How to Start a Pack and Ship Business
Pack and ship stores keep busy between leasing mailboxes and shipping packages, taking passport photos, logistics, overnighting items, or faxing documents. The store offers numerous services that appeal to many customers. If you are a problem-solver, enjoy socializing with customers, and are motivated to grow your business, then owning a pack and ship store is an excellent business endeavor.
A pack and ship store’s primary function is (as the name suggests) packing items and selling shipping labels. However, many pack and ship stores offer additional services, such as moving assistance, passport photos, notary services, mailbox rentals, photocopying, large printing projects, and faxing. The stores can also provide seasonal services, such as gift wrapping and holiday card printing.
Mailbox rentals are a central and steady source of income for pack and ship stores. Further, mailbox rentals are a semi-passive source of income as it requires little maintenance or upkeep. Conversely, packing and shipping require more time and effort but are another primary source of revenue. Packing and shipping services usually fluctuate based on seasons and consumer needs. For instance, packing services typically peak during the holidays.
Many individuals and businesses utilize pack and ship stores to fulfill daily needs. As a result, the U.S. has a significant prevalence of pack and ship franchises—one of the more well-known franchises being the UPS store. There are approximately 7,556 pack and ship franchises that generate $2 billion annually, according to IBISWorld.
Since individuals and businesses use packing and shipping services, the industry has seen a 3% growth in 2022. And over the last five-year period, the industry has consistently grown by approximately 1.3% each year.
Online shopping has boosted pack and ship businesses, heightening the demand for sending and receiving packages. Many consumers shop online from their homes or on the go, using the devices in their hands. This trend grew significantly during the global pandemic because people were staying home more.
As consumers continue to shop online and many small businesses need to ship items to customers, the need for packing and shipping will continue to be in demand.
However, the e-commerce trends can also have a negative effect on pack and ship businesses. For instance, the need for mailboxes has decreased. Services that used to be completed on paper through snail mail can now be accomplished digitally. Documents and applications are more frequently completed online, reducing the amount of mail.
Pack and ship businesses have two primary markets: individuals and businesses. Individuals utilize pack and ship stores to send and receive packages and complete administrative tasks like faxing, printing, photocopying, and passport photos.
Businesses use mailbox rentals, shipping, and photocopying services. For instance, a business that needs a mailing address may rent a mailbox at the store, bringing in consistent monthly income. Additionally, retail-type businesses need to pack and ship packages to customers and use the store to assist with packing, labeling, and shipping.
Owning a Pack and Ship Franchise
A large majority of pack and ship stores in the U.S. are franchised businesses, such as UPS Stores or an authorized ShipCenter store with FedEx. Owners of a UPS Store independently own and operate the business but are bound to the franchise rules and regulations.
The benefit of a franchise is brand recognition, which instantly gives the business notoriety, respect, and consumer trust. So, although owning a franchise doesn’t allow you complete freedom, it gives you a reputation, customers, and business support that you may not have on your own.
Checklist for Starting a Pack and Ship Business
Starting a pack and ship business can be a rewarding and profitable venture. However, there are a few things you need to do to get started. This checklist will help you get organized and set up your business for success.
Step 1: Write a Business Plan
In order to start a pack and ship business, it is important to have a well-written business plan. This document will outline the company’s goals, marketing research, competitors, and financial needs.
Not only will a bank require you to have one, 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: Name the Business
There are a few things to consider when choosing a name for your pack and ship business. First, you want a name that is easy to remember and pronounce. Second, you want a name that conveys what your business does. And lastly, you want a name that is unique and differentiates you from your competition.
Some tips for picking a great name for your pack and ship business include: looking at the names of similar businesses (that aren’t in your area) and grab a thesaurus and come up with a list of keywords related to your business. Narrow the list down to the top three or so and talk with friends, family, and potential customers to see which ones resonate the most.
With a little creativity and thought, you should be able to come up with a name for your pack and ship business that is both memorable and unique.
Related: Tips on naming a business
Step 3: 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 pack and ship 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 4: Select Your Location
There are a few things to consider when choosing a location for a pack and ship business. The first is foot traffic. The location should be in a place where there is a lot of foot traffic, such as near a busy mall or in a downtown area. The second is visibility. The location should be easy to see and find and have space to put up good signage. The third is access. The location should be easy to access, with a good parking situation.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Like any business, a pack and ship business owner will likely need to obtain a variety of business licenses and permits in order to operate. Some of the most likely licensing include a business license, occupancy permit, and sales tax permit.
Related: Common business licenses, permits, and registrations by state
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 pack and ship business is another. The cost of starting a new pack and ship business can be expensive when considering acquiring a storefront, renovations, marketing, etc.
Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money 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
In order to market and advertise a pack and ship business, it is important to first understand the target customer. What are their needs and how can the pack and ship business help them?
Once this is understood, the next step is to develop a marketing strategy that includes both online and offline marketing techniques. Some ideas for online marketing include creating a website, starting a blog, and using social media. For offline marketing, consider using business cards, brochures, and local print or television advertising.
Related: Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a pack and ship business. A couple of these include:
– General liability insurance covers expenses if a client is ever injured or if the business ever damages a client’s property.
– Worker’s compensation insurance is required if a business hires employees. It helps cover expenses like lost wages or medical bills if an employee is injured while working.
