Most courier contracts are accepted on instinct and a headline rate. Most courier businesses that fail, fail because the arithmetic behind that rate was never done. The good news is that the arithmetic is not complicated; it is just rarely done honestly.
Start with the route, not the rate
A rate of £1 per stop tells you nothing until you know what a realistic day looks like on that route. The questions that matter:
- How many stops can a competent driver actually complete in the contracted window, not on the best day but on a normal day?
- What is the stop density? Sixty stops across a town centre and sixty stops across rural lanes are different businesses.
- How do volumes move across the week and across the year? A route that pays in December and starves in February needs to be priced as a whole year.
Multiply realistic stops by the rate and you have realistic gross revenue per day. That number, not the rate, is the starting point.
Then subtract the real costs
The costs that sink subcontractors are the ones that do not appear in week one:
- Vehicle: rental or finance, insurance appropriate to the work, maintenance, tyres, and the damage and penalty exposure that comes with depot work.
- Fuel: priced against the actual route profile, not a hopeful average.
- Driver: what you must pay to keep a good driver, not the minimum you can advertise. Cheap drivers are expensive.
- Cover: holidays, sickness and no-shows are certainties, not risks. If the route only pays when you personally drive it, you have bought a job, not a contract.
- Administration: onboarding, references, payroll or invoicing, and the time spent managing all of it.
The break-even test
Divide your true weekly cost base by realistic weekly stops. That is your break-even rate per stop. If the offered rate is below it, no amount of effort fixes the contract. If it is marginally above it, you are carrying all of the risk for none of the margin; one van breakdown consumes a month of profit.
A contract is viable when it clears break-even with room for the things that will go wrong, and when the payment terms do not starve your cash flow while you wait.
Ask what the contract is really buying
Finally, be honest about the strategic question: does this contract build anything? Some contracts are worth taking at thin margins because they establish a depot relationship, prove capacity, or fill a quiet period. Others are thin margin with no upside; they simply transfer risk from the network to you.
If you would like an experienced second pair of eyes on a specific contract, that is exactly what our contract review is for.