoid any unwanted misunderstanding regarding prices.
Some frequently asked questions related to this pricing guide
As per the Bureau of Labor Statistics, a delivery driver earns around $15.12 per hour on average. The per-hour rate ranges between $9.43 to $29.39. The rate for local messenger and delivery workers is $16.74 per hour, and that of couriers and express delivery service workers is $25.10 per hour.
Note: The rates may differ depending upon the location.
As per Glassdoor, the Amazon delivery drivers earn $12 to $25 per hour. Including the average additional pay of $1200, the yearly pay of a driver is $38,000.
Per hour earned by Amazon flex drivers ranges between $18 to 425. The amount may vary during peak hours, or by adding tips.
Though mosting delivery jobs charge as per job type, some even charge by a mile for long deliveries. For cars, the rate is $1.50 per mile and for pickup vans, the rate is around $2 per mile.
If you just started with your delivery job and are confused about how to price your services, then do check out the above guide. This would help you get an idea about the tricks of effective pricing. Start pricing your services and boost your business revenue. For further financial assistance for your business, get the Billbooks software! This helps to channelize your business finance to the right track.