How to Determine What To Charge
The one question we get more than all the others combined is: “How do I figure out what to charge for delivery services?”
The answer is that much of your pricing depends on the answers to several questions:
- Where are you? Prices in Kansas are going to be much lower than New York City.
- How much competition do you have and what are they charging?
- What are you delivering? Is it an envelope or a big screen TV? Is this a one time delivery or a repeating scheduled delivery?
- Is the delivery local or out of town?
- How much is your overhead? Do you have an expensive office or do you work by yourself out of your house?
- How much profit do you want to make?
- How much does it cost to operate your vehicle? how much is your insurance? What is the current price of fuel in your area?
These are just some of the many variables to consider when you are figuring out your rates.
What you charge will be tailored to the very specific requirements of each and every client. I have owned my courier service for over 20 years and every one of my clients is charged a different fee because their delivery needs are unique and diverse.
I have clients who pay me less than $100 per month and I have clients who pay me more than $10,000 every month. The client who pays me $100/month is charged a much higher per delivery charge than my $10,000 per month client (who is charged one of my lowest per delivery charges).
While it would be nice if there were standard rates that were competitive everywhere, these variables will affect the pricing in your area.
Luckily, there are several simple strategies for figuring out what you should charge your clients.
Strategy One: Determine Competitors’ Rates
Find out what other courier and delivery services in your area are charging.
If you charge more than the going rate, you will probably not get many clients. If you charge less than the market rate, at best you are leaving money on the table. At worst, you may go out of business because your profit margins will be too thin.
The most important factor is what are people in your area used to and willing to pay for delivery services. In other words, you need to determine the market price for your services in your area.
Strategy Two: Determine What You Want To Make
Set a target revenue goal and then work backwards.
If I want to make $60 per hour, then that means each minute of my time is worth $1.00. So, if a delivery takes me 10 minutes, I’ll charge $10. If a delivery takes me 25 minutes, I’ll charge $25 for that delivery.
This strategy can provide an easy way to provide quotes, but it’s only effective so long as the prices you are quoting are still competitive in your area. So, Strategy Two must be used in conjunction with Strategy One.
Also, it should be pointed out that you should be sure to factor your expenses into your target income goal. Even if I am earning $60 per hour, I’m going to have to subtract my expenses from that income.
Strategy Three: Survey Your Target Market
Similar to Strategy One, Strategy Three involves actually asking prospective clients what they are paying, what they are willing to pay, and, essentially, how much your services are worth to them.
Now, rather than simply asking them “How much do you want to pay me?” which is not likely to provide you with useful information, you can instead ask questions to ascertain the amount of convenience that you will be providing to them.
Simply put, you can ask them how many employees they have, who generally makes the deliveries, where the deliveries are going, what time of day their deliveries go, etc. Gathering this type of information should give you clues to how much you can charge.