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. The average delivery cost globally is $6.4 per cubic meter.
Delivery prices play a critical role in the final decision of a product transaction. Today, customers are looking for free deliveries, or some may prefer to pay a premium for speedy deliveries.
But while running a business, you understand there’s nothing free, and every business operation has a cost you need to adjust to.
You need to finalize the cost of your delivery operations to understand your expenses better and charge the customers accordingly.
The best way is to calculate the cost per mile to track the miles for completing the delivery operations, streamline your profits, and deliver operational costs accordingly.
There are multiple ways to calculate the delivery charge. So, let’s understand how much to charge per mile for delivery?
Table of Content
- How Much Should You Charge Per Mile For Delivery?
- Why is Calculating The Charge Per Mile For Your Delivery Business Important?
- How To Calculate The Charge Per Mile For Delivery Business?
- Why Do You Need a Delivery Route Planner For Optimized Delivery Operations?
- Upper Route Planner Got You Covered
How Much Should You Charge Per Mile For Delivery?
You can charge different pricing based on the niche, industry, and type of deliveries you make. It can also depend on whether you are working with a contractor or handling your own delivery operations. We have categorized different delivery charges based on the type of delivery business.
Have a look.
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|
|Lorry or large truck||$2.20|
These delivery fees may vary based on the location, fuel pricing, and other important factors but you can consider them as 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 vehicle type 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?
1. Better decision-making
You can improve your decision-making by knowing how much your per-mile delivery operations can cost. It can help you set up better pricing brackets and ensure that you don’t make losses with your delivery operation.
2. 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
Delivery businesses can be hard to make great profits from 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 The Charge Per Mile For Delivery Business?
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
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 others use per mile
- The additional fees
- The delivery area size
- List of competitors in the areas you deliver.
Market research includes analyzing the industry players, customers, and how the industry is working. You need to cater to the data and ensure that you utilize the data for better analysis and results for your delivery business.
Understanding the industry-standard price for a charge per mile can help you set your pricing effectively.
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 things that run your delivery business. You need to break the expenses and calculate the overhead cost.
Here’s what to include:
- The cost of gas
- Maintenance cost of vehicles
- Labor cost
- Administrative and insurance cost
- Rent, utilities, and supplies for the office
Once you have listed these expenses, you can estimate the total monthly cost that can 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 from your customer to create an additional flow of income to 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
There are two primary pricing metrics used in the delivery business. One is based on the hourly rate, and the other is by the mile.
We have selected the charge per mile, so we’ll not discuss other options. A typical pricing metric for delivery businesses works exceptionally well if you cover 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 the miles it should last by its worth. You need to add a small profit margin to the result, and you have your delivery cost.
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 to cover the city area, help your delivery business scale, and increase 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 additional factors that can impact your delivery operations and add to your cost per mile rates.
Factors like delivery weight or size, rush hour or after-hours delivery, and assembly or waiting fees can be important elements that must be considered while finalizing the delivery cost.
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 the 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 that you increase 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 lessen 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 the drivers and update your customers, which will improve your customers’ trust and loyalty to your brand. And build solid relationships in the long run.
A route planning software 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 requirement and fits your budget.
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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, add a small profit margin 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 costing, and other important values. You can also charge extra by considering the after-hours orders, bulky packages, longer deliveries, overweight fee, and waiting charge to ensure a competitive rate.
Being a small business, you need to calculate the delivery cost to understand better the operational costs that can help you plan a profitable strategy in 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 available in the business, but if you want to get your hands on the best, Upper Route Planner is the tool you are looking for. It can offer 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.
Upper Route Planner Got You Covered
Upper Route Planner is a professional route planning and optimization software that can help you streamline your delivery operations and ensure that you can achieve your desired business outcomes with finesse.
You can create optimized delivery routes for multiple delivery locations that solve the major complexities of your delivery business.
The software has a smooth UI/UX that makes it easier for delivery drivers to adapt to the change. Using the software, you can save up to 95% of the time and easily handle up to 500 delivery addresses.
You can digitize most of the management operations, and it can help you save operational costs and provide competitive pricing in the industry.
You can extract well-vetted performance reports for the optimization of your business. Access a free 7-day trial period and transform your delivery business.