So, how are you doing? Did you have a good day? Was it a good week?
How do you know?
Let’s talk about measuring your performance. I know there is a simplicity of doing deliveries where we just jump in the car, we drive around, from order to order, and then the next week the money gets dropped in our bank account. Nice and easy but sometimes we don’t know how we really did.
I made pretty good money last week, but you know, I worked a lot of hours too – was it really that good? If you can start tracking some objective data, you start getting a better picture of your business and better ideas where you can improve.
Benefits of tracking your performance
There are some solid benefits of tracking your performance, of documenting the data of what you’re doing.
- It gives you a good before and after picture. It’s kind of like the pictures and measurements you take starting a diet or workout program, and then compare them later to see your progress.
- It builds a business owner mindset. I know that sometimes talking about being a business owner can make your eyes glaze over, and the same with talking data, right? But you know, there is something in the discipline, you’re doing something that FEELS like being a business owner, you get a sense that you’re more serious. There’s a bit of a confidence boost in that.
- It gives you a sense of control. You can feel helpless when Grubhub and Postmates chop the delivery fees, but when you see the big picture you see there are things you can do that far more than overcome those reductions. YOU feel in control.
- It gives you feedback. When a day didn’t go well, you can look at and see things that help you see where things went wrong and what you can do differently.
- It helps you focus on the overall picture. You don’t look just at the dollar amount now, you get a better picture of the more important information. It gives you objective information to compare different kinds of days.
What kind of information do you want to track?
This is the kind of thing that’s maybe best to grow into. You want to start easy. Don’t get overwhelmed. I would say just start by jotting a few things down at the end of each day of delivery:
- How much did you earn? Include all your tips, bonuses and incentives
- The number of miles you drove
- How many deliveries did you complete?
- How many hours were you delivering?
(As long as you are writing things down, it’s a good idea to start jotting down odometer readings at the start and end of deliveries. I know there are apps to track miles, but the IRS can get pretty old school on this thing – it’s always good to have a backup)
It starts out that simple. Four simple things. Now if you deliver for multiple platforms, you can choose to write down a total for each one. Otherwise, it’s pretty simple. You can write those down in a notebook or put it on a spreadsheet. It’s really about what works for you.
Personally, I use a spreadsheet. I use Google sheets because I can pull it up on my phone or on my computer and use it pretty easily. One of the reasons that I use the spreadsheet is that the real power in these numbers is in some simple calculations, and a spreadsheet makes that easier.
Business Term of the Day: The Key Performance Indicator (KPI).
So you start off with four simple things that you write down. What you do next though gives you the real power. If you want to really see how you are doing and have real information to watch trends, there are three calculations you want to make.
I don’t know if you’ve ever heard the term KPI – Key Performance Indicators. That’s a business acronym that makes your eyes glaze over kind of thing, I know, but it’s these calculations that you want to figure out:
- Profit per hour
- Deliveries per hour
- Dollars per mile driven
Getting the total picture with Profit Per Hour
Your profit per hour is the most important metric you could have. It takes into account the total picture – how much you earned, your expenses, and the time. It’s better than just a total amount or even a total profit because it puts it in a way that you can compare and evaluate.
Understand your Cost Per Mile
You need one more bit of information to calculate your profit per hour. You need to know what your car costs per mile. There is always the IRS standard mileage deduction of 58 cents a mile. I prefer to go with a number that is closer to my actual cost. A good ballpark number that kinda fits in the middle for most of is might be 35 cents a mile, so for now we’ll go with that.
Step 1: Calculate your expenses
You start with figuring an expense total. That total is the miles driven times cost per minute. 100 miles at 35 cents a minute is $35. That’s your expense.
Step 2: Calculate your Profit
Your profit is your money earned minus expense. If you earned 155 dollars, and $35 was your expense, that’s $120 profit.
Step 3: Calculate your Profit Per Hour
Your profit per hour is profit divided by hours. Say you drove 8 hours and had $115 profit – that’s $15 profit per hour.
Tracking the things that impact your profit with Deliveries per hour and Dollars per mile
Your profit per hour is based on money, expense, and time. The other two numbers that you want to calculate help you evaluate how you are doing on the things that can most increase and decrease your profit.
We can’t change the delivery fees. However, we can still increase our earnings by getting more deliveries in the same amount of time, and we can decrease our expenses by reducing the miles we drive for those deliveries. The deliveries per hour helps us see our efficiency, and the dollars per mile help us get a better feel for how we are doing on the expense side. These two provide the best at-a-glance look at the things that impact our profitability.
Going Ninja: Tracking Every Delivery.
If you want to really get information that provides real information on how, where and when you can make the best money, you can start tracking individual deliveries. I won’t go into the details right now, if there’s interest we can look into this more in the future. I started recording every delivery a couple of times, and have been doing it regularly since November. Here’s some of the information I’ve been able to learn:
- Postmates has been my most profitable platform lately in profit per hour, at $24.15, $3 per hour more than Grubhub and $5 more than Doordash
- 8 PM is the best hour of the day at $24.59 per hour, 2 PM is the worst at $16.96
- Friday is the best day of th week, averaging $24.21 per hour, Tuesday is the worst at $18.25
- At one time I divided my area into 9 zones and marked which zone each delivery was from there. I found that downtown was by far the most profitable for me, completely opposite of what I was expecting.
See how that information can help you? This gives me the data to have a better idea of the best times and days to deliver, and the times to avoid. Obviously we have to understand that there are other factors that can make a difference, but this information give you a good guide.
I was blown away by some of this information. I never would have expected Postmates to be paying better than Grubhub and wouldn't have expected downtown to be more profitable. But looking at dollars per mile and deliveries per hour, I can see why it would happen, as the deliveries in both instances are faster and shorter.
I know now that I’ll make more money downtown in spite of traffic and parking. I know which days are better to deliver on and which ones are better to avoid. When you can track that kind of information you can maximize your time by picking times and days where you can make the most money.
Taking this information home
There’s a saying that says you can’t know where you’re going if you don’t know where you’ve been. You can always make good progress, but we REALLY get a feel for how well we are doing at that when we start paying attention to where we’ve been and start really paying attention to what is happening day by day. I took a bit more time with this episode just because the tracking lays a foundation. And even then, we could have gone really in the weeds.
This kind of tracking can seem pretty intimidating or seem like a lot of extra work, but I can tell you that doing this tracking has done more than anything else that I can think of to help me improve my profit per hour by 40% over the past year. Start with the daily tracking, start watching the trends, and then when you get comfortable, you can start getting deeper into tracking individual deliveries.
Friday 12th of July 2019
Regarding expenses: are you factoring in dead miles i.e. miles it takes to get to the restaurant or just miles from pick up to drop off? I perused the 40 cents rule article several days ago, but is this expense calculation any different?
Friday 12th of July 2019
That's actually a really good question. I think if you see having to deadhead back somewhere, you might factor that in. The big thing is knowing your market and using that knowledge to make the best estimate possible. Maybe I'm really fortunate, there's not a lot of deadheading I have to do, there's usually something reasonably close to where I drop off. There are a couple suburbs I avoid because they are just in such a spread out area, so I'm not usually taking deliveries to that area unless it's just that good an offer