The complete guide:

How to launch
and scale a
delivery business
profitably
THE COMPLETE GUIDE: HOW TO LAUNCH
AND SCALE A DELIVERY BUSINESS PROFITABLY

TABLE OF CONTENTS

01 Introduction 03

02 The Ideal Delivery Model 04

Sell: Take Orders 05

Plan: Route Planning 07

Deliver: Drivers and vehicles 10

03 The Economics of your Delivery Business 12

Route Density explained 13

04 Summary 16

05 About the Author 17

THE COMPLETE GUIDE: HOW TO LAUNCH AND SCALE A DELIVERY BUSINESS PROFITABLY

Introduction

We live in unprecedented times where retail businesses are closed and people are stuck at home. The
demand for home delivery has never been greater. Fun fact: for the first time in Google’s history the
search term for “delivery” has overtaken the search term “bar”.

In recent weeks, we’ve seen many businesses
pivot out of necessity and launch a delivery
service in just a matter of days. The good news is
that we live in an age of technology where this is
possible. The other good news is that demand
for home delivery is growing like never before.
There’s been no better time to launch a
delivery business.
This ebook will teach you the basics on how to
launch a successful delivery business from
scratch. We will cover the most important
elements of a delivery business, the important
considerations that will impact your bottom line,
and the different pitfalls that you need to watch
out for.
called “The Ideal Delivery Model”. It will cover
some very specific tactics you can deploy to get
going. The second section dives deeper into the
economics behind your delivery business and
highlights the most important decisions you’ll
need to make that will profoundly impact your
profitability.
By the end of this ebook, my hope is that you will
feel confident and inspired to launch your home
delivery business in a matter of days. If you
already have a delivery business and it’s starting
to scale beyond 50 or 100 orders a day, this
ebook will cover some best practices to help you
through that scaling process smoothly and
profitably.

The first section of this guide describes the three

elements to a delivery business in a framework

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THE COMPLETE GUIDE: HOW TO LAUNCH AND SCALE A DELIVERY BUSINESS PROFITABLY

The Ideal Delivery Model

Customers

Deliver: Drivers and vehicles Ideal

Build a professional end-to-end customer
experience with the right delivery fleet Delivery
Model

Plan: Route Planning Sell: Take orders

Plan your delivery routes in the most efficient way Launch an eCommerce storefront
and minimize cost per delivery to start selling online

The Ideal Delivery Model framework – see
picture above – summarizes the entire delivery
business model in a nutshell.1 This framework
can be followed by any type of local delivery
business, whether you deliver groceries, produce,
meals, beverages, parcels, medicine, toys,
cannabis – whatever it is that people need in
quarantine.
The Ideal Delivery Model highlights the 3 core
elements to a delivery business:
Sell: Take orders
Plan: Route planning
Deliver: Drivers and vehicles
We will cover each of these elements in more
details in this guide. The idea is that you need at
least the bare minimum in place across each of
these 3 elements in order to launch your delivery
business – and it doesn’t have to be perfect if
you’re just starting out. You can always improve
on each element later.
The idea behind launching as quickly as possible
– aside from the fact that time is tight for
businesses who have been severely affected by
the pandemic – is to test the demand in the
market for your product, as well as gain some
experience running a delivery business.
Once your product hits the road, and things start
to scale beyond 50 orders/day2, you’ll quickly
notice opportunities across each of these
elements to automate things more, and deliver a
great holistic experience to your customers.

1
The assumption is that you already have a product that you can sell, and a production line that can scale to meet the
demand. Discussion about production best-practices is out of scope for this guide, as it is unique to your business.

2
While 50 orders/day may seem like it could take you months to get to with a lot of marketing efforts, but with the
current market conditions it could happen in a matter of days. I spoke with one such entrepreneur in March, 2020, who
pivoted his business into a produce delivery business, and he told me that he received 200 orders on his first day! Prior
to launch, he spent only about a week setting everything up from scratch – that’s how fast this can happen.

