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Courier MBA Day 10: The Two Best Ways to Improve Profits

This may be the most practical lesson of the course.

The two ways you can improve profits. In fact, they're the only two ways when you think about it.

Increase income

Reduce expenses

Okay, that's pretty obvious. But that's pretty much it – anything you can do that increases your profits will fall into one of those two categories.

The best way to apply that to your deliveries:

Complete more deliveries (increase income)

Drive less (reduce expenses)

You can give yourself a pay raise – a significant one at that – by doing these things.

Notice I didn't say anything about any of these platforms paying you more. Higher delivery fees would be nice. But the thing is, since I started delivery fees have gone DOWN about 20% but my hourly profit has INCREASED 20% per year.

The point being – you have far more control over how much you earn than the delivery companies. That's what's cool about being the boss.

Drive less

The bottom line is, your car is not just a big tax write off. It's a big tax write off because it's a big EXPENSE. It may not cost the 57.5 cents a mile that the IRS allows you to claim, but it's a heck of a lot more than most people think.

I may be beating a dead horse with this talk about what a car costs

I talked a lot about this in yesterday's page. We'll get more in depth.

If you drive too many miles, you will pay the price. Your car is going to pay the price, and guess who foots the bill? At a dollar a mile your car is costing a fourth to a half of your income.

Usually, the ones driving the most miles are the ones who take every offer. These companies do not care if it costs you more to complete a delivery than you are paid. I've run tests to compare what I earn and have run between $5 and $10 lower profit per hour when taking everything that's thrown at me.

Obviously, you can choose what works best for you. Another beauty of being the boss. You may have reasons to take everything. You just have to decide if the cost is greater than the benefit.

I'm a bit of an odd duck when it comes to accepting and rejecting offers. I'll take a $5 delivery and turn around and reject a $25 offer. That's because the distance (and associated time) usually weighs heavier in my decision than the dollar amount.

Deliver more

Efficiency is huge.

There was a time in the pandemic where my profits skyrocketed. I wondered if people were really paying more. When I dug into it, I found that the number of deliveries I was completing per hour had increased at about the same rate as my profit.

I could get done so much faster without the traffic and parking hassles, and faster drop-offs due to no contact deliveries. 50% more deliveries meant 50% more profit.

See where that 50 cent rule from yesterday is so huge? Everything you can do to shave seconds means you can get more deliveries done.

If you can shave a minute off every delivery, that minute adds up over a dozen deliveries. That usually means you fit one or more extra deliveries into the same time frame.

Get more deliveries in the same time is the best way to give yourself a raise.

Three key statistics to help you see how you are doing in these two areas.

In business they call these key performance indicators. It's a way to take a glance at the numbers and see how it's going. Is it great? Or, Houston, do we have a problem?

Almost every time my profits improve, I see improvements in each of these numbers as well. In Episode 9, I listed two of these, but I think a third can be appropriate.

Deliveries per hour

Efficient word held by a man or person who is effective at getting a job done while other people lie crushed under the word Inefficient to illustrate poor planning or execution skills

How many deliveries did you perform in the time you were out there? (If you received multiple deliveries at once, count each one).

I've had some pretty good growth in profitability. The biggest factor I can point to is how many deliveries I completed in an hour. In 2018 I had 2.15 per hour. In 2019 I bumped it up to 2.32. So far in 2020 it's 2.67.

That's nearly 25% more deliveries that I get paid for in the same amount of time.

Miles per dollar

Some will measure dollars per mile. Either one works as long as you're measuring everything the same.

I already ranted about driving a mile or more for every dollar. It costs a lot more than you think, and you can't get as many deliveries in when you go further.

I went from 0.64 miles per dollar in 2018 to 0.55 in 2019 to 0.46 so far in 2020.

For what it's worth, that's going from $1.57 per mile to $1.82 to $2.17.

I see a lot of people use this as their primary evaluation in taking offers. I don't find it as reliable personally because it doesn't take time into account.

Average miles per delivery

I've recently started paying more attention to this one.

After Uber Eats started showing expected pay (but without the expected tip) I started figuring out that the pay amount was more or less meaningless. In fact I found that I made more if I put more priority on the lower dollar offers than the higher pay. That was because the higher the pay, the longer the delivery.

What I've figured out over time is that time/distance is a better indicator of how profitable a delivery will be than the dollar amount. The shorter and faster the delivery, the more I can do. I'm more than happy to let a $20+ delivery go when it's taking me 15 miles away, and I'm okay with a smaller amount if I can get it done in ten minutes.

So I'm starting to pay attention to that average miles. Here's what I've noticed:

In 2018, average miles were 6.2, in 2019 it was 5.7 and so far this year it's 5.1.

The value of tracking these key performance indicators

KPI Key Performance Indicators Goals Success 3 Rolling Dice 3d Illustration

When your profits are good, you want to know why so you can keep doing more of the same. When your profits aren't so good, you want to know why so you can fix it.

Looking at your deliveries per hour, your miles per dollar and your average delivery will help you get a feel for what's going wrong.

When you see your average miles or your miles per dollar were normal but your deliveries per hour were way down, that gives you a chance to ask, what happened?

Was it a long wait at the restaurant? Did I get hung up at the apartment complex trying to find the cusotmer? Is there anything I can do differently next time? Do I remember that this restaurant is always slow? Do I look for mapping information on apartment complexes? Maybe I make a note to self not to take that delivery that takes me in and out of downtown at rush hour. Or perhaps I start paying attention to how much longer I have to drive in the suburbs than in the city.

What these do is help you look for ways to one, increase income (by getting more deliveries in an hour) and two, reduce cost (by driving less).

Could this help someone else? Please share it.