Starting a Delivery-Based Business? Don't Forget to Plan for a Fleet

by FleetCardsUSA

April 18, 2020

Starting a small business involves myriad decisions and investments — and when your business model is based on the fast delivery of products to local customers, one of those decisions will undoubtedly be related to transportation. When delivery is a value-added service, you may be able to get by with one or two vehicles. But if delivery is a core component of your offering, you’ll need to create a fleet of vehicles. When that happens, determining how many vehicles to buy and manage — along with how best to pay for and track expenses like fuel and repairs — will be crucial to keeping your delivery operation running smoothly.

This subject has been top-of-mind for many entrepreneurs in recent months. Last summer, online retailer Amazon announced that it’s prepared to hire hundreds of independent delivery businesses to help it get more packages to consumers. According to The Washington Post, Amazon shipped more than five billion packages through its Prime program last year alone. This means many enterprising individuals are already exploring the logistics of setting up a fleet of vehicles.

With COVID-19 shaping both our business and private lives, delivery services have become more important than ever before. With the challenges at hand come opportunities for those wanting to meet critical needs while taking advantage of the chance to exercise their entrepreneurial skills.

When your business goal is to have your own fleet

This trend isn’t limited to crisis response or to those who hope to work with Amazon; creating a fleet is something many small businesses strive for. Such was the case for Fred Jimison, founder and owner of delivery company Rushmestuff, who had been considering forming a fleet of his own for quite some time.

Jimison’s company, which delivers everything from fast food to groceries and drug store medication to customers in Schenectady, NY, couldn’t exist without dependable vehicles and drivers. When he established  Rushmestuff in 2017, Jimison initially relied on self-employed contractors with their own vehicles. Once business began picking up, he decided to acquire a fleet.

“There’s a high demand for delivery services right now, because it simply buys back people’s time,” Jimison says. “[A fleet of vehicles]allows for great mobile advertising, GPS tracking for more precise deliveries, and a brand presence.”

There are other benefits to planning for a fleet as well. With a fleet of delivery cars, Jimison won’t have to limit new hires to workers who own their own vehicles; rather, he’ll be able to focus on building a friendly and dependable staff. Owning a fleet also prevents wear and tear on employees’ personal cars.

For all of its advantages, establishing a fleet does have its hurdles. Chief among them is the complexity of managing expenses like fuel and repairs on top of existing administrative tasks. “It’s challenging keeping up with the administrative side at this point, because we’re a local small business that’s still growing where my role is owner and operator,” Jimison says. To date, he has been managing all of Rushmestuff’s business expenses himself.

Managing fleet-related expenses

When the time comes to launch a fleet, most businesses find themselves facing a whole new set of obstacles. Small business owners with fleets must be prepared to invest in the maintenance of their vehicles, pay for unexpected repairs, and record fuel consumption. As soon as they purchase fleets of their own, they go from being staff and business operations managers to fleet managers in one fell swoop.

To ease the transition, they should start by familiarizing themselves with the main costs associated with running a fleet, namely:

  • New vehicle purchases or leases
  • Vehicle depreciation
  • Business fleet insurance
  • Fuel
  • Maintenance (both regular maintenance and emergency repairs)

Researching small business trends and staying abreast of industry surveys via resources like Business Fleet and Automotive Fleet will help you get a sense of the additional expenses you might encounter. Those include fleet management systems (FMS) that track driving hours, work breaks and fuel management.

Deciding how to pay for vehicle operating expenses is another important decision. Equipping drivers with fleet cards can help eliminate costly and time-consuming payment methods, simplify accounting and tax documentation, and prevent fraud. A good fleet card program not only includes detailed tracking and reporting; it also provides real-time fraud alerts and the ability for the owner to set spending controls and turn card access on and off immediately.

Monitoring your drivers

Another issue to consider when launching a fleet for your business is how you plan to monitor your drivers. Speeding and idling, among other bad behaviors, can negatively influence the condition of your vehicles, your fuel costs, and even the reputation of your brand.

One of the most effective ways to supervise your delivery employees is by keeping a close watch on their fuel expenses. Providing your drivers with fuel cards, for example, makes it easy to see who’s filling up most often. This may indicate that they’re engaging in bad driving habits. As the Chicago Tribune reports, a large sedan with a 4.6-liter engine can consume more than a quart of fuel per hour while idling. Multiply that by numerous hours and vehicles, and idling can really add up.

Many businesses also rely on fleet management software to track driver behavior and measure its impact on their bottom line. A recent study conducted by Verizon Connect found companies that reviewed reports related to harsh driving, speeding, and idling by their drivers were able to improve this erratic and costly behavior within the first month. Harsh driving was reduced by 12 percent, speeding by 71 percent, and idling by 29 percent. Additional improvements occurred during the second month of looking over driver behavior and operational efficiency reports.

An effectively managed fleet, complete with invaluable tools like a fuel payment solution, can help small and medium businesses fulfill their promise of bringing products, as Jimison puts it, “from store to door.”

Talk with on of our specialists and get started on building and running an efficient fleet.

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