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THE COMPLETE GUIDE: HOW TO LAUNCH AND SCALE A DELIVERY BUSINESS PROFITABLY

When you do this right and follow the Ideal
Delivery Model framework, your delivery
business will have:
Streamlined operations that avoid
logistical nightmares, so you can spend
your time doing what you love.
A profitable business that can scale
sustainably as you’re minimizing cost per
delivery.
As you continue to iterate on your processes to
meet demand, soon enough, you’ll be delivering
goods to hundreds of customers a day with a
growing number of drivers to meet the demand.
Sounds idyllic? Well, it’s called the Ideal Delivery
Model for a reason, but it is definitely possible.
I’m not going to lie, it will take a ton of effort and
work on your part. But if you’re excited and feel
inspired, let’s get started!

An excellent end-to-end customer

experience, resulting in repeat customers
and word-of-mouth.

Sell: Take Orders

If you haven’t already, the first step is to launch an e-commerce store so you can start selling your
product. Because e-commerce has been growing for many years, there is a large ecosystem around it.
What this means for you is that there are many software packages you can use to get going in no time
with ample support and guides on the internet.

Here are our 3 favorite picks for you to explore:

Shopify
Very easy-to-use, overall excellent
and most popular choice. The
platform is extremely user-friendly,
allowing business owners and
operators with practically no
website building skills to build
modern, customized online stores.

Prices start as low as $29 and go up

as you unlock more features.
There’s also a marketplace for
third-party apps.

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THE COMPLETE GUIDE: HOW TO LAUNCH AND SCALE A DELIVERY BUSINESS PROFITABLY

WooCommerce
WooCommerce is built on top of
Wordpress, so if you’re already
familiar with Wordpress, you might
want to explore this option.

WooCommerce is highly
customizable, you must first possess
a good understanding of WordPress
and you should also be comfortable
tinkering with some code.

It’s free to get started with the basic

theme, but you’ll likely end up
spending money for additional
plugins or customized themes.

Squarespace
Quick and easy setup with great
aesthetics. If you care about good
design and slick branding, you
should definitely check out
Squarespace. It’s great for small
businesses with simple e-commerce
needs, yet has all the things you
need to hit the road running.

There is a 14-day free trial and

prices start at $26/month.

You can read more about these e-commerce platforms in this review: Best 4 e-commerce platforms
for small businesses. You can’t go wrong with any of these choices to get started, but I encourage you
to do your own research as well to find something that suits your personal tastes, as you will be
spending a lot of time on
the platform.

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To get started, I would recommend browsing through the various templates any of these platforms
have available. Pick one you like and reflects your branding well. Then pick a name for your store and
start uploading your products to sell. You can do all of this in just a few days, even if you’ve never
played with e-commerce before.

Scaling Up: Branding

The initial goal is to get a storefront up as quickly as possible. As you’re starting to see some demand
and you’re getting a few cycles of deliveries in, it might be worthwhile to spend a bit more time on
your e-commerce storefront. Your customers will judge a product by its cover, so this is a great
opportunity to leave a good first impression!

Unless you have design chops yourselves, I would highly recommend engaging with a professional
designer to make your storefront look professional and trustworthy. There are many freelance
designers on the market that could elevate your brand and e-commerce look-and-feel with very
minimal effort and decent budgets. A few places to look for them include 99designs, DesignDok,
UpWork, or ManyPixels.

The best way to grow sales is by providing a great holistic experience to your customers, so that they
will tell their friends and family. This is the intent of this guide. But to complement this, it is worth
pointing out that a little bit of marketing can go a long way too. Perhaps you could run some ads on
Google, Facebook or Instagram. Perhaps you could write some articles about your product or the story
behind your business and share it on social media or on a blog. There’s a ton you can do in the realm of
marketing – you could read entire books about it – so we’ll leave it out of the scope of this guide.

Plan: Route Planning

So you’ve launched your e-commerce storefront, did a bit of marketing on social media, and now the
sales start to roll in – congratulations! You just hit a big milestone as you’ve validated that there’s a
market for your product. Now you have a list of orders on your e-commerce platform that you need to
deliver on.

The second step of your Ideal Delivery Model is to come up with an efficient plan for your delivery
routes. The goal is to deliver your product to your customers in an organized and efficient way. The key
to efficient route planning is to sequence orders as best as possible so you can deliver as many goods
as possible in little time. If you have multiple drivers, you’ll also need to decide how to split the load in
the most efficient way.

