How to price delivery rounds: cost per drop, minimum orders and delivery charges

Most small delivery businesses price their products carefully and their deliveries not at all. The van, the fuel and the driver's time get quietly absorbed, until you notice that the customer taking four croissants twice a week across town is costing you money. This guide walks through how to work out what each drop really costs, and how to turn that into prices, minimum orders and delivery charges.

Step 1: Work out your cost per hour on the road

Start with what it costs to have the van and driver out for an hour. List your costs for a typical year:

• Driver time. Wages plus employer costs, or what you'd want to pay yourself if you drive.
• Vehicle fixed costs. Finance or depreciation, insurance, vehicle tax, servicing, MOT, tyres, breakdown cover.
• Running costs. Fuel or charging, which mostly scales with miles rather than hours.
• Other. Phone, parking, tolls, congestion charges where they apply.

Our guide to delivery van costs covers each category in detail. Divide the fixed and driver costs by the hours the van is actually out delivering, and the fuel by miles, and you have two figures: a cost per hour and a cost per mile.

Step 2: Work out your cost per drop

Take a typical day: how long the run takes from leaving base to getting back, how many miles, and how many drops.

Cost per drop = (hours × cost per hour + miles × cost per mile) ÷ drops

Here's a worked example with made-up but realistic-looking numbers. Use your own.

Item	Example figure
Run length (base to base)	4 hours
Cost per hour (driver + van fixed costs)	£22
Miles driven	60
Fuel cost per mile	£0.20
Drops	20
Cost per drop	(4 × £22 + 60 × £0.20) ÷ 20 = £5.00

The delivery cost calculator does this sum for you with your own figures.

That £5 is the average. Drops in the middle of a tight cluster cost much less. The one on the far side of town costs much more. It's worth knowing which is which.

Step 3: Compare cost per drop with margin per drop

For each customer, the question is whether the gross margin on what they buy at each drop (sale price minus the cost of the goods) covers the cost of the drop with something left over.

Continuing the example: if a café's order is £18 and your gross margin is 50%, you make £9 before delivery. After a £5 drop cost you have £4 left. Fine. A café ordering £8 gives £4 of margin and loses you £1 on every drop. Twice a week, every week, that's over £100 a year to supply them.

This is the single most useful calculation in a delivery business. Do it for your smallest few customers.

Step 4: Choose how to cover delivery

There are four common ways to make small drops pay. You can combine them.

Minimum order value

"Minimum order £25 for free delivery." Simple, widely understood, and it nudges customers to order a bit more. Set it so that the margin on the minimum order covers an average drop with a comfortable margin.

Delivery charge

A flat charge per drop, often waived above a threshold. Honest and transparent. Some customers dislike seeing it, so many suppliers phrase it as "free delivery over £X".

Delivery days by area

Instead of charging more, reduce the cost. Deliver to outlying areas on set days only, so those drops sit inside a cluster. This often helps more than any price change.

Distance bands

Free or flat-rate delivery within a radius, a higher charge beyond it. Common for firewood, water and laundry, where customers are spread out.

What to do about an unprofitable customer

When the sums show a customer costs more to deliver to than they bring in, you have more options than dropping them:

• Move their day. If they're on a day when you're nowhere near them, put them on the day you're already in their area. Their drop cost may fall to almost nothing.
• Reduce frequency. Two small deliveries a week can often become one bigger one. They get the same goods; you halve the drops.
• Introduce the minimum order. Tell them about it with notice, and most will round their order up.
• Add a delivery charge for drops below the minimum, so they choose.
• Let them go politely, if none of that works. A customer who costs you money every week isn't helping your business, however loyal they are.

Look at the whole account too. A small café that also refers other customers or orders large extras at Christmas may be worth keeping at a small loss.

Pricing service rounds

For window cleaning and similar service rounds, the job itself is the product, so the logic flips: you want a price per visit that hits your target per hour, including travel between jobs. Estimate how many cleans you complete in a working day, multiply by the average price, and divide by hours worked. If that's below your target hourly rate, you need higher prices, denser streets, or both.

The round pricing calculator shows what a round earns per day, per month and per year from your prices and cycles.

Price rises

Costs rise every year, so prices have to as well. Some practical points:

• Review prices at least once a year. Small regular rises are easier for customers than one large catch-up.
• Give notice in writing with a clear date, typically a few weeks ahead.
• Explain briefly if you like, but don't over-apologise. Every supplier's costs are going up.
• Start with your lowest-margin customers. If one leaves over a fair rise, you may be better off.

Don't forget payment costs

Card payments and Direct Debit both carry processing fees, and late payers carry the hidden cost of your time and cash flow. Build typical payment costs into your prices, and read getting paid on time for how to reduce chasing.

Summary

1. Work out cost per hour and cost per mile.
2. Turn a typical day into a cost per drop.
3. Compare it with the margin each customer brings per drop.
4. Use minimum orders, delivery charges, area days or distance bands to make small drops pay.
5. Review yearly and raise prices with notice.

If you track drops and runs in RoundSorted, you already have the drop counts per day that this calculation needs. See pricing, or start with the free calculators.