Starting a last-mile delivery company is a rewarding venture that combines logistical planning and customer service skills with sharp business savvy. The industry is worth hundreds of billions of dollars, fueled by steady demand from e-commerce, retail, and food delivery services.
This guide will take you through the practical steps of validating your business concept, obtaining necessary licenses, acquiring the right equipment, and building supplier relationships to help you launch a successful last-mile delivery company in the U.S.
Step 1: Validate your business plan
Begin by researching your local market. You can talk to managers at local businesses like florists, pharmacies, and restaurants. Ask about their current delivery solutions and what they wish was better. This direct feedback reveals service gaps you can fill.
With that local knowledge, you can size up the competition. Use Google Maps to find every delivery service in your target zip codes. Many new owners only watch big names like FedEx and forget that their main rivals are often smaller, local outfits.
Estimate your startup costs
Mapping out your finances early helps prevent surprises down the road. A lean launch is possible, but you need to account for a few key expenses. Your initial investment will likely fall between $16,000 and $33,000.
- Used Cargo Van: $15,000 - $30,000
- Insurance Down Payment: $500 - $1,500
- Business Licenses & Permits: $300 - $800
- Basic Marketing Materials: $500 - $1,000
Here are 3 immediate steps to take:
- Talk to at least five local business owners about their delivery needs.
- Create a list of all direct competitors operating in your desired service area.
- Draft a startup budget using the cost estimates provided above.
Step 2: Set up your legal structure and get licensed
You should consider forming a Limited Liability Company (LLC). This structure protects your personal assets from business debts and lawsuits. It also allows for pass-through taxation, so you report business profits on your personal tax return, which simplifies paperwork.
Federal and state requirements
Your business will fall under the U.S. Department of Transportation (DOT). You must obtain a USDOT number, which is free to acquire through the Federal Motor Carrier Safety Administration (FMCSA) online portal. This number identifies your company and vehicles for safety compliance.
If you plan to operate across state lines, you will also need a Motor Carrier (MC) number from the FMCSA. The application costs $300 and typically takes 20-25 business days to process. A frequent misstep is delaying your insurance paperwork, which must be filed during the 21-day vetting period after you apply.
Finally, check with your city or county clerk for a local business license. These requirements vary widely, but you can expect costs to range from $50 to $400. This is a step many new owners overlook, leading to potential fines.
Here are 4 immediate steps to take:
- File for an LLC with your state's Secretary of State office.
- Apply for your free USDOT number on the FMCSA website.
- Begin the MC number application if you will cross state lines.
- Contact your city clerk to ask about local business license requirements.
Step 3: Secure your insurance coverage
With your legal structure in place, the next move is to protect your business with the right insurance. This is not just a formality. Many clients and brokers will not work with you unless you meet their minimum coverage requirements.
Key insurance policies
You will need a few specific policies. A frequent oversight is to underinsure your vehicle or cargo, which exposes your new business to significant financial risk. Make sure your policies meet these common standards.
- Commercial Auto Liability: Most brokers require a $1,000,000 combined single limit policy. This covers damages your vehicle may cause.
- Cargo Insurance: This protects the goods you transport. Coverage of $50,000 to $100,000 is standard.
- General Liability: This covers non-vehicle-related accidents, like a slip-and-fall at your office.
- Workers’ Compensation: If you hire employees, your state will likely require this to cover on-the-job injuries.
Annual premiums for a new delivery business often range from $8,000 to $15,000 per vehicle. You might want to work with an agent who specializes in commercial trucking. They understand the FMCSA filing process and can often find better rates than a general agent.
When you look for quotes, consider providers like Progressive Commercial, The Hartford, or CoverWallet. They have deep experience with new motor carriers and can guide you through the specific requirements of the last-mile industry.
Here are 4 immediate steps to take:
- Get quotes for a $1 million commercial auto liability policy.
- Compare cargo insurance policies with at least $50,000 in coverage.