The cost to insure a pack and ship business will differ according to factors like the location of the business, the value of the equipment to be insured, and the number of employees on staff. To get a more accurate idea of potential insurance costs, request quotes from multiple insurance companies. Compare the policies and consider factors like deductibles and coverage limits to find the policy that’s best for a business.
Related: Types of insurance your business may need
Step 10: Hire Employees
A pack and ship business will likely need employees to cover the store and work with customers to pack items securely and efficiently, as well as ship them out. Good customer service skills are also a must, as customers will often have questions or need assistance with their orders.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your pack and ship business is critical to your business’s long-term success.
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.
Related: Setting up the accounting for your business
How much does it cost to start a pack and ship business?
A pack and ship business has several layers of costs to assess. Some of the main expenses include location costs and employee wages. And, if you decide to go the franchise route, you will have franchise fees to account for. With the many moving parts of opening a new business, it helps to know the start-up costs, so let’s take a look.
Business Formation Costs. You must acquire licenses, permits, and insurance when you open a new business. The costs for licenses and permits vary by state, so the quickest way to determine the cost is to look up your state’s filing and licensing fee schedule.
In addition to getting permits, licenses, and insurance in order, you may also choose to create a website and purchase a domain. Domain names usually run between $10 – $15 per year, and a professionally designed website for a small business typically costs between $2,000 – $9,000.
Equipment. Some common equipment a pack and ship business will need include shipping and packing material, a bar code printer, scanner, label printer, computers, and a credit card reader.
Employee Wages. Although you could open a pack and ship store as a sole operator, you may quickly find that you need employees to help manage the various aspects. For instance, you may hire store clerks to manage the store’s front end or pack items into boxes. The average wage for a UPS retail associate is nearly $14 per hour.
Rent and Utilities. Rent and utilities differ depending on location. For instance, rural areas tend to have less expensive rent than metropolitan areas. In the U.S., the average rental cost for retail space is $22.09 per square foot.
Franchise Fees. If you decide to go the franchise route, you should expect to pay a fee to initiate the franchise. For instance, the UPS Store fees range from $80,000 to slightly over $500,000. However, with this fee, you get brand recognition, franchisor support in finding an ideal location, marketing assistance, and more.
How much money can you make with a pack and ship business?
One of the greatest aspects of a pack and ship store is its endless money-making opportunities. For example, the store can offer services from mailbox rentals to poster lamination. Mailbox rentals cost little for the business to run and generate consistent monthly income, such as $10 – $50 per box. So, with only 20 mailboxes, the store would generate $200 – $1,000 monthly in mailbox rental fees. Of course, with more mailboxes, you increase your semi-passive income.
Another large source of income comes from packaging items. Customers pay a fee for the store to box, tape, and wrap items for shipping. Packing services have a high profit margin since all the service costs of the business are time and supplies. Depending on size and breakability, stores may charge anywhere from $5 to over $100 to pack an item.
Pack and ship stores also keep a percentage of shipping costs. A majority of shipping costs go to the shipping company, but the store earns a portion for facilitating the sale. In addition, pack and ship stores generate income from more minor services such as printing, faxing, and retail sales.
The amount of money that each store earns annually depends on customer saturation and customer frequency. For instance, metropolitan locations likely have more consistent daily customers than rural locations. On the other hand, due to necessity, rural areas may have more mailbox rentals than metropolitan locations.
Are there grants to start a pack and ship business?
It’s extremely rare to find a grant to start a pack and ship 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 skills are needed to run a pack and ship business?
Owning any business challenges your strengths and skills and allows for personal growth. As the business grows and evolves, so will you. Nevertheless, starting with some skills helps get your business off the ground and running efficiently.
Interpersonal Skills. Working with customers and managing employees is an essential skill for a pack and ship business owner. There are many moving parts to owning this business: sales, operating registers, packing items, sorting incoming inventory and mail, accounting, emailing, and phone calls.
A well-staffed business allows you to assign many store tasks to employees. However, delegating work requires you to have management skills to train and educate employees and oversee each area of your business to ensure that jobs are done correctly and on time.
Additionally, the face of the business interacts directly with customers. So, having the interpersonal skills to diffuse conflict, resolve concerns, and meet your customers’ needs is a great way to boost your business.
Store Organization. Your pack and ship stores will likely offer several services. For instance, you may have a packing station, printers, shelves of inventory, and customer workstations. All these stations need to be organized and strategically placed to appeal to your customers and allow the store to operate efficiently.
A crowded and disorganized store can negatively affect your marketing efforts, and an unclean environment may drive away your customer. However, a strategically placed sales rack can influence sales.
Marketing and Sales. A large portion of the business’s income derives from store sales. Often, the sales are for services, such as packing items for shipping, a large printing job, or notarizing documents. Therefore, knowing how to market and sell your services are essential skills that can improve your store’s revenue.
Advertising is another essential skill in marketing and can be accomplished online through websites and social media accounts or physically through ads and promotions. Although this skill is a helpful one to have, you can also hire a professional to help with your marketing plan.
What is the NAICS code for a pack and ship business?
The NAICS code for a pack and ship business is 561910.
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?
Pack and ship stores are a proven and profitable business opportunity. They are versatile and generate revenue by diversifying their offerings to customers and becoming a one-stop shop to serve customer needs. With a bit of elbow grease, a solid staff, and determination, you could make a pack and ship store a thriving and satisfying business.