How to Start a Courier Business
If you live in a city, the chances are that you’ve seen many couriers at work and may not have even known it. With their efficient and sometimes specialized delivery services, couriers help to keep other businesses running. Starting a courier business of your own could provide many advantages. It’s possible to start up a business on a part-time basis, and if you already know your local area well, you may be well-prepared for this career.
Courier businesses transport packages, goods, and documents from local businesses to recipients, who may be other businesses or individuals. Couriers offer the advantage of fast delivery, package tracking, and a more secure experience than businesses might have if they used traditional shipping methods. Most courier businesses accommodate a wide range of goods, including a same-day document delivery or a more complicated large piece of equipment that requires special handling.
Couriers may work with a variety of businesses, but they typically have specific service areas that they know well. Pharmacies, veterinarians, realtors, lawyers, and many other businesses frequently use couriers for convenience and efficiency. Couriers don’t just operate during standard business hours, and instead may deliver at night, too. It’s most common to find couriers in highly-populated areas, like cities, where such time-sensitive deliveries are common.
If you’re considering starting a courier business, make sure you’re focusing on the right location and target market. These businesses do best in highly populated areas, like cities, where there are plenty of retailers or businesses with ongoing delivery needs. Do some market research to identify not only the need for courier services but also any existing competitors. Try to identify an unmet need in the area, like the availability of couriers who will take on rush jobs or large, heavy packages.
When it’s time to start your courier business, you don’t have to immediately startup full-time. This is an industry that allows you to test the waters on a part-time basis while still retaining employment elsewhere. You can gradually scale up your business and transition into a full-time operation once you’ve built up your clientele.
According to IBIS World, the couriers and local delivery services in the United States industry experienced a 4.7% growth from 2015 to 2020. That data reflects both larger couriers and smaller local delivery companies. Increased consumer spending, corporate profit, and a greater number of businesses in operation during that five-year period drove the courier industry’s growth.
The courier service industry is expected to benefit from increased consumer spending and a growing number of businesses from 2020 through 2025. An improving economy is also likely to drive spending and the need for courier services.
As of 2020, the courier and local delivery services industry was a $113 billion market. A total of 235,005 businesses employed 935,038 staff.
The courier industry continues to evolve, and it’s shaped by many trends. Picante Today notes that with the development of technology, tracking is more important than ever. Couriers can use real-time tracking to give their customers confidence and build their trust in the business. Route tracking also plays an important role in the industry since it can assess traffic and save drivers time by choosing the fastest route. Route tracking also helps larger businesses to decide which packages to assign to each driver, maximizing efficiency. Adopting this new technology can help a courier business stand out and provide an excellent customer experience, encouraging customers to use the courier business repeatedly.
With the rise of e-commerce, the industry is growing as demand for couriers increases. One potential threat, though, is drone deliveries. Drones have proven to be cost-effective, and they also benefit from saving time and offering fast deliveries. When it comes to delivering time-sensitive items like medicine and food, we’ll likely see drones increasingly used.
Courier businesses often work with businesses that need prompt, personalized delivery services. These potential clients could consist of retailers or manufacturers, but they can also be other types of businesses or even individuals who need to have something delivered quickly, often on the same day. A courier business might target certain types of other businesses needing deliveries made within a certain timeline.
The geographic area may also define a business’ target market. A smaller courier business might specialize in a part of a city or a few towns, while larger businesses could expand to cover larger areas and enjoy a larger customer base as a result.
Checklist for Starting a Courier Business
If you’re thinking about starting your own courier business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your business should be to write a courier business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a courier business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Name the Business
Finding the perfect business name for a courier business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
It’s possible to start a small courier business out of your home, especially if you are the only initial employee. As that business grows, it may be time to expand into a rented office space. Rental costs will depend on the size and location of the space, as well as available amenities like designated parking spaces. As you grow your business into a multi-vehicle fleet, you may need to rent garage space for the vehicles.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A courier business will need to obtain certain licenses and permits in order to operate.
