How to set up a courier business

If you’re considering starting your own courier business, it’s important to do your research first. Here’s our handy guide on how to set up a courier business and increase your chances of success.

Why start a courier business?

The COVID-19 pandemic and associated lockdowns have helped to contribute to a rise in demand for courier services as increasing numbers of people shop online and expect items to be delivered to their door. 

On top of this, more people are choosing to buy and sell second-hand items on sites such as eBay and Vinted, which means more couriers are needed to deliver the goods.

However, the courier industry is also very competitive and you’ll be competing against the likes of D2D Couriers and MDS Collivery, along with the larger international firms such as TNT, DHL and Evri (formerly Hermes). 

This means that if you’re thinking about launching your own courier company, you’ll need to carry out some research in your area beforehand to establish how you’re going to position yourself and stand out from the rest of the competition. 

Key steps to set up a courier company:

Market research

Your very first step is to carry out some thorough market research. You need to find out whether there is enough demand for another courier service in your area and how much competition there is. 

Look at other courier businesses to work out:

• How much they charge and the type of services they offer
• Whether they focus on local, national or international deliveries
• Whether they operate a fleet of vehicles. 

Then consider how you will stand out from the crowd. For instance, it might be that no courier in your area offers a 24-hour service and your business could fill that gap. Or perhaps you want to focus on offering a flexible and high-standard service to your customers who might want valuable items or important documents delivered promptly. As an independent company, you can focus on offering a personalised service with high-quality deliveries.

It’s also worth asking people in your area what they would like from a new courier service so that you can tailor it to their requirements. You could even ask how much they would be willing to pay for such a service. 

Vehicles

There are a number of factors you’ll need to consider when choosing the most appropriate vehicle for your business. For a start, you’ll need to look for a vehicle that’s comfortable to travel in and one that’s reliable as you could be covering vast distances. 

You will also need to consider the size of the vehicle. This is likely to depend on what you plan to deliver. You might want a fleet of vehicles or, if your primary concern is the environment, you could even consider a bicycle for short-distance drop-offs or an electric vehicle. 

Bear in mind that if you plan to hire employees, they might be able to use their own vehicles but you’ll need to talk with your insurance company first. 

Capital/funding

A major consideration when setting up your own business is how you will fund it. If you don’t have enough cash saved up yourself, you could ask family and friends whether they would be happy to invest in your business. This can be cheaper than taking out a traditional loan, but it can also put a strain on your relationship if things go wrong.

Another option to explore is a startup loan. This type of loan is specifically designed to help new businesses launch and expand. You’ll be given a lump sum of capital that you then repay in monthly instalments at a fixed rate of interest. To be eligible you must be at least 18 years old and live in South Africa, and your business must have been trading for no more than 36 months. You must also be able to prove that you were unable to obtain a loan from alternative sources and that you can afford the loan repayments. 

Alternatively, if you need funding to help you acquire vehicles (or equipment) for your business, you could consider asset finance. Within this, there are three options to consider – hire purchase, leasing and contract hire. 

Hire purchase requires you to pay an initial deposit for the vehicle and the remaining cost is then divided into monthly instalments, with interest added. Once the last payment is made, you’ll own the vehicle outright.

Leasing, on the other hand, requires you to rent the vehicle from a finance provider and then pay a regular fixed fee over a set term, with interest added. At the end of the term, you might be able to pay a lump sum to buy the vehicle or you can continue to lease it or cancel the agreement. 

Finally, there’s also contract hire which is often used for new or nearly new vehicles. You set up a contract with a finance company and it will buy the vehicle you need and hire it to you over a set period. The company then takes back the vehicle at the end of the contract so you can acquire another new one with a fresh contract. 

Equipment

It’s important to choose your equipment carefully. Exactly what you need will depend on what you are going to be delivering and how you’ll be delivering it. 

For example, if you’ll need to handle fragile goods, items that need to be kept within a certain temperature and perishable goods, you will need specialist equipment such as refrigeration units and gloves. Or if you plan to carry out deliveries on a bike or motorbike, you will need clothing that can cope with weather extremes and potential accidents, as well as hi-vis items. You might also need backpacks.

Logistics

Another point to consider is the type of software and hardware package you’ll require. As part of this, you’ll need to think about:

• Online product management to keep invoices and accounts up-to-date.
• Warehouse management systems to record and track packages in and out of buildings – you could offer customers a live tracking link so they can follow the progress of their package.
• Smartphone apps to help drivers find the best route from A to B.
• SMS messages to let customers know when their package is on its way and when it’s been delivered. You could also include a feature to enable customers to change their delivery date or add a “safe place”.

Insurance

Many insurance firms will offer dedicated courier insurance that will cover you to safely deliver goods to multiple drop-offs and on behalf of clients. However, policies won’t come cheap as courier drivers are considered a higher risk. After all, you’ll be making several stops, facing tight deadlines and potentially driving on unfamiliar roads for long periods of time.

Other insurance policies to consider include:

• Goods-in-transit insurance: This will protect the items you’re delivering against damage and theft (it might be included in your courier insurance policy).
• Breakdown insurance: This will help you get back on the road in the event your vehicle breaks down mid-journey. 
• Fleet insurance: This is a specialist insurance policy for businesses with two or more vehicles in the company. It can work out cheaper than individual insurance and you can usually insure different makes and models under the one policy.  
• Public liability insurance: This will cover you if you’re taken to court because your business activities have caused damage to someone’s property or resulted in injury. It can cover your legal costs and any compensation you might have to pay.
• Employer’s liability insurance: If you hire staff, this will cover you for compensation claims if an employee becomes ill or is injured because of the work they do for you.

Employees

If you want to hire employees to join your courier business, they will need a clean driving licence. Hiring people with good communication and organisational skills will also be a bonus for your business. Many drivers are self-employed which means they are often contractors rather than full-time employees. They should also be happy to work evenings and weekends and be comfortable driving long distances.