How Much to Charge Per Mile For Delivery Business in 2024

keyKey Takeaways:
  • Cost per mile is the total operational costs associated with each delivery you make.
  • Calculating how much to charge for delivery in your delivery business is integral to balancing your customers’ expectations for competitive prices without impacting your bottom line and profitability.

Do you know that 70% of customers prefer the cheapest form of home delivery, and only 23% of those people would pay a premium price for quick same-day delivery?

As evident, customers today are increasingly looking for free deliveries; it may be challenging to balance their expectations with your profit targets. If you charge too high, you may not get much business. On the other hand, undercharging your deliveries may leave you with little profits.

So, how do you find the middle ground?

By calculating how much to charge per mile for your delivery business.

This blog is also for you if you are looking for different ways to determine how much to charge per mile for delivery. 

It walks you through how to calculate delivery fees accurately and efficiently to retain customers while staying profitable.

How Much Should You Charge Per Mile For Delivery?

You can charge different pricing based on your:

  • Niche
  • Industry
  • Delivery business models and types, including parcel services, courier, express shipping, or freight

Below is a categorization of different delivery charges based on your delivery business type.

1. Subcontracting with a company

If you are delivering for another business or contractor, your delivery pricing per mile can vary based on delivery requirements.

Vehicle Cost per mile
Small van or car $0.52
Medium truck or van $0.68
Medium wheelbase $0.84
Long wheelbase $0.94
Extra-long wheelbase $1.15
Luton van $1.30
Lorry or large truck $2.20

These delivery fees may vary based on the location, fuel costs, and other important factors. However, you can consider them the minimum delivery fee you should charge if you are subcontracting for someone.

2. Subcontracting yourself

If you are handling a small delivery operation, you should charge between $0.8 to $1.2 per mile to cover the truck expenses and an additional $0.5 as your profits.

You can also estimate delivery jobs based on the type of delivery vehicles you want to use and your profits. However, ensure that you choose a cost-effective delivery method to complete your jobs that can result in a higher cost per mile charge profits.

3. Working as a multi-stop delivery

We would recommend you avoid per-mile courier charges because of the multi-stop delivery points. 

You can charge according to the stop. For example, if you decide to charge $1 per stop and cover 200 to 250 stops per day across your delivery ecosystem, you can make $200 to $250 daily.

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Why is Calculating The Charge Per Mile For Your Delivery Business Important?

Calculating cost per mile for your delivery business is essential. It helps you establish competitive market rates and prices that set a fine balance between your profit margins and your customers’ expectations for nominal charges.

Below are the benefits of determining how much to charge for delivery per mile.

1. Better decision-making

Knowing how much your per-mile delivery operations can cost can improve your decision-making. It can also help you set up better pricing brackets and ensure that your delivery operation doesn’t lose money.

2. Improved product costing

Improved product costing

Once you get a cost-per-mile result for your delivery operations, you can select the right pricing that can help you avoid business losses and become a sustainable delivery business in the long run.

3. Scale your profits

Scale your profits

Delivery businesses can find it hard to make great profits because of the multiple ups and downs faced in the delivery operations, but if you have better planning and prediction about the pricing, you can pave the way for more profits.

How to Calculate Delivery Business Charge per Mile?

The charge per mile estimate is an important task to set up a solid foundation for your delivery business. Here’s what you can do.

1. Research your market

Research your market

You need to determine the scope of average market value in your delivery area. Once you get the average charge per mile for your delivery business, it will become easier to change the value based on your delivery industry, service, and other factors.

You can also discover what services other delivery providers offer your target audience and at what price. Market research can help understand:

  • What pricing metric do others use per mile
  • The additional fees
  • The delivery area size
  • List of competitors in the areas you deliver.

Market research includes analyzing:

  • Industry players,
  • Customers, and 
  • How the industry is working

You need to adapt to the data and ensure that you utilize it for better analysis and results for your delivery business.

2. Calculate overhead cost

Once you are done with the market research and have the data in place, you must estimate how much you can charge competitively.

You need to forecast the overhead costs and pinpoint the pricing metrics. To calculate the overhead cost, you must include the expenses that run your delivery business.

Here’s what to include:

Here’s what to include:

  • The cost of gas
  • Vehicle maintenance costs
  • Labor costs and employee salaries
  • Administrative and insurance cost
  • Rent and expenses for the office space, utilities, and supplies

Once you have listed these expenses, you can estimate the total monthly cost, which can help you predict the number of deliveries you want to make to drive profits for your business. 

You can also add the delivery cost to your product pricing, which can help you manage your overall operational cost. 

You can also provide special delivery services and charge a premium to your customers to create an additional flow of income and scale your business to new heights.

Remain competitive and make reasonable profits by adjusting the overhead cost in your product delivery service.

3. Decide the metrics

Two primary pricing metrics are used in the delivery business: hourly rates and mile rates.

We have selected the charge per mile, so we’ll not discuss other options. This pricing metric works exceptionally well for delivery businesses with a large service area.