- Contact an insurance agent who specializes in commercial trucking.
- Check your state’s workers’ compensation requirements.
Step 4: Find a location and buy your equipment
A physical location might not be necessary at first. You can often run the business from a home office and a secure garage, provided local zoning allows for commercial vehicle parking. If you need a dedicated space, look for a small 500-1,000 square foot warehouse.
Many new owners sign long leases for spaces that are too big. You should negotiate for a one or two-year term with an option to renew. This gives you an exit if you need to scale up or down. Check self-storage facilities too, some allow business use.
Get your delivery gear
You do not need brand-new equipment to start. Used gear from online marketplaces or local auctions works well and keeps your initial costs low. Focus on items that make loading and unloading faster and safer.
- Hand Truck or Dolly: $100 - $250
- Moving Blankets (1 dozen): $100 - $200
- Ratchet Straps (set of 4): $50 - $100
- GPS Unit or Smartphone Mount: $20 - $50
Here are 4 immediate steps to take:
- Check your local zoning ordinances for commercial vehicle rules at a residence.
- Price out 500-1,000 square foot warehouse spaces.
- Search online marketplaces for used hand trucks and moving blankets.
- If you rent, ask the landlord for a one-year lease term.
Step 5: Set up your payment processing
For business clients, Net 15 or Net 30 payment terms are common. This means you invoice them and they have 15 or 30 days to pay. For one-off or residential deliveries, you should collect payment upon completion. A frequent misstep is not requiring a deposit for large contract jobs.
Choose a payment solution
You need a way to accept payments on the go. For jobs that require payment on-site, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and you are done.
The rate is just 1.99% per transaction with no hidden costs or extra hardware needed. This is a significant saving compared to other providers whose commission rates often average 2.5% to 3.5%. It's particularly useful for collecting payment upon delivery from a customer.
- 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. There is no wait for bank transfers.
Here are 3 immediate steps to take:
- Decide on your standard payment terms for business clients.
- Download the JIM app to explore its mobile payment features.
- Create a basic invoice template for your records.
Step 6: Secure funding and manage your finances
Find the right funding source
You might want to explore an SBA 7(a) loan. For amounts under $50,000, the application process is often simpler. Lenders typically look for a personal credit score of 680 or higher to qualify for favorable rates.
Another path is equipment financing, which is a loan specifically for your delivery vehicle. Lenders like Crest Capital focus on this area. Interest rates can range from 5% to 15% depending on your credit history and the age of the van.
Plan your working capital
With funding in mind, you need to calculate your working capital. This is the cash on hand to cover expenses for the first three to six months, before your business generates steady income. A frequent miscalculation is to underestimate these operational costs.
Here is a sample budget for your first six months:
- Fuel: $3,000 - $6,000
- Insurance Premiums: $4,000 - $7,500
- Vehicle Maintenance Fund: $1,000 - $1,500
- Owner's Draw/Salary: $12,000 - $18,000
Here are 4 immediate steps to take:
- Check your personal credit score through a free service.
- Review the requirements for an SBA 7(a) loan online.
- Request a quote from an equipment financing lender.
- Create a six-month budget for your working capital needs.
Step 7: Hire your team and set up operations
Build your driving team
Your first hire will likely be a delivery driver. Expect to pay between $18 and $25 per hour. Their duties include loading, safe transport, and customer communication. A frequent oversight is misclassifying drivers as independent contractors to avoid payroll taxes, which can result in serious IRS penalties.
Drivers need a valid state driver's license and a clean driving record. For most cargo vans, a commercial driver's license (CDL) is not required. However, they will likely need a DOT medical card, which confirms they are physically fit to operate a commercial vehicle.
Streamline your daily operations
Efficient routes are your profit engine. Manual planning is a recipe for wasted fuel and time. You might want to use route optimization software like Onfleet or Routific to plan multi-stop routes automatically. These platforms can also send customers real-time tracking updates.
