Starting a delivery business is a rewarding venture that blends logistical skill with business savvy. The last-mile delivery market is a multi-billion dollar industry, fueled by steady demand for everything from restaurant meals and groceries to e-commerce packages.
This guide will take you through the practical steps of validating your business concept, obtaining necessary permits, acquiring the right equipment, and securing funding to help you launch a successful delivery business in the U.S.
Step 1: Plan and validate your business
First, gauge local demand. Use Google Trends to compare search interest for terms like “local courier” and “food delivery” in your specific city or region. You can also check local social media groups and forums for discussions about existing delivery services.
Competitor and cost analysis
Identify who you are up against. Beyond national giants, look for local players by searching business directories. Many new owners focus only on big competitors, overlooking smaller companies that have strong local ties. This can be a significant oversight.
This brings us to your initial investment. Startup costs typically range from $10,000 to $30,000. A dependable used cargo van might cost $15,000-$25,000. Commercial auto insurance can add another $3,000-$6,000 per year, with business registration fees around $500.
Here are 3 immediate steps to take:
- Analyze local search volume for delivery keywords on Google Trends.
- List three local competitors and note the specific services they offer.
- Create a preliminary budget that includes vehicle, insurance, and registration costs.
Step 2: Establish your legal framework and get licensed
Choose your business structure
Most new delivery businesses should form a Limited Liability Company (LLC). It protects your personal assets if the business faces debt or lawsuits. Filing costs range from $50 to $400, depending on your state, and it provides a vital layer of security.
Some owners opt for a sole proprietorship to cut initial costs. This is a mistake that leaves your personal car and home at risk. The pass-through taxation of an LLC offers similar tax simplicity without the personal liability, making it a much safer choice.
Secure federal and state permits
With your structure chosen, apply for an Employer Identification Number (EIN) from the IRS. It is free and you get it instantly online. This number is your business's federal tax ID, like a Social Security number for your company.
If your service will cross state lines, you must register with the Federal Motor Carrier Safety Administration (FMCSA) for a USDOT number. This process can take a few weeks. Local-only delivery services usually do not need this federal registration.
Finally, check with your city clerk and Secretary of State for local business operating licenses. These requirements and fees vary widely, so it is smart to confirm what you need early on to avoid delays.
Here are 3 immediate steps to take:
- File LLC formation documents with your Secretary of State.
- Apply for a free EIN directly from the IRS website.
- List the specific business licenses required by your city and state.
Step 3: Insure your business and manage risk
With your legal structure in place, the next move is to secure the right insurance. Your personal auto policy will not cover business activities, so you must get commercial auto insurance. Expect annual premiums to be between $3,000 and $6,000 per vehicle.
Key insurance policies
Beyond auto coverage, you need general liability insurance. A $1 million policy is standard and typically costs around $500 per year. This protects you from third-party claims like property damage. Also consider cargo insurance to cover the goods you transport against theft or damage.
Many new owners make the mistake of going with a general agent to save a few dollars. This can leave you with coverage gaps. You should work with providers like Progressive Commercial or The Hartford who understand the specific risks of the delivery industry.
Here are 3 immediate steps to take:
- Get quotes for commercial auto insurance from at least two providers.
- Confirm your general liability policy provides at least $1 million in coverage.
- Research insurance agents who specialize in commercial delivery services.
Step 4: Secure your location and equipment
Find your home base
You do not need a large space at first. Look for a 200-500 square foot unit in an area zoned for commercial or light industrial use. This provides enough room for a small office and secure overnight vehicle parking. Check local zoning laws to confirm compliance.
When you find a spot, try to negotiate a shorter lease. A one or two-year term offers more flexibility than a standard five-year commitment. Some landlords may agree to an early termination clause, which can be a lifesaver if your business needs change.
Gear up for operations
Your vehicle is the main expense, but smaller gear is just as important. Many new owners overlook these items. A quality hand truck ($100-$200) and a set of cargo straps and moving blankets ($50-$150) are vital for efficiency and safety.
You can find this equipment from suppliers like Uline, which often has no minimum order quantity for these common items. Also, a reliable smartphone with a rugged case is your command center for navigation, communication, and order management.
Here are 3 immediate steps to take:
- Research 200-500 square foot commercial units in your area.
- Ask potential landlords about their willingness to offer a 1-2 year lease.
- Price out a hand truck and cargo straps from a supplier like Uline.
Step 5: Set up your payment processing
Most clients expect to pay upon successful delivery. You should be ready to accept credit cards and digital wallets from day one. Some new owners try to stick to cash or checks, but this can limit your customer base significantly.
Choosing a payment solution
Look for a solution with low transaction fees and no hardware requirements. Many providers charge 2.5% to 3.5% per transaction and require you to buy a separate card reader. These costs can add up quickly, especially when you are just starting out.
For delivery businesses that need to accept payments on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done. It is a simple way to get paid.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it is a great fit to collect payment immediately after a successful delivery. This rate is much lower than the 2.5% to 3.5% average that other providers charge.
Getting started is straightforward:
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.
Here are 3 immediate steps to take:
- Decide on your payment terms, such as payment on delivery.
- Compare the transaction fees of at least two payment solutions.
- Download the JIM app to see how it works on your phone.
