The Amazon Delivery Service Partner program may be one of the best out-of-the-box business opportunities in the delivery industry. Startup costs can be low or at least reasonable, and establishing a profitable business is a relatively simple process. But to start with, you need to know about financing an Amazon Delivery Service Partner Business.
There are several options, and those depend on the maturity of the route business you wish to purchase, the annual income it produces, and the number and type of routes that are a part of the business. This article will walk you through everything you need to know.
The Initial Investment Needed for Amazon DSP Businesses
When the Amazon Delivery Service Partner (DSP) Businesses were first offered to entrepreneurs, the initial investment was only $10,000. However, this was simply a way to get started. The business startup costs varied and were designed to establish five delivery vehicles and routes.
The routes are either standard delivery or rural delivery routes, although there are special delivery routes available as well. It also assumed that a delivery company takes advantage of all third-party deals impacting startup costs that Amazon has negotiated in connection with the DSP program with respect to delivery vehicle procurement, insurance, mobile devices and data plans, and uniforms.
While you don’t have to use these services, they are the best way to achieve the lowest startup cost possible. This is also a startup delivery business, not a fully ramped and mature business. The startup cost for purchasing those DSP businesses is more significant, and we’ll discuss those later in this article.
The takeaway is this: the lowest startup cost you will need to purchase outright or for financing an Amazon Delivery Service Partner Business is ten thousand dollars, but it can be more, depending on your situation.
Liquid Assets Needed for Financing an Amazon Delivery Service Partner Business
Amazon does have some requirements for Delivery Service Partner business owners regardless of how they come to purchase a route. The reason is simple: they want business owners to succeed, and to do so, they need to have a certain amount of liquid assets in place.
The minimum amount required is thirty thousand dollars. However, if you wish to purchase a fully ramped business rather than a startup, it is highly recommended that you have more liquid assets available.
The rule of thumb is that you should have approximately three times the amount of your business purchase available should you need it. These liquid assets do not have to be cash but should be those you can access almost instantly should you need them, like stocks, bonds, property, and, of course, savings.
Vehicles need repair, drivers need to take time off at the last minute, and sometimes you need supplemental vehicles or personnel to handle the additional workload of your route. This is especially true around peak periods like Christmas and the holiday rush from November through January.
The important thing is that you are prepared for the unexpected and can manage the cash flow of your business even through the roughest of times.
Ways to Purchase an Amazon DSP Business
There are a couple of ways to purchase an Amazon Delivery Service Partner business. You can either go through the Amazon DSP program and wait or buy all or part of an existing DSP business.
Through Amazon, you will go through an application process, and then you will be put in a group of Future DSP owners in your area. When routes become available through the Amazon program, they will be offered to the qualified DSP applicants, usually on a first-come, first-serve basis.
The second way is to purchase all or part of an existing business. You will still need to be approved by Amazon and go through Amazon training for DSP business owners, but you can purchase a company that is already ramped up and profitable. Generally, this type of business will come with vehicles, equipment, and even personnel already approved drivers who want to stay with the company.
The difference is that financing an Amazon Delivery Service Partner business that is already ramped up will require more capital, as the company is worth more. Amazon will also have to approve the transfer and reassignment of the business. However, if you follow all of their guidelines, this is a relatively simple process.
But at that point, you will likely want to enlist the help of a route broker who can help you evaluate both the health and the worth of the business and ensure you are getting the right deal in the right place and at the right price. A broker will understand the ins and outs of the process and will help you with due diligence and the final closing of the deal and transfer of the business from one owner to another.
But besides the financing, what is the difference between a startup and a fully ramped DSP business?
Startup vs. Fully Ramped Companies
An Amazon Delivery Service Partner business’s annual revenue and profit potential range is from $75K to $300K annually. These estimates are for companies performing standard or rural delivery services operating 20 to 40 delivery vehicles and those performing specialized delivery services operating 10 to 30 delivery vehicles.
A startup is simply a way in the door, but most DSP owners wish to scale quickly to a fully ramped business. The difference is the amount of work you have to manage and the number of personnel and vehicles you, as an owner, need to deal with.
Amazon Delivery Service Partner businesses are not for those looking for a hands-off business or to manage routes in several different geographic areas. These routes are businesses that will require constant owner presence and effort and do not efficiently run themselves.
This is especially true the larger the business gets. Vehicle maintenance, personnel, and more will demand much time and attention. You’ll also need to know the routes in your area, do ride-a-longs, and ensure that your drivers and helpers have what they need to work successfully.
To purchase a fully ramped route, it is helpful to have some business experience and experience in the last-mile delivery industry as well. But when financing an Amazon Delivery Service Partner business, you’ll also want to account for other business costs that will impact your cash flow.
Taxes, Insurance, and Other Costs
One of the primary concerns for DSP business owners is insurance, including business and vehicle insurance. The cost of this insurance is directly related to driving records, accident records, and more. This is one reason DSP owners use apps to monitor driver safety. Amazon is also very particular about a potential driver’s safety and violation record. Even a single accident or violation can severely impact your cash flow.
Taxes are also a concern. As an independent business and not an employee of Amazon, owners must not only pay their taxes but manage the payroll and taxes for their employees. Most use a payroll app to do so, and many fully ramped businesses employ accountants or HR personnel to ensure everything is handled correctly. But it is a concern and a cost.
Also, your state will likely dictate what kind of workers’ compensation you have to carry, may have rules on parental and sick leave you are required to offer, and other regulations. Also, to retain drivers, you may have to provide benefits like health insurance, gym memberships, and other perks like paid time off.
These are all expenses you should account for when considering how to purchase and finance an Amazon Delivery Service Partner business. And when you are ready to make a purchase, having a route broker in your corner can be a huge help.
Route Brokers and Financing an Amazon Delivery Service Partner Business
A route broker can do a lot for you when you are ready to purchase any delivery route business. They play a couple of roles. First, they buy and sell routes all the time, so they know the ins and outs of the process that you may not be familiar with. You may buy one or two businesses in your lifetime, but this is the job of a route broker.
They also understand due diligence, profit and loss statements and all the other paperwork that goes with buying a delivery business. They can help you evaluate equipment, personnel, and how viable the future of the company is. You’ll also have a partner you can trust to help you navigate a process that is not familiar to you.
So when you are ready to purchase a route or if you just have questions, contact us here at Route Advisors. We’d love to be your route broker, and we’ll be with you every step of the way.