Guide to Starting a Business - Independent Delivery Contractor

Description of Job

• Deliver packages, supplies, small appliances, and other items on demand for local retailers.
• Pick up and deliver packages and boxes as an independent representative of a national or regional carrier.
• Rent, lease, or purchase an appropriate vehicle.

The Need

It does not always make economic sense for retail outlets to buy or lease trucks and pay drivers for occasional deliveries.

Major national shipping companies, including FedEx, often hire independent delivery contractors for their on-demand pickup and ground delivery services.

When a company makes a deal with an independent contractor, it typically does not have to pay federal payroll taxes, Social Security taxes, federal unemployment insurance tax, state unemployment insurance premiums, and workers’ compensation insurance premiums. It also is excused from most employee benefits, such as health insurance, vacation time, sick leave, retirement benefits, and life or disability insurance. In addition, the contractor has to provide the truck, the office, and a telephone.

Furthermore, the company can hire a contractor for a short period of time or for a special project without worrying about capital expenditures.

Challenges

You will bear the expense of purchasing or leasing a van or truck, plus the cost of licensing and insurance. This business will succeed only if you can bring in a steady stream of jobs at prices that cover your expenses and time.

Work may be seasonal, with spikes of business around holiday periods. In tourist or vacation areas, companies may need extra help in the summer or winter seasons.

By signing up as a contractor for a national shipping company, your job flow may be more regular, but such companies are very strict about driving records, court records, and insurance requirements.

Consult an attorney before setting up a trucking company with scheduled deliveries that cross state lines. Although the Interstate Commerce Commission no longer has a stranglehold on trucking, there are still many state and federal agencies, including the U.S. Department of Transportation, that will take an interest in your operations.

Know the Territory

Spend time with an accountant or consultant to go over your business plan to ensure that you can be economically successful as an independent contractor. The margin for error is slim.

Study the contracts offered by major carriers and make sure they will work for your situation. For example, FedEx’s published rules for independent contractors dictate that drivers can have no more than three moving violations within the previous three years and no more than one in the previous 12 months. Drivers must have a commercial driver’s license with a hazardous materials endorsement and must pass a U.S. Department of Transportation–defined physical exam and drug test.

How to Get Started

Contact area office supply stores, appliance stores, and other merchants and offer your services for on-demand deliveries.

Check with major national carriers about availability of independent contractor deals in your area.

Up-front Expenses

You’ll need a van or truck large enough to meet the needs of your clients, but not so large that its purchase or lease and the cost of operation would eat up all of your profits.

You will also be required to have a commercial driver’s license and tags, plus adequate collision and liability insurance coverage.

How Much to Charge

Contracts with major carriers usually pay by the mile, plus a stipend to cover some of the costs of the vehicle itself.

Deals with smaller local retailers may be priced by the hour or the mile, with extra payments for overweight items, night or weekend deliveries, and inside deliveries (versus those left outside the door).

Legal and Insurance Issues

Special notes: An insurance agent can offer counsel about commercial vehicle insurance and liability coverage.