Step 6: Fund your business and manage finances
You will need about six months of operating cash to stay afloat. For a single van, this means around $10,000 to $15,000 to cover fuel, insurance, and unexpected repairs. Many new owners secure a loan for the van but forget these day-to-day costs.
With that number in mind, let's look at funding. The Small Business Administration (SBA) is a solid first stop. Their Microloan program offers up to $50,000, which is often enough for your first vehicle and initial expenses. You generally need a credit score of 680 or higher to qualify.
You might also consider equipment financing. Lenders are often more willing to approve these loans because the vehicle itself serves as collateral. Rates can range from 5% to 20% depending on your credit and the vehicle's age.
Also, look for local economic development grants. Your city or county may offer small grants for new businesses that create jobs. These are competitive but do not require repayment, making them worth the application effort.
Here are 3 immediate steps to take:
- Calculate your 6-month operating costs, including fuel, insurance, and maintenance.
- Check your credit score with a free service to see where you stand.
- Review the SBA Microloan program requirements on their official site.
Step 7: Hire your team and set up operations
Hiring your first driver
Your first hire will likely be a part-time Delivery Driver. This role handles loading, transport, and basic customer communication. Plan for a pay rate of $15-$20 per hour. A clean driving record is non-negotiable, but no special certifications are usually needed for standard vehicles.
Some owners hire friends to save time, but this can be a mistake. You should always run a formal background check and verify their driving history. This protects your business and your commercial insurance policy.
Managing daily operations
With a driver on board, you need to manage schedules. You can use software like When I Work or Homebase to handle shifts and team communication. Many of these platforms offer free plans that are perfect for a one or two-person team.
As you grow, a good benchmark is to maintain one full-time driver for every $100,000 to $150,000 in annual revenue. This ratio helps keep your labor costs balanced with your income, which is key for profitability.
Here are 3 immediate steps to take:
- Write a job description for a Delivery Driver with a clear pay range.
- Research two background check services suitable for small businesses.
- Compare the free plans for scheduling software like When I Work and Homebase.
Step 8: Market your business and find customers
With your operations ready, it is time to find customers. A common mistake is to pour money into broad digital ads. Instead, focus on targeted local efforts first. Your initial goal should be to keep your customer acquisition cost (CAC) under $100 per client.
Local marketing strategies
Start by creating a Google Business Profile. It is free and puts your business on Google Maps. Fill out every section with your services, hours, and contact details. This is often the first place potential customers will find you.
Next, identify businesses that need your services. Think about local florists, bakeries, law firms, and print shops. A personal visit or a direct email can be more effective than a generic ad. Offer a special introductory rate to get your first few contracts.
You can also try simple flyers. A well-designed flyer distributed in business parks can yield a 1-2% response rate. This is a low-cost way to generate initial leads. Focus your message on reliability and professional service, not just price.
Here are 3 immediate steps to take:
- Create and fully populate your Google Business Profile.
- List five local businesses to approach for delivery partnerships.
- Design a simple flyer that outlines your services and contact information.
Step 9: Set your pricing and get paid
Choose your pricing model
Most delivery services use one of three models. Per-mile pricing, often $1.50 to $3.50 per mile, works well for courier routes. Flat-rate pricing is simpler for local zones, like a $10 fee for any delivery within a 5-mile radius.
A percentage-based fee, typically 15-30% of the total order value, is common for restaurant or grocery deliveries. This model scales with the size of the order.
Many new owners underprice themselves to win early jobs, but this strategy is rarely sustainable. After you account for fuel, insurance, and vehicle wear, you should aim for a net profit margin of at least 20-30%.
To see what your market will bear, do some research. Call a few local competitors and ask for a quote on a hypothetical delivery. This gives you direct insight into their rates, far better than just guessing from their website.
Here are 3 immediate steps to take:
- Calculate your cost-per-mile by adding up monthly vehicle, fuel, and insurance costs and dividing by estimated monthly mileage.
- Call two local competitors to get a quote for a sample delivery route.
- Decide on a primary pricing model: per-mile, flat-rate, or percentage-based.
Step 10: Maintain quality and scale your operations
Measure what matters
Keep a close eye on your on-time delivery rate, and aim for 98% or higher. You can also track customer satisfaction with a simple post-delivery survey. A score above 4.5 out of 5 is a solid target to maintain.
Don't forget your order accuracy and damage rates. You want both as close to zero as possible. These numbers give you a clear picture of your service quality without any guesswork.
Know when to grow
A common mistake is to expand too fast. A good benchmark is to add a new driver for every $100,000 in annual revenue. You might consider a second vehicle once your current one hits 85% utilization during peak hours.
When you add drivers, route optimization software like Routific or Onfleet becomes very helpful. It can cut fuel costs and help you manage multiple routes efficiently, which is a big win for your bottom line.
Here are 3 immediate steps to take:
- Set up a simple survey to track your customer satisfaction score.
- Calculate your current vehicle's utilization rate for a typical week.
- Compare the features of route optimization software like Routific and Onfleet.
Starting a delivery business is about reliability. Your reputation for on-time, safe deliveries is your most valuable asset. Focus on building that trust with every single package. You have the roadmap, now it is time to start the engine and make your first delivery.
And when you make that delivery, getting paid should be simple. JIM turns your phone into a card reader, so you can accept payments on the spot for a flat 1.99% fee, with no extra hardware. Download JIM to get started.