With the increase in maintenance and gas costs, pricing metrics by the mile can help you cover these expenses and add a profit margin to your delivery business.

You need to estimate the vehicle’s total value and divide its expected mileage by its worth. Then, you add a small profit margin to the result, and you have your delivery charges.

It might be confusing, but let’s understand it using an example. Say you have a car that’s worth around $44,000.

If it lasts around 150,000 miles, you can charge around $3.40 per mile.

So, if you want to deliver a 10-mile delivery, the delivery cost will be a minimum of $34. 

It’s a great strategy for covering the city area, helping your delivery business scale, and increasing profits. 

Once you have calculated the delivery, you can adjust the price in your product listing or directly ask the customer for the delivery charges to avoid increasing operational costs.

Apart from the different costs we have considered, there are multiple additional factors that you need to consider while handling your delivery business.

4. Adjust for additional factors

Once your base delivery cost is set, you can look for variable expenses that can impact your delivery operations and add to your delivery rate.

These variable expenses include: 

  • Delivery weight or size 
  • Rush hour  
  • After-hours delivery
  • Assembly or waiting fees 

can be important elements that must be considered while finalizing the delivery charges.

These factors also depend on the industry you operate in. A furniture-based delivery business will have different restrictions on sizing compared to a food delivery business.

If a client has an increased number of deliverables, you need to charge them accordingly because they take up space for other clients. You need to decide the limit of your delivery service and standardize the “large package” fee for better delivery cost calculation.

You also need to adjust the delivery cost based on the speed of the delivery. If the client has special requests, you can ensure that you deliver a quality customer experience after they are willing to pay the price for the special delivery service.

All these factors are important for deciding the charge per mile for your delivery business to minimize operational costs and maximize profits. But apart from the pricing factor, a delivery route planner can also help you streamline your delivery operations and ensure an increase in your profits and revenue.

Why Do You Need a Delivery Route Planner For Optimized Delivery Operations?

A delivery route planner is professional software that can help you reduce manual delivery business management and integrate automation into your courier service business.

It can help you adapt to cost-effective delivery methods and minimize time and effort, ensuring smooth multi-route deliveries.

A route planner can automate the scheduling process and assign the delivery tasks to different delivery drivers within a few clicks. The scheduled path is highly optimized and short based on real-time traffic and weather updates. 

You can create an effective communication channel between your on-ground team and the management staff to manage your delivery operations effectively. You can get centralized control over the business workflow and ensure that there are no issues during the execution.

You can track the real-time delivery locations of delivery truck drivers and notify your customers of estimated times of arrival, which will improve their trust and loyalty to your brand. And build solid relationships in the long run.

A route planning software can set a solid platform for your business to scale and handle the complexities of large delivery operations. You can simplify the process irrespective of the industry you serve.

Multiple route planning and optimization software are available in the industry; you need to choose one that can handle your business needs and fits your budget.

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FAQ

The delivery cost per mile is calculated by estimating the vehicle’s total expense and dividing the miles it should last by its worth. Also, a small profit margin should be added to the result to get the delivery cost per mile. You can calculate the courier delivery expense by adding the average number of deliveries, different costs, and other important values. You can also charge extra by considering the after-hours orders, heavy or bulky packages, longer deliveries, overweight fees, and waiting charges to ensure a competitive rate.

As a small business, you need to calculate the delivery cost to better understand the operational costs that can help you plan a profitable strategy for your delivery business. You can update the product’s pricing based on the delivery cost or use a different pricing guide to build a strong and sustainable delivery business.

Yes, it is profitable because of the rising demand in the online industry and the transition of consumers towards online shopping. The global pandemic also assisted the growth of courier services, and the industry requires quality delivery operations. You can price a reasonable courier charge that can help you stand out from most couriers and enable you to earn a good profit.

A field service management software can help you automate the redundant process and remove errors to optimize the delivery process. It can help you control the business workflow and set a solid foundation to handle operations at a large scale. You can simplify the complexities of the business and create a productive and efficient work environment.

You can choose from multiple software options available in the business, but if you want the best, Upper Route Planner is the tool you are looking for. It offers a wide range of features at a highly affordable price to help you stand out from your competitors and strengthen your brand presence in the industry.

Cost Per Mile: Your Key to Competitive Pricing Strategy

Cost per mile is a crucial financial metric that gives you a better understanding of transport costs associated with each mile your drivers travel to make deliveries. It helps you balance your customer expectations for competitive rates and your targets of profit margins to create a win-win situation for both you and your customers. So, it is high time you priced your delivery services right to attract more customers and ensure high revenue and profits.

Author Bio
Rakesh Patel
Rakesh Patel

Rakesh Patel, author of two defining books on reverse geotagging, is a trusted authority in routing and logistics. His innovative solutions at Upper Route Planner have simplified logistics for businesses across the board. A thought leader in the field, Rakesh's insights are shaping the future of modern-day logistics, making him your go-to expert for all things route optimization. Read more.