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THE COMPLETE GUIDE: HOW TO LAUNCH AND SCALE A DELIVERY BUSINESS PROFITABLY

Here’s a little image to illustrate the importance of good route planning:

Poorly planned routes – or worse, not planned at all – can lead to a lot of wasted drive time and fuel,
resulting in extremely thin margins and potentially even a money-losing business. It’s really important to
keep this in mind.3

One entrepreneur in Chicago who pivoted their business to deliver fresh bread to people’s homes told
me that the difference between an unplanned route and an optimized route can be as much as 1 hour!
And he wasn’t even talking about extremely long and complicated routes – his routes only had 5
addresses on them. Yet, he was able to “fix” one of his drivers’ routes by resequencing it himself on
Google Maps, which reduced a 1.5-hour long route to only 30 minutes.

1. Split by zones and let drivers figure it out

If you have experienced drivers who know the streets very well, this could potentially work
at low volumes. For example, if you have 30 orders and 2 drivers, you can split it in half
and give each driver 15 orders for them to figure out themselves. This is not
recommended, but it’s an option to “pass on the problem” for now.

3
This is called route density, which we’ll discuss in more detail in a later section called “The Economics of your Delivery
Business”.

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2. Using Google Maps and eyeballing it

This option is already better as it allows you to centrally control the routes to make things
more efficient. You can upload your addresses onto Google Maps to see all the pins on a
screen, so that you can sort your spreadsheet manually by eyeballing it. You can then print
it out as a manifest for your drivers. Fairly easy and low effort. You can read a step-by-step
of this method in 3 ways to plan a delivery route with Excel.

3. Use google maps to sequence a route and send a link to your driver

You can also use Google Maps to plot the entire route and send a link to your drivers to
follow. The limitation of this option is that you can only build 1 route at a time and up to
10 addresses max. You can read more about how to do this in Google Maps Route
Planner for Deliveries.

Scaling Up: Route Optimization

Note that any of the above options still require quite some manual work on your part. Most businesses
will start to feel rather overwhelmed and bottlenecked with manual route planning pretty quickly.

If you’re going beyond 50 orders/day, using route optimization software is highly recommended. You
might even feel the bottlenecks before you even hit the 50-order mark; you’ll know it when:

You spend more than 1 hour every day planning routes

Your drivers complain about inefficient routes
Your margins are too thin

When you start to feel these pains, it might be time to adopt route optimization software. Here’s a
review of the 8 Best Route Planning Apps for Deliveries.4 Alternatively, you can also look at Capterra’s
“Route Planning Software” listings, which is an independent business software review site from real
users. You can read what other people have to say about each software, so you can create a shortlist
for yourself to try. Do beware that a lot of the top results are “Sponsored” ads, meaning that
companies pay money to appear high on the list (similar to Google Ads). The way to distinguish an ad

4
Disclaimer: yours truly is the Founder & CEO of Routific, and we sell route optimization software as well. I don’t want
to appear biased, which is why the review article does not mention Routific. If you are curious to learn more about our
software, you can visit us at routific.com.

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from a real listing is to look for the color of the button next to a company’s profile, which turns orange
if it’s an ad. Make sure you look for the actual rating and number of reviews instead of the ordering of
the list.

Do your research, try out a couple route optimization software packages, and see which one suits your
tastes and business needs best. My only strong recommendation is that you adopt routing technology
sooner rather than later, as manual route planning can really hurt your business.

Deliver: Drivers and vehicles

The last piece to the puzzle is to actually do the deliveries. Now that you’ve created the perfect route
plan, it needs to be executed. If you’re just starting off with your first delivery runs, I would recommend
that you double as the delivery driver. This way you’ll experience what it’s like, so that when you hire
and train drivers, you’ll know what to teach them.

After you get a few rounds in, and the order volumes are growing beyond your ability to handle
yourself, it would make sense to hire external contractors to help out. There are many places you can
look for delivery drivers, such as your local classifieds or Craigslist, or job sites like Indeed – which also
published a helpful article on “How to hire a delivery driver”.

Just a quick reminder to double check with your insurance provider if you’re using your personal
vehicle, as it typically requires you to be on a commercial-use insurance plan in case something
happens on the job.

Scaling Up: Delivery Experience

From your customers’ perspective, the delivery experience is very important. Your delivery fleet and
drivers are an extension of your brand. In fact, the delivery experience is the only touch point your
customer has with your company – aside from your e-commerce website. So make sure you take the
opportunity to leave a good impression!

