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The 40 Cent Rule: Setting a Price on Helps Make Better Delivery Decisions

Quick Reference: Tax and PPP help.

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? What's the best way to 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:

Deciding on deliveries based on time, not miles.

Picture of a school chalkboard with "40¢ Rule" written on it

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?

Insert the sound of crickets here…

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?

Man studying complex equations on a chalkboard.
I think the process of coming up with the 40 cent rule looked a little like this.

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.

And then you break it down to minutes.

When I first settled on a 40 cent rule it was pretty simple. At the time I was averaging about $24 per hour. That's 40 cents per minute.

To be honest, the math is also a lot easier at 40 cents per minute than 35.

But whatever the rule you choose, whatever you average per hour can be broken down into minutes. It's a lot easier to gauge what you are doing (as well as how much you're losing) by looking at your earnings by the minute rather than by the day or hour.

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 a 33 cent rule.

The other option is you can do it based on a goal. Set an amount a little higher than you normally earn as a way to challenge yourself.

I've done this since originally publishing this article. As my hourly earnings consistently moved past the 40 cent per minute rate I thought I could go with 45 cents. Or I could push it to 50.

If you aren't aiming high, you'll never hit high.

Using the 40 cent rule to make decisions on the fly

complex flow chart layout symbolizing complicated factors in delivery decisions making.

Now that you decided what your time is worth, you can use that to make decisions.

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.

When you can place a value on the extra time one option uses, you can compare the cost of the time verses the cost of driving.

I used the 40 second rule to decide to go ahead and buy a new delivery bag. The design lets me get food in and out of the bag very quickly and easily.

I figure that bag saves me an average about ten to fifteen seconds per delivery. That's not much, but 15 seconds is now worth about 7 cents. Twenty deliveries in a day and that's added up to $2. It doesn't take long for that bag to pay for itself.

I had an example once where I screwed up and forgot to grab the customer's drink. I felt responsible so I promised to go make it right. That twenty minute round trip was going to cost me $8. It was cheaper to buy the replacement at the convenience store across the street.

Using the 40 cent rule to evaluate deliveries

You get an order. Do you take it or not?

How long is it going to take? What will it pay?

You can do the math now. Is it going to pay 40 cents a minute or better? Well, there's your answer as to whether you should take this.

I simplify that a bit further now that I've graduated to a 50 cent rule. I look at how much a delivery is going to pay and quickly figure out how soon it needs to be done to pay 50 cents a minute. A $10 delivery has to be done in 20 minutes. A $6 offer needs to be done in 12 minutes.

It's simple: Can I reasonably expect to be done in that amount of time? If so, take it. If not, pass.

Using the 40 cent rule to decide when and where I'll deliver.

How easily can you meet your goal at certain times and certain places?

Okay, I've been nerdy enough to track every single delivery and create reports of how much I profit per hour at certain times, certain days and even certain parts of town. Some might say that's going overboard.

But when you have a quick and easy way to evaluate your deliveries, you can now make some decisions without going all nerdy.

Are you having a harder time finding orders that meet your criteria in a certain part of town? Or certain days of the week?

Is 40 Cents a Minute too high?

Only if there are no 40 cent a minute deliveries.

But if you think you can't get that much, have you tried?

When I was thinking of bumping my price to 50 cents a minute, I sat and just watched offers come in for awhile. No intent to take any. Each time an offer came in I did a quick estimate what I thought it would pay per minute and wrote it down.

There were definitely enough offers that met my price.

But here's the thing: You now have something to help you gauge if your price is too high. If you're waiting a long time between offers, you now know what that wait time is costing you.

A ten minute wait between offers is costing you $4.00. Or $5, or $3, depending on your price.

Some tell me it's impossible to know how long a restaurant is going to take. If you do this long enough and pay attention, you have a good idea.

And now you know what that wait at the restaurant is costing you.

You'll never get it all right. It's an estimate. You'll miscalculate badly at times. I know I do. Over time though, it averages out.

Here's the thing that has amazed me since implementing a rule. I don't have the peaks and valleys any more. Some days pay great, others horrible. IT feels a lot less like luck of the draw. Setting a price has evened things out and allowed me to have pretty consistent earnings for more than two years now.

Maybe your rule is best set at 35 cents. Or perhaps 50 cents does the trick for you. Who knows, anyone want to try 60?

Knowing what your time is worth, down to the minute, can ultimately transform your delivery business.

Could this help someone else? Please share it.

driving in hard weather conditions, rain on the windshield
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