On the Road Again? Maybe It's Time for Your Own Delivery Vehicle
Experts explain when it's time to buy or lease, and what else you'll need when building your fleet.
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After Adam Vaughan landed in a ditch, he decided it was time for a company van.
The managing owner of Plain and Simple, an Amish furniture store in Evanston, Ill., was towing a trailer two winters ago with a truck owned by one of the 8-year-old business's owners. When the ungainly setup skidded off the road, it was the last straw. The truck wasn't always available for shipping orders, and it was hard to find a place to park the truck-trailer combo near the furniture showroom in Plain and Simple's urban, Chicago-area neighborhood.
"It wasn't a safe situation," he says. "Sometimes we rented a truck, but it was a major hassle – we never knew how long we'd need it for, and it looked unprofessional. I'd be driving up with an $8,000 bedroom set in a van that said, "U-Haul' on the side."
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Many growing businesses eventually find themselves in a situation like Vaughn's, facing the decision as to whether to invest in their own commercial vehicles. Some businesses, such as floral delivery, may need a vehicle to open for business. Others, such as Plain and Simple, simply hit a point where the inconvenience and cost of renting a delivery vehicle, using courier services or relying on major shippers begins to hurt the bottom line or hamper growth.
Once you decide it's time for a company vehicle, there are many questions to consider. The first step is to determine what vehicle best suits your business's needs, says Gerald Koss, fleet marketing manager for Ford Motor Co. Considerations include gas mileage, carrying capacity, engine power, towing capacity and durability. Consider both the fragility and weight of the goods you'll deliver, as well as how many miles you anticipate driving the vehicle in a year.
"The biggest thing to take a look at is what it'll be used for," says Koss. "If you're towing, do you need a V-8 engine? Does your furniture need a box for protection or are you a plumber who could use an open van?"
When you've decided on the vehicle type, more questions arise. Should you buy new or used? Own or lease? Finance or pay cash?
Koss says that while entrepreneurs choose to lease company cars, some choose to own vans and trucks because of the longer working life they'll often see. Leasing can offer some tax advantages, as the lease payments are a deductible business expense.
At Plain and Simple, which did $600,000 in sales last year, the owners decided to pool their funds to purchase a used, heavy-duty 2006 Isuzu NPR-HD box truck for $23,000 cash. The van's short cab and tight turning radius helps it get down Chicago's alleys.
"We thought it could be a good investment and last for years," Vaughan says.
Other owners choose to buy new to avoid the hassle of breakdowns. In Rancho Mirage, Calif., that's the route iPastries President Lee Shoopman took a year ago. To open her business, the longtime pastry chef bought a new Ford Transit Connect, a small van with a roomy cargo space designed for small business deliveries. She says she chose the van after looking at competing models from other automakers that were larger and didn't get the same gas mileage. While other major carmakers didn't have an equivalent vehicle when Shoopman was shopping, two new competitors arrived this year, the Nissan NV200 and the Fiat Doblo. iPastries had the Transit fitted out with custom racks to hold baked goods for deliveries to local restaurants, hotels, country clubs and casinos.
"I make the deliveries, so I needed a van I feel comfortable in," she says. "It's easy to maneuver and has a back window for reversing. A lot of vans have no windows."
Having the van with its logo driving around town and parked outside her commercial kitchen space has also been a valuable marketing tool, too, Shoopman says.
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Once you've got a delivery vehicle on the road, the question is how to keep it running, use it efficiently and avoid wasting money. Fortunately, helpful technology is available to small businesses with a single delivery van, not just big corporate fleets. Fleet-management programs can digitize orders and deliver them to smartphones to prevent errors, coordinate deliveries with drivers in transit and design gas-saving routes.
For instance, with Verizon's Network Fleet (http://www.networkfleet.com) program, your staff can track the location of a delivery vehicle through its GPS unit, allowing a dispatcher to send additional orders to a driver's smartphone while the van is out making deliveries. The service starts as low as $29.95 per vehicle per month for a self-installed system with GPS, says Verizon transportation solutions director Abdul Abdullah. A company with a fleet of 1,000 can expect to pay about $3,000 per month. Similar services are available from scores of specialized firms such as Wheels and ARI Fleet. Businesses considering such programs will need to make sure their drivers are outfitted with the appropriate devices, such as tablets or smartphones, and factor the appropriate dataplans into their budgets.
Such fleet tracking solutions might be best suited to businesses with 25 or more vehicles, says Travis Mjolsnes, director of business development at GE Capital Fleet Services. Those with less than 25 vehicles might still benefit if their business is decentralized and drivers are located in various parts of the country.
To control costs, you might also consider a robust roadside assistance program. A single tow for a big van or truck can easily run $200 or more, says Verizon's Abdullah. The Network Fleet program includes a roadside assistance service with free towing within 25 miles. Vehicle maintenance is another service that can be pre-purchased to control costs.
Some small businesses don't think about these issues until they run into trouble. Plain and Simple's used box truck turned out to have multiple mechanical problems that cost $7,500 and took several tries to fix, says Vaughan, leaving the business scrambling to cover costs and make its deliveries.
"Have a budget for repairs, if you buy used," Vaughan advises, as well as extra funds for licensing and insurance. "It's not just the purchase price you have to think about. You don't want it to break you if it breaks down."