As you grow, a good benchmark is to aim for $75,000 to $125,000 in annual revenue per vehicle. This figure helps you decide when to add another driver and van to your fleet. It keeps your growth aligned with your profitability.
Here are 4 immediate steps to take:
- Draft a job description for a delivery driver, including pay and responsibilities.
- Research your state's laws on employee vs. independent contractor status.
- Confirm DOT medical card requirements for your specific vehicle type.
- Request demos for route optimization software like Onfleet or Routific.
Step 8: Market your business and get customers
Your first customers will likely come from direct outreach. Revisit the local businesses you spoke with in step one. Create a simple one-page sales sheet that lists your services, insurance coverage, and contact information. This professional touch makes a big difference.
Many new owners rely only on digital ads, but you will see better results if you also build local relationships. A good early goal is to keep your customer acquisition cost (CAC) under $100 per client. Focus on low-cost, high-impact actions first.
Find clients through load boards
Once you are ready for more volume, you can use load boards. Platforms like DAT One and Truckstop.com have sections for expedited and hot shot freight, which often includes last-mile work. Subscriptions typically run from $50 to $150 per month.
Also, set up a free Google Business Profile. This is a simple step that gets your company on Google Maps and in local search results when potential clients look for delivery services. It adds a layer of legitimacy to your operation without any cost.
Here are 4 immediate steps to take:
- Create a one-page sales sheet with your rates and services.
- Contact the five businesses you identified in your initial research.
- Set up your free Google Business Profile.
- Research subscription costs for DAT One and Truckstop.com.
Step 9: Set your pricing strategy
Choose your pricing model
You have a few options for pricing. A per-stop fee, often $5 to $10, works well for dense urban routes. For longer distances, a per-mile rate of $1.50 to $2.50 is more common. Some clients prefer a simple hourly rate, usually between $40 and $60.
Your goal should be a net profit margin of 15% to 25% after all expenses. A frequent mistake is to underprice your service just to get the first few clients. This approach is not sustainable and can quickly lead to cash flow problems when fuel or maintenance costs rise.
To find the right price point, research your competitors. Call at least three other local delivery services and ask for a quote on a sample job. This gives you a real-world baseline for what the market will bear. You should aim to compete on reliability, not just price.
Here are 3 immediate steps to take:
- Decide if you will charge per stop, per mile, or per hour.
- Call three local competitors to get sample delivery quotes.
- Calculate your target price to achieve at least a 15% profit margin.
Step 10: Maintain quality and scale your operations
To keep clients happy, you need to track your performance. Focus on two key numbers: your on-time delivery rate and your damage-free rate. You should aim for 98% or higher on both. Many new owners get caught up in growth and forget to monitor these figures, which can lead to losing customers.
Set your benchmarks for growth
The rule of thumb is to add a new vehicle for every $75,000 to $125,000 in annual revenue you generate. Once you manage three to five vans, you might want to hire an operations manager to handle dispatch and driver support. This frees you up to focus on sales.
As you add more drivers and stops, manual dispatch becomes inefficient. The route optimization software you researched earlier, like Onfleet or Routific, becomes vital. It helps maintain efficiency as you scale and keeps your fuel costs in check across a larger fleet.
Here are 4 immediate steps to take:
- Set a target for your on-time delivery rate (e.g., 98%).
- Calculate your current revenue-per-vehicle to see if you can add another van.
- Define the point at which you will hire an operations manager.
- Revisit route optimization software demos for your growing fleet.
You have the roadmap to launch your last-mile delivery business. Remember that reliability, not just speed, builds a loyal customer base. Your reputation for consistent service will be your greatest asset. With this plan, you are ready to get started.
As you complete those first deliveries, make sure getting paid is just as smooth. JIM turns your phone into a card reader for a flat 1.99% fee, so you can accept payments on the spot without extra hardware. Download JIM to simplify your sales.