In the age of social distancing, contactless delivery has become the new norm. You simply leave the
package in front of the door, knock-knock, and you walk away. If you are delivering perishables, make
sure you wait from a distance to ensure that they’ve received your package. You can also send an SMS
to notify the customer that you’ve left the package. This additional touch adds to a nice customer
experience.

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I recently had a conversation with an entrepreneur who pivoted his business to launch a meat delivery
service. He told me a sad story of a delivery he had made to a customer by leaving it in front of their
door. But the customer didn’t know it was delivered and only discovered it a few hours later, at which
point the meat had gone bad. Needless to say, it was a horrible customer experience.

Such incidents reflect poorly on your brand and are a very simple thing to avoid. To go above and
beyond, you can even send them a heads up that the delivery is on the way and expect to be there in
15 minutes. This way, the recipient can get ready to stand-by and receive the package. If the package
hasn’t been delivered yet, the customer can at least inquire about it. Half of good customer support is
simply transparent over-communication.

Final piece of advice for making contactless deliveries is to quickly snap a photo as you leave it at the
door. You will inevitably experience disputes where the customer tells you that they never received the
package, while your driver swears that they delivered it and left it at the door. A photo as proof of
delivery will simplify these disputes greatly.

Aside from using it in case of disputes, snapping a photo is another opportunity to delight your
customer; you can send the photo to them right after you made the delivery. You’ll notify them of the
delivery and show them where the package is at the same time, while avoiding room for any disputes
in the future. Also, having them receive the package quickly also greatly reduces the risk of it being
stolen.

For further reading on the delivery experience, you can refer “How can I deliver a better delivery
experience than Amazon Prime?”

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The Economics of your Delivery Business

In the previous section we covered the basics of the three elements of a delivery business that make
up the first layer of the Ideal Delivery Model framework, with specific recommendations and tactics to
get going.

In this section, we’ll complete the Ideal Delivery Model by discussing the important considerations and
decisions you’ll need to make to run a profitable delivery business.

You don’t want to end up in a situation where you’re losing money on your deliveries unbeknownst to
you, because if you scale up the number of deliveries, you’ll end up losing more. You’ll need to keep a
close eye on the economics and your margins.

The most important number you need to understand and monitor closely for your delivery business is
your cost-per-delivery: how much does it cost me to fulfil each order?

As a business owner, I assume that you’re already familiar with the concept of calculating gross
margins, but make sure you don’t ignore or underestimate the cost of delivery – which usually is the
largest cost driver after your production costs.

Here’s an example of a leaked document from a former food delivery company Maple:

$29.60

NET REVENUE
$30
LABOR-BOH
LABOR-FOH
$24.49
OTHER HUB EXPENSES
$25
FOOD COST
CITY LEVEL COST
$18.84
$20

$15 $12.15

$13.07
$12.32 $12.45
$11.53 $11.80
$10 $7.53

$5

MAY SEP DEC NOW MATURE

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In their example, you’ll see that the total production + cost-per-delivery in May was $29.60.
Meanwhile, they were only making $11.53 per order, so they were losing quite some money per order!
At the time the article was published, they were just about break-even (see 4th column) and projected
to be profitable in the future. Unfortunately, the business went bankrupt before they reached that
projection.

Keep in mind that this is a bit of a contrived example of a VC-funded startup that was trying to grow at
all cost – literally – hoping that “at scale” the business turns profitable. A lot of VC-funded startups in
the delivery space take this very risky strategy of growth first, profitability later. But as a small business
owner, I urge you to not try this at home.

Instead, I highly encourage you to aim to be a profitable business right upon launching, if not within a
few weeks. It is definitely possible and many businesses have done this. It is especially crucial in this
economy.

Before I share with you the how, it’s important to first understand the concept of route density.

Route Density explained

How many deliveries does your driver make per hour on average? That is your route density in a
nutshell. The higher your density, the lower your cost per delivery. Here’s an image to explain this
concept with some example numbers:

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At the time of writing, the average delivery driver wages are USD $15.65/hour in the U.S. If your
driver only made 1 delivery/hour, that’s how much it would cost you to fulfil each delivery.

For simplicity sake, we can neglect fuel costs because the driver’s time is much more expensive
comparatively.5

A route density that’s less than 3 is considered bad and is hardly sustainable. At 3 deliveries/hour, you
end up paying about $5.20/delivery. Now compare that to a good route density of 6 deliveries/hour, in
which case the cost-per-delivery is only $2.60.

