You constantly have to make decisions on the fly as an independent contractor doing deliveries for Uber Eats, Grubhub, Postmates, Doordash, and other similar platforms. How do you know whether a delivery is worth it? How do you decide what part of town to work? How do you get a feel for how your day is going?
As an indpendent contractor, you are a business owner. One of the keys to being consistently successful is making good business decisions. I said in this post that the most important strategy for delivery gig success is to BE THE BOSS. Being the boss means taking control of your destiny. You don’t have to rely on the luck of the draw when driving nearly as much as you think. You can make decisions all through the day by making business decisions around your earnings goals.
There are a lot of factors you have to weigh in a lot of these decisions. We’ll do our best to cover those factors over time with new posts (this post will probably already be too long, so I’m trying not to make it even longer). But there is one simple rule that I use a lot in my decision making process:
The 40 Cent Rule
Time is money. You may have said the same thing before. If you frequent the social media forums for delivery drivers, you’ll see people say that all the time. But do they know what exactly that means? Do they use that sentiment to guide them in their work, or is it just something to use when complaining about wait time at a restaurant?
For most people who absently mutter that phrase, the question then becomes: If time is money, what’s it worth?
I found that once I determined a value for my time, based on my goals, I was much more consistent in meeting those goals. I also found it was easier to make decisions around how to handle certain situations. When I first came up with the rule, I was calling it the 25 cent rule. It’s eventually grown to be the 40 cent rule. You may come up with a 25 cent rule, you may come up with a 50 cent rule.
What is the rule? It’s pretty simple – it goes like this:
The 40 Cent Rule: My time while on deliveries is worth 40 cents per minute.
Using this rule can help you get on track with your earnings goals. It can help you avoid wasting time. It can help you know when it makes sense to spend extra time. The 40 Cent Rule puts a hard value on your time and helps you use that to determine whether a decision is helping you meet your goals or prohibiting you from doing so.
I know that for me, once I started using the rule, it made a big difference in keeping my earnings steady even in slower times.
How did I come up with 40 cents? Why not 35, or 50?
To understand this, we need to start with understanding that the best way to measure how we are doing isn’t a daily total, but it’s an hourly rate. Not hourly totals, but hourly rate. How much did you make for each hour you were working? Hourly rate means you’re taking that amount and applying it based on both full hours and fractional hours. It even breaks down to minutes.
A lot of people measure based on how much they made in a week or in a day. But if you leave it at that, you could be working 80 hours to meet a goal, or only 40 hours. You can’t gauge your progress as well and know when you need to make adjustments.
For me, the last few months, I’ve averaged around $24 per hour. So for now, that’s my measuring point. $24 per hour comes out to 40 cents per minute.
What that means is, if I’m making $24 per hour, I’m making 40 cents a minute. If I’m making 40 cents a minute, then if something slows me down, it’s costing me 40 cents a minute by doing so.
Create your own version of the 40 cent rule
You can do what I did, and go by what your current averages are. You might feel like you’re in a good spot so you decide to use that as your measure. If you average $800 a week in 40 hours, then you’re taking the 800 divided by 40, coming up with $20 per hour. $20 per hour adds up to 33 cents a minute, and you can go with the 33 cent rule.
The other option is you can do it based on a goal. You want to earn $800 and you want to work 50 hours a week. 800 divided by 50 is 160, which comes out to around 27 cents a rule. Now you might round up or down to make it easier to make calculations. I would suggest you round up to a higher number, it gives you something to shoot for, and also because usually when we set earnings goals we too often don’t provide enough for our vehicles or taxes.
Using the 40 cent rule to make decisions on the fly
Now that you decided what your time is worth, you can use that to make decisions.
You get an order. Do you take it or not? Do a quick estimate of how long you think it will take to complete this order. After you do this awhile you get a good feel for how long you might have to wait, and how long it will take to get places. You have to drive a bit further on this particular order so you figure it might be a half hour. So you take your 40 cent rule – 30 minutes times 40 cents is $12. If that order is $10, you might determine that’s close enough, it’s worth it. But if you expect the payout to be only $4, that means there’s a lot of making up to do if you take that order. It might be better to wait for the next order.
You have two possible routes to get to a customer. One is a straight route that takes 15 minutes. Or you can jump on a freeway and drive 2 miles longer but get there in 8 minutes. Is it better to go the shorter route and save money on gas, or the longer route and get there sooner? That 7 minutes you save is worth $2.80 (7 x 40) and if you calculate based on standard mileage rate of 58 cents a mile, that extra 2 miles is costing you $1.16. I’m taking the freeway every time.
I used the 40 second rule to decide to go ahead and buy a new delivery bag. It has a velcro seal, firm sides, is large enough for a small pizza. I figure that on average it saves me about 10-15 seconds per delivery. 10 seconds is 1/6 of a minute, 1/6 of 40 is about 6 cents. 6 cents isn’t much, but with several hundred deliveries a month as a full timer, it pays for itself multiple times.
I’ll throw in an example where I used this rule and decided it was better to spend money on a problem. I had a customer 10 minutes away from the restaurant. I totally screwed up and missed their can of soda. So I could have driven back and picked up the soda for nothing, but that 10 minutes back to the restaurant and 10 back to the customer was $8 of time that I’m not getting paid for. It cost me less to go to the 7-Eleven at the end of the block and buy a soda to replace it than it would cost me to go back to the restaurant. (I know, some of you would pipe in that I wasn’t obligated to go back, but I felt a personal responsibility because it was completely my mistake AND he’d tipped me well – it just felt like the right thing to do).
Using the 40 cent rule to evaluate deliveries
I have been tracking my deliveries for awhile now. I jot down how many minutes a delivery took, how far I drove, and how much I received. So I’ll go through and see how that delivery paid compared to my goal. I look for patterns – if there are certain times of day or certain days of the week where I’m having more trouble meeting that goal, then I know that those are the times that are better for personal things. I have found deliveries in certain parts of town are less likely to meet that goal. I have also found that even with traffic and parking, I’m more likely to meet the goals downtown than most other parts of town. That helps me decide where and when to work.
Keep in mind that the 40 cent rule is a calculation. It won’t always play out every day – especially where you are shaving time off by being more efficient. I’ll use the example of the bag that I mentioned above – shaving 10-15 seconds off of each delivery might mean maybe 4 minutes if you work a full day. Most days that 4 minutes won’t be enough to get another delivery in, so it didn’t actually pay off. But every once in awhile, that 4 minutes will make the difference in doing one more delivery. So it all adds up.
The bottom line is, when we start thinking in terms of the 40 cent rule, we are more aware of the fact that time is money. We’ve decided that every minute is worth something, and we’ve figured out those minutes add up. That helps us think in terms of doing things more efficiently. For me, paying attention to that rule has helped me go from an average of 2 deliveries per hour to 2.4. (Or from 20 deliveries in a 10-hour day to 24 – those 4 more deliveries are worth something!)
Let us know below some things you’ve been able to do to make your deliveries faster and more efficient.