A Guide to Estimating Delivery Jobs
If your business offers a delivery service , it's important to know how to create accurate cost estimates. After all, if you fail to factor in enough revenue to cover the delivery costs — including wear and tear on vehicles and gas mileage — you might not make enough profit or a large enough profit margin on your delivery services .
Without pricing that makes revenue from the delivery service , you can start losing money overall, and that can hamper your business's ability to earn a profit and be successful in the long run. While some businesses can offer a free delivery service (e.g., Amazon) , they typically collect the money in other ways, such as through product markups , moving large amounts of merchandise, or having customers pay for memberships that include this benefit.
Fortunately, there are strategies you can use to boost your ability to estimate delivery costs and create more accurate prices. This will help you be confident that you can provide your customers with optimal service, earn the income you need to cover your delivery costs, and build revenue for your organization as a whole. Whether you offer food delivery — similar to DoorDash , Grubhub , Postmates , or Uber Eats — or furniture delivery, a quality delivery estimate can be found with the right calculation.
What Is the Delivery Price?
The delivery price is what you'll charge your customers for your delivery service . It should be set with the intention of generating profit from your delivery service . When you sell to your customers, you naturally set prices to ensure that your efforts to produce the goods and services they want will create a profit for your business. Think of your delivery service as any other service you'd provide for customers.
The delivery fee should also be set upfront and agreed on by both you and the customer at checkout . The customer needs to determine if they want to purchase this additional service, and you need to let them know how much it will cost them before they make a decision. Therefore, to create a delivery price, you need a solid formula that will tell you how to accurately estimate your costs for the delivery and set your service fees .
How Do You Estimate a Delivery Job?
To help you set optimal prices for your delivery service , we'll walk you through the steps to make this calculation. In just a few simple steps, you'll know how to set profitable prices that will help keep your business moving forward.
Scope Out Your Delivery Competition
As you begin to investigate your delivery service prices, your first step will be to look at the prices and procedures of your competition. See what other people charge for similar delivery services and how they calculate their charges.
To find this information, you can investigate the companies online or even call them to see how they schedule their delivery rates. You want to set charge rates that fall around the average for your industry and area.
Figure Out the Time and Distance of the Delivery
Remember that the delivery charge has to consider the distance the driver will need to go and the gas mileage needed to get there. It also needs to cover the amount of time necessary to drive, wear and tear on the vehicle, and any vehicle maintenance.
You'll want to calculate a price based on distance. Some businesses find it helpful to develop rates based on a particular radius from the base of operations — such as one charge for destinations within 5 miles of your business, a higher charge for those 10 miles from the business, and still higher for those up to 20 miles from the business. Having a flat rate can help you quickly calculate the cost for your shipping service .
Calculate customers' typical distance from your business and the typical driving time based on traffic in your area to determine the most convenient methodology for you.
Determine What Delivery Drivers Should Make per Hour
Your delivery price also needs to consider hourly wages for your delivery drivers , as delivery times will impact your price. Looking at your competition again can be helpful here, as well. Knowing what delivery drivers make for other companies can help you set competitive wages so you can attract and retain the best employees.
If the driver is paid $18 per hour, you know that you essentially pay them $0.30 per minute. Use this per-minute charge to help you determine delivery prices by estimating how long it will likely take the driver to make the delivery. Once you have the per-minute rate, you can use your company data to determine how long a typical delivery job takes within a particular area and calculate a price for deliveries within certain distances.
Decide on Extra Fees
Finally, you want to consider the importance of calculating extra fees that may need to get added to some delivery charge estimates. For example, if particularly heavy deliveries will take the driver longer to complete or result in more maintenance on the vehicle, you might add a few extra cents per mile. Businesses might also need to base their service fee on other factors, such as weekends versus weekdays , front-door service requests, and requests for new window of delivery times .
Similarly, some companies might chart routes for their drivers and expect them to deliver a certain number of packages per day. If large deliveries or deliveries outside your typical delivery zone make it harder to meet this benchmark, you might need to add an extra charge for these types of deliveries. Depending on location, you might also need to take into account deliveries requested during rush hour.
Some businesses have also adjusted some shipping rates based on the COVID -19 pandemic. As the coronavirus has quickly spread around the world, companies have had to adjust delivery processes and shipping costs to ensure that drivers receive the right compensation while still remaining as safe as possible. Consider if you will need a surcharge to manage certain types of unusual circumstances.
Consider which factors might take more of your driver's time or cost more in terms of vehicle maintenance than your standard calculations take into account. This will ensure that you plan appropriately for these unusual circumstances.
Use an Estimate Template
Once you begin to compile the different factors that will influence your delivery estimates, you will need to bring them together and calculate your actual rates. An estimate template not only helps track these different service quotes but it also helps you add up the different estimated costs and ensures that the prices you decide on match what your organization needs.
Skynova offers a free estimate template that can help you make estimates to provide to customers. You can use this to let customers know about estimated delivery costs upfront.
Use Skynova's Software to Help Manage Your Estimates
As you begin to build your business and provide delivery services , you want to make sure that the prices you quote to your customers will help you earn a profit and not turn into a source of loss. The best way to make sure that your organization charges enough for delivery is to calculate accurate estimates by looking at the factors that might influence your deliveries. From driver's fees to vehicle maintenance costs, your prices should be competitive enough while still helping you turn a profit.
Skynova is here to provide businesses and delivery companies just like yours with the templates they need to run their businesses. With accounting software and business templates that can help you track your expenses and charges, you can make sure that your estimates provide you with sufficient revenue to benefit your organization as the delivery trucks begin to move out. From tracking your sales tax , including any extra services fees, and charging accurate shipping prices , see how our software products can help.