Monday, February 3rd, 2014

How to Determine What To Charge

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Determining what to charge is one of the most important steps you will take as you begin your courier service. Luckily, several strategies that you can employ will ensure your competitiveness.

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.

Comments

34 Responses to “How to Determine What To Charge”
  1. Robert says:

    hi am planning to lease my motor cycle to a courier company for mail deliveries within our city.please help me determine what i should charge the courier company

  2. Nombulelo says:

    Hi ! I just want to say this really has helped a lot to know more about courier business since I ‘m in the process of starting my own.

  3. Joanna says:

    Hi I would like to have some help figuring a charge for running errands for meal delivery How much per person?

  4. Nichelle Moor says:

    I am having a very hard time trying to get prices on how to charge for radioactive material pick up…how do I go about getting some prices on class 7 & 8 I am so lost in this area

  5. Glen Nelson says:

    Hi i’m thinking about starting a courier business, i have been thinking of starting my own business for a while and reading threw the e-mails you all offer good advise. Being in the military for 25 yrs. i have learn what it mean to be reliable, competence, i would like to bring this experience into my courier business to be dedicated to my customers as well. One question i have is getting paid, is it possible to get paid before a delivery. for instance like if i order a washer or dryer can i get paid in advance like sears and delivery the goods.

    • Laurie says:

      I am a retired airline employee with the ability to fly domestically and internationally for free. I have been wanting to start a courier business for some time. Does your program deal with international courier services?
      Thanks

      • Sam Knowlton says:

        Laurie,

        Sounds like fun! We designed the CCBSK to be tailored to a variety of different courier businesses, but primarily those that focus on servicing their local business communities.

        In other words, as an air courier, you’ll have to develop a strategy for finding and courting clients that may differ from the approach we outline in the kit.

        Best of luck!
        Sam

  6. Michael Wynne says:

    I thought about starting a courier business for a long time and one idea I had was using my motorcycle with a backpack. I figured the cost would be cheap when it comes to fuel and easier for me to get around. What better way than to ride my motocycle year round in the beautiful Arizona weather and make money doing it!

    Great website you have here!

  7. josh coleman says:

    Hi I was wondering on some advice on how i can generat some buisness, i am stuggling tryin to find clients, were i live buisness do not seem very interested and dont know what they can use me for. Banks were a good source at first but require a 100,000,000 dollar ins. There is a ups store in town witch does not help me cause its around the corner. and the nearest city is 2 hours away any insite would be greatly appriciated

    • Sam Knowlton says:

      Josh, if you’re not near any moderately-sized urban areas, or even several smaller urban areas, you’re going to have to work harder to find and secure your first few clients. You’ll have to use all the tricks in the book, contacting your personal network, joining Chambers of Commerce, business clubs, etc. In the end, if you are in an extremely remote area, you may have to focus your business on a specific niche that will allow you to overcome the sparse population.

  8. Dips says:

    How much profit margin does a typical courier service make…say, pick up and delivery of small packages?

  9. W.Mason says:

    I hi contenplateing on starting my own courier servicers my situation is diffirent form most,you see I live in a small town were there know big businesses I would have to drive 50MI to what we call a major town, but none the else this is somethiong that i want to do so.Like many others the light cargo is what I’m looking to deliver nothing big or the heavy.

  10. am.moses says:

    hi i live in south africa cape town and i am lookinking to start acourier business but do not have the knowlege of and where to be begin i do not have any money at this point intime .i do have bakkie would you guys to tell me more of how get started and what it gonna cost me to get your package in sa currency .

  11. joe says:

    hi,i live in burundi africa,and would like to start a bike courier business,do u know anybody who done it in africa and it’s any advise?

  12. Is it expedient to only deal in the delivery of letters and how favourable will that be without the delivery of large materials like T.V. sets and others?Will that be profitable?

    • randy king says:

      My question is, I still am employed with my current employer, and I work 3 twelve hour days which switch every two weeks, can I build a base list of clients by working only 3 days steering this business out , thank you.

      • Sam Knowlton says:

        Randy,

        It’s certainly possible. We’ve had quite a few members who have started up while working another job to pay the bills. Your strategies will have to be different, however, and you may have to look into starting with a partner, employee, or subcontractor who can handle deliveries while you are unavailable.

        Starting with drivers can actually help you in the long run, because it’s easier to grow your business. Instead of getting busier and busier with more deliveries, you can stay focused finding clients and leave the deliveries to your drivers.

        So, as long as you have set things up accordingly, it’s completely possible to start up a “part-time” business.

