Any business owner can tell you that it’s nearly impossible to run a business without some sort of cost. Most wannabe entrepreneurs dive into their ventures with zeal – excited about seeing their business ideas come to fruition.
They are quickly set back however. Staff costs, utility bills, office space and computing are just some of the most common overheads that any business will face.
Then, there are industry-specific costs to worry about. In the logistics industry for example, businesses have to pay close attention to transportation costs, oil prices, taxes and levies etc. Non-monetary costs also come into play – demurrage, delays etc. must also be taken into account.
In this article we’ll examine just some of the most common expenses you might encounter if you’re running a logistics business.
Capital expenditure – vehicles, warehouse etc.
Of all the logistics specific costs, arguably the biggest expense is transportation expenses. If you own your own fleet of vehicles, the initial outlay can be high.
Of course, the option to lease is always available to you – in fact, I’d always recommend that you lease rather than own. This will allow you to retain the flexibility of *touch wood* terminating your business in the even things go south. Even if your business doesn’t shut down, having the freedom to quickly terminate your leases/rentals will allow you to right size your business and pivot quickly. All this will allow you to adapt to a changing business landscape quickly.
For long haul deliveries, vans or even haulage trucks are needed. Even used models can be expensive – in the US market, the average used truck price for April 2017 was $37,451 (£29,335). The cost of buying vehicles is high, as is insurance and fuel – for a whole fleet, you will need to set several thousand aside.
Petrol and diesel costs tend to fluctuate on a daily basis, given its high price elasticity. It’s almost impossible to predict the events that may lead to supply cuts or surplus – that’s why hedging fuel costs with oil futures or forwards are key.
Right now, petrol costs £1.16 per litre and diesel is £1.17 per litre. For a 50-litre tank that needs to be filled every few days, that eats into a courier company’s budget. Choosing a vehicle with higher than standard fuel economy will slice a few pounds from your final bills.
It’s imperative for a company to adopt the latest industry-specific technologies to remain competitive.
Staying with transport, on-board technology is a must for couriers. A SatNav system for each vehicle is needed, so that drivers can find the delivery point without getting lost. These can be bought for under £100 per system when purchased in bulk, but are worth every penny.
Elsewhere on the technological front, order processing software is needed to track every single delivery. Companies like Myparceldelivery use it for mapping addresses and delivery routes, as well as for notifying customers about when their package(s) are due to arrive at their doorsteps.
Aside from vehicles, fuel and tech, there’s all the legal stuff that couriers need to pay for. Keeping vehicles road legal is one. There are licences for each vehicle, annual MOTs and road taxes to pay for. Smaller vans weighing up to 3,500kg can be driven by anyone with a standard driving licence, but special ones are needed for bigger vans and trucks.
Insurance is a necessary cost. While business can run without being insured, accidents etc. should be considered inevitable. Taking up insurance will remove the guesswork of trying to figure out when an accident might happen, and how much it will cost you.
For a transport/courier company, the you’ll need to ensure your money makers – the delivery vehicles. Being bigger than cars, vans cost a little more to insure. However, by spending a few minutes on a price comparison website, it is possible to get them covered for not much more than your average hatchback!
Finally, there’s the cost of hiring employees. By law, every company must pay the minimum wage, as well as additional costs such as National Insurance. Be sure that you’re paying the right amount; hire an employment lawyer if you aren’t completely sure what to pay.
Costs are inevitable in any business venture. Being aware of the costs will allow you to run your business with both eyes open – that means no nasty surprises. And that means a more robust, resilient business.