This makes a huge difference, especially as you consider passing on this cost to your customers by
charging a delivery fee. How would you feel if the delivery fees were as high as $10?! Even at $5 it
becomes hard to swallow. But if you can get the cost as low as $2 per delivery, you could even include
it in your price and offer delivery for FREE!

Now the big question is: how can I create high route density?

The first obvious answer is with higher order volumes. UPS/FedEx drivers often have route densities
that are higher than 10, allowing drivers to deliver 100+ packages a day! That’s because they get
thousands of orders a day in a small region. As a small business, it might take you a while to scale to
that kind of volumes.

Luckily, there are a number of other ways to get higher route density:

Delivery area

As you prepare to launch your delivery business, the first

important decision you’ll need to make is your delivery area:
how far are you willing to drive?

The larger your delivery area, the larger your market. But also
the longer your drive times will be. The recommendation is to
start small, perhaps as small as a 3-mile radius, and expand
from there. The advantage of doing it this way is that you’ll get
route density even with lower order volumes. You can always
expand your area later, whereas shrinking it is much harder.

5
Especially the case now, as fuel prices are at an all-time low (at the time of writing in April 2020).

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Delivery days

Another tactic is to offer deliveries only on select days. To start

M T W Th F off, you could offer deliveries only once a week; this way you can
collect orders throughout the week, batch them all up, and
deliver them all together on a single day.

The obvious impact of this is that the customers have to wait

longer for their orders to arrive. As you get a healthy route
density on a single day, you can start to expand it by adding
delivery days.

Another option is to combine the previous tactic together with

this one and only offer a particular delivery area on a particular
day, while delivering to another area on another day.

Route Optimization

One of the biggest levers to create route density that does not impact your business model or your
customer experience, is by using route optimization.

Given a set of 100 orders, route optimization software can easily shave off 20%~40% in mileage and
drive time compared to a manually planned route. Your route density is guaranteed to go up
significantly.

Note that you can use route optimization in combination with any of the other tactics as well.

Delivery dates or time-windows

Allowing your customers to select their own preferred delivery date and time-window makes for an
amazing customer experience. I’m sure you can identify with the UPS experience of “we’ll deliver
between 9am and 6pm today”. This is an opportunity to provide a much better experience by giving
your customers more control.

The downside of this, however, is that the more granular control you give to your customers, the less
room you have for efficient route planning. For example, if a customer selects 9am-10am as their
preferred time-window, meanwhile their neighbor selects 4pm-5pm, you’re going to have some circular

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routes. Instead, you might want to consider offering morning/afternoon options, so you’ll have more
room to plan efficient routes.

It is also common practice to charge a premium delivery fee for this extra service, so you don’t end up
with everyone selecting very tight time-windows without being compensated for it.
As you’re starting off, the more flexibility you have, the easier it will be to create route density, so I
would recommend offering these options only once you’re more established, or if your product requires
timeliness (e.g. hot lunch delivery).

Many new (and even established) delivery businesses simply take orders with a promise of 7-day
delivery. With this approach, you even gain the flexibility to decide what day to deliver to a particular
customer, which allows you to group your customers by proximity, thereby again creating route density.

Summary

The Ideal Delivery Model framework gives you an overview of the important elements operationally –
but also economically – to help you launch a successful and profitable delivery business from scratch.

Start simple, launch quickly, test the market for your product, and scale up from there. As you deliver a
delightful holistic end-to-end delivery experience, starting from your e-commerce website all the way
to their doorstep, you’ll be sure to gain happy and repeat customers who will spread the word for you.

After your first month of running your delivery business, make sure you start to measure your route
density as well as your gross margins. This will inform you what you should charge your customers, as
well as whether you need to work more on your route density through the various tactics presented in
this guide.

These are extraordinary times. The demand for delivery services has exploded overnight. If you’re
considering pivoting your business to add a delivery service, the timing has never been better.
Hopefully this guide will help you on your journey. Best of luck!

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 About the Author

Marc Kuo is a routing expert with nearly a

decade of experience in last-mile logistics. He
wrote his thesis on advanced vehicle routing
algorithms and he is the Founder & CEO of
Routific.

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