        Best regards,
        Sam

  13. Magdalena Limon says:

    Hello, I live in texas. What is resonable charge if delivering medications and medical supplies? Thanks!

  14. partecia powell says:

    What are the cons of signing with a company as an independent contractor? I know you are responsible for your own taxes and expenses. Just asking as I’m just starting out an this s the first opportunity I have for work as a new company.

  15. hi i”m trying to start my errand business and would like to know how much to charge hourly. and what would the insurance cost be if i decided to transport cutomers.

  16. mike says:

    whats the diffrence in becoming a courier broker and starting your courier business the way you have organized it?

  17. Dennis says:

    How soon would you recommend to start charging for the services rendered?
    Weekly?
    Monthly?
    Bi-Weekly?

  18. Dennis says:

    Hi. I am trying to start my own Courier business. However, I would like advise on how much to charge? and How to make my service known. I have flyers and business cards. Should I walk in the places and introduce my service or what would you recommend?

  19. Jeff says:

    Where do you go to find the jobs to bid on or get the business to start?

  20. John says:

    Hi, I’m trying to get started. Does anyone have any thoughts on determining competition’s pricing in my area? If there are internet searches I can make, I’m not finding them so far. I’m going to call some places with a couple of scenarios in mind, but it seems difficult to get a feel for all of the nuances of pricing. Thanks to anyone whos has any thoughts. –John

    • Ken says:

      Here is an idea, call another company tell them you have a document or package weighing so many pounds, tell them were your location and were it is going to (address) make it up. Tell them you only want a quote. And there you go, you have more or less of an idea how much to charge…

  21. Rick Simm says:

    You can start a courier business for $0? Impossible!
    1. Office phone/cell phone
    2. Car or van
    3. Business insurance for car or van
    4. Register with the County and State for a Doing Business As.
    5. Register for a tax license with the State and Federal Government
    6. More than likely register your business as a LLC/Attorney fees
    7. Liability insurance for what you pick up and deliver for you and each employee
    8. Loss and omissions insurance
    9. Maintenance on van or car
    10. Daily fuel
    11. Wages, Taxes, Workers Compensation Insurance, Business Taxes, Health Insurance
    12. Uniforms with identification
    13. Marketing/advertising
    14. Pay for an accountant and tax person

    These are just for starters. Start up $0. No way.

    • Sam Knowlton says:

      @ Rick. Actually, let’s look again:

      1. Office phone/cell phone [If you already have this = $0]
      2. Car or van [If you already have this = $0]
      3. Business insurance for car or van [Not necessary before signing your first client]
      4. Register with the County and State for a Doing Business As. [Not necessary before signing your first client, and in many places this costs $0]
      5. Register for a tax license with the State and Federal Government [$0]
      6. More than likely register your business as a LLC/Attorney fees [Necessary only if you desire additional liability protection, and certainly not before signing your first client]
      7. Liability insurance for what you pick up and deliver for you and each employee [Not necessary before signing your first client]
      8. Loss and omissions insurance [Not necessary before signing your first client]
      9. Maintenance on van or car [Yes, though this is already going to be something you pay for out of pocket]
      10. Daily fuel [Same as above]
      11. Wages, Taxes, Workers Compensation Insurance, Business Taxes, Health Insurance [You won't pay wages or workers comp until you have employees, and the rest you are going to have to pay for anyway]
      12. Uniforms with identification [Optional]
      13. Marketing/advertising [Networking, an ideal source of new business, costs $0]
      14. Pay for an accountant and tax person [Perhaps, but certainly not until the end of the business year]

      Can you run a business for long without spending any money? No. The point is that you can easily get out there and get started with few upfront expenses.

  22. nicole says:

    how much do u think i will need to start the whole process?

  23. rhonda lyles says:

    i want to know what rate i should charge for an xtra person charge in a delivery service, after hours charge, airport charge, holiday charge

    • Sam Knowlton says:

      Rhonda,

      That likely depends on what it’s worth to you if YOU are the one making the delivery. If you’re paying a subcontractor/employee, then it’s a matter of what you’ll have to pay them over and above normal compensation.

      Cheers,
      Sam

  24. Beckie says:

    Hi Christine, I agree with the top 3 of your points however double that to determine the possible profit. I would take the market rates and find a sweet spot a basic profit margin of 20-35% many people would be super happy with.

  25. Christine says:

    Okay, in order to determine what I should charge an hour, I’m gonna consider 1.) I’ve got to pay the driver her salary 2.) I’ve gotta pay the insurance 3.) Wear and potential maintanance must be allowed for 4.) Double that to determine possible profit. Thoughts or feelings?

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