Some cities require couriers to have specific licensing while others do not. In addition to courier-specific licenses, there may be general business registrations to register for as well such as a business license, tax permit, Employer Identification Number, and more.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a courier service is another. While costs to start are generally low, funding to start a courier business can be difficult as it is generally a cash business with few assets to borrow against. To get a small business loan, the borrower(s) will need to have good credit and personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Marketing is essential to build up an initial customer base and continue to bring in new customers. Common marketing techniques include establishing a website, social media presence on Facebook and LinkedIn, online ads, direct mail advertising, and even networking with business owners in person and handing out business cards.
Some courier businesses may offer a loyalty discount to encourage repeat customers, and establishing a referral program can also help build up a roster of customers.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a courier business. A few of these include:
– General liability insurance protects the business if customers are injured or their property is damaged because of the business’ work. This type of insurance can help cover medical bills, the property’s replacement cost, or other expenses.
– Commercial vehicle insurance covers business-owned vehicles and protects the business if the vehicle is ever in an accident.
– Worker’s compensation insurance protects the business and covers legal and medical bills if an employee is ever injured on the job.
The cost to insure a courier business will depend on factors like location, the number of employees on staff, and the value of the business’ vehicles. To get the most accurate idea of how much to budget for insurance, request insurance quotes from multiple providers. When comparing the quotes, don’t only account for differences in premiums but also consider differences in coverage limits, exclusions, and deductibles.
Step 10: Hire Employees
It’s possible for a business owner to act as the only courier when starting up a business, but as that business grows, it will be time to hire additional couriers. Salary.com reports that couriers and messengers make an average of $32,604 per year. Actual salary ranges vary from $25,162 to $41,573 per year. In addition to budgeting for salaries, a business’ budget will also need to include other employee-related expenses like paid time off, health insurance contributions, and worker’s comp insurance.
Instead of hiring employees, many courier businesses will use contractors. Be sure to research the rules as misclassification can be costly.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your courier company is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a courier business?
One of the major benefits of starting a courier business is that the investment is typically quite low.
Some common startup costs for a courier business include:
– Office supplies, computer, and printer
– Marketing materials and website
– A business cell phone equipped with a GPS
– Equipment like dollies and moving blankets
– Delivery vehicle, such as a bicycle, van, or truck
– Working capital for salaries, internet, insurance, etc.
How much can a courier business owner make?
Many variables affect a courier business’s profitability, including its customer base, where it’s located, how many employees are on staff, and even whether the business operator runs it as a part-time or full-time business. Business owners can maximize their profits by focusing on the types of jobs that pay the most, like delivering medications for pharmacies or performing rush jobs. Establishing relationships with customers who have ongoing delivery needs can also ensure a steady stream of work and boost a business’s income.
What skills are needed to run a courier business?
Starting a courier business doesn’t require a business degree, but certain skills and experiences can give you an advantage in this industry.
Previous courier experience. Previous experience working within the industry is valuable and can prepare business owners for the challenges they’ll face in running their business.
Geographic knowledge of the area. In-depth familiarity with the service area is a definite benefit. When a business owner knows an area intimately, they can better plan routes, avoid known problematic traffic areas, and ensure that deliveries arrive at the right destination.
Organization skills. With multiple deliveries going to different destinations with different deadlines, a business owner needs to be organized and efficient.
Attention to detail. Details, like pickup times and destination addresses, matter greatly in this industry. Attention to detail can contribute to a business’ success.
Physical strength. If a courier business offers delivery of large packages, then physical strength is important. Training in how to properly lift heavy loads can also help to prevent injuries while on the job.
Customer service skills. Phone etiquette, the ability to address customer concerns, and strong interpersonal skills are essential customer service skills that can help a business owner build rapport with customers.
Troubleshooting skills. Problems will arise in this industry, and a business owner will need to be able to think on their feet to address and fix any issues.
Are there grants to start a courier business?
It’s extremely rare to find a grant to start a courier business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a courier business?
The NAICS code for a courier business